The audit of a family foundation involves periodic and independent evaluation of its asset management. It also verifies the foundation’s ability to incur and fulfil obligations. Chapter 9 of the Family Foundation Act of 26th of January 2023 outlines the rules regulating the audit. It must be conducted by an entity appointed by the assembly of beneficiaries.
Who can perform the audit of a family foundation? What is the scope of the audit? How often should such an audit be conducted? The answers to these questions are described below.
Table of Contents
- The Family Foundation Act
- Who can perform an audit of a family foundation?
- Requirements regarding family foundation auditors
- The scope of the audit
- How often should an audit of a family foundation be conducted?
- What are the rights of family foundation auditors?
- An audit report
The Family Foundation Act
The Family Foundation Act passed on the 26th of January 2023 will come into effect on the 22nd of May 2023. It regulates the organization and operations of family foundations. This also concerns the rights and obligations of the founder and beneficiaries.
The goals and assumptions of a family foundation include:
- Formal separation of family and business
- Functioning as a family treasure
- Implementing the founder’s vision and upholding his values in business
Thus, a family foundation ensures the operation of a business for generations. It also secures the financial needs of its beneficiaries.
Who can perform an audit of a family foundation?
Pursuant to the provisions of the Family Foundation Act, the beneficiaries’ assembly is authorized to choose an audit company. Alternatively, it can also appoint a team of auditors. This team may include certified auditors, tax advisors, lawyers, or legal counsellors. As the audit involves more than just financial control, other people besides certified auditors will also have to participate in it.
The Family Foundation Act does not require the financial statement review and audit to be conducted by the same entity. The legislator left this matter to the decision of the assembly of beneficiaries.
Requirements regarding family foundation auditors
A person responsible for the audit of a family foundation must fulfil certain conditions specified by law.
Art. 78 of the Family Foundation Act states that it may be performed by a person who during the audit period and its duration:
- Is independent of the family foundation in question.
- Has not participated and is not participating in the decision-making process of the family foundation.
- Has not provided and is not providing financial audit or advisory services to the family foundation.
The scope of the audit
As indicated above, the audit is carried out by an auditing firm or an audit team. The assembly of beneficiaries appoints this entity.
According to art. 77 of the Family Foundation Act, the scope of the audit of a family foundation includes:
- management of the foundation’s assets,
- incurring and fulfilling obligations,
- incurring and fulfilling public law obligations.
Such an audit must follow certain criteria:
- compliance with the law, the foundation’s purpose and its documents.
How often should an audit of a family foundation be conducted?
The Family Foundation Act provides for the obligation to conduct an audit of the family foundation. It must be done at least once every four years of its operation.
There is a need to make audits more often if the financial statements of the family foundation are subject to examination under the Accounting Act. In such a case, the audit should be carried out at the same time as the examination resulting from the Accounting Act. Therefore, the obligation to perform an audit of the family foundation may occur every year.
This is a solution to protect the assets of the family foundation and the rights of beneficiaries. It enables control over its financial aspects. However, it also verifies the foundation’s objectives and compliance with the law.
What are the rights of family foundation auditors?
In order to ensure the performance of tasks by the audit firm or members of the audit team, the Act on a family foundation grants them certain rights.
According to Art. 80 of the Act on Family Foundation, the auditing firm and its members have the right to request documents from the foundation’s management. In particular, they have the right to request a valid list of the foundation’s beneficiaries.
An audit report
The Family Foundation Act requires that the audit ends with the report, which is then submitted to the management. Then, the management has to present the report to the supervisory board. If there is no supervisory board, the management presents the audit report to the assembly of beneficiaries. This solution enables undertaking corrective actions to the irregularities. Moreover, it allows for eliminating threats to the assets of the family foundation.
According to the provisions of the Family Foundation Act of the 26th of January 2023, auditors audit the management of family foundation assets, incurring and fulfilling obligations and public law obligations. The audit is conducted in terms of correctness, reliability and compliance with the law. Moreover, the purpose and documents of the family foundations are also verified. As a rule, an audit must be done at least once every four years. It concludes with the preparation of a report, which is then handed over to the management.