When does your company need to conduct a financial audit?

As Dutch companies grow, they face more legal obligations. As a business owner, you may have started small with a convincing business plan and an office in a spare room at home. Over time, you work hard to expand your business, and with that growth comes added responsibilities. It’s very likely that your company must now comply with the legal requirement to conduct a financial audit. But what exactly is a financial audit, and when is it mandatory? We’re happy to tell you more about this financial audit.

Enhancing transparency and investor confidence

Conducting a financial audit not only fulfills legal requirements but also enhances transparency in financial reporting. Investors and stakeholders are increasingly seeking assurance that companies operate with accountability. An audit by a certified firm helps provide this assurance, ultimately supporting business growth and sustained investor confidence.

The purpose of a financial audit

In the Netherlands, companies must conduct a financial audit under certain circumstances. This audit must be performed by a certified audit firm. The purpose of a financial audit is to ensure the accuracy and reliability of a company’s financial data. A specialized audit firm can assist businesses with the mandatory audit services required by Dutch legislation.

When is a financial audit legally required?

Three criteria determine when a financial audit is required. A company must conduct a financial audit if it meets at least two of the following three criteria over two consecutive years. These criteria are based on assets, net revenue, and the number of employees. Below is an overview of these three requirements.

Assets

The total asset value exceeds €7.5 million. This includes all company assets, such as buildings, equipment, and other significant holdings.

Net revenue

The annual net revenue exceeds €15 million. Net revenue reflects the company's earnings after deducting returns and discounts.

Number of employees

The company employs more than 50 employees. This represents the average number of full-time employees employed by the company throughout the year.

Engaging an audit firm for mandatory audits

Does your company meet at least two of the above criteria? If so, it is legally required to perform a financial audit. For this, you must enlist a certified accounting firm that provides audit services. A trusted accounting firm will verify that your company’s financial information is reliable and that it complies with legal standards. This audit also offers advantages for your company, as it boosts your credibility with investors, shareholders, and other stakeholders.

Failure to conduct a legally required audit

If your company meets at least two of the set criteria, a financial audit becomes a legal obligation. This means that failing to conduct the audit can result in legal and financial repercussions. For example, your company may incur fines or face other penalties, such as restrictions on access to financing. Therefore, it’s very important to arrange the audit through a certified party when legally required to do so.

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