In general, as set out in Additional Provision One of the LAC, which stipulates an audit must take place when entities, regardless of their legal form (including public sector corporations, local or regional), meet any of the following requirements:
a) Those issuing securities listed for trading on official secondary stock markets or multilateral trading systems.
b) Those issuing bonds for sale to the public.
c) Those routinely engaged in financial intermediationand, in all cases,credit institutions, investment services companies, las empresas de servicios de inversión, the governing companies of official secondary markets, the governing companies of multilateral trading systems, the Systems Company, central counterparties, the Stock Exchange Company, the management companies of the investment guarantee funds and the other financial entities, and other financial institutions, including collective investment institutions, securities funds and their managers, that are entered in the corresponding Registers of the Bank of Spain and Spanish National Securities Market Commission.
d) Entities whose corporate purpose includes any of the activities regulated by the revised Private Insurance (Regulation and Supervision) Law, approved by Legislative Royal Decree 6/2004 of October 29, 2004, within the limits established in the relevant implementing regulations, and pension funds and their management companies.
e) Entities that receive government grants or aid or perform work for or render services or supplies goods to the State and other public bodies, within limits established in the implementing regulations to be laid down by the government in a royal decree.
The second and third additional clauses of the Audit Regulations clarify this aspect by establishing the following limits:
Concerning the entities receiving subsidies or aid, whatever their legal nature and provided that they must prepare annual accounts in accordance with the applicable financial information regulatory framework, that during a fiscal year they have received subsidies or aid charged to the Budgets of the Public Administrations or funds of the European Union, for a total accumulated amount exceeding 600,000 euros, will be obliged to submit to audit the annual accounts corresponding to said year and the years in which the operations are carried out or the investments corresponding to the subsidies mentioned above or aid.
Grants or aid shall be deemed to have been received when registered in the ledgers of the company or entity, in line with the applicable accounting regulations. In addition, subsidies or aid shall be understood as those, for this provision, that are considered as such under Article 2 of Law 38/2003 of November 17, 2003 (General Subsidies Act)
Concerning entities that contract within the public sector, whatever their legal form and provided they file annual accounts in accordance with the regulatory framework for financial reporting that applies to them, those that have contracts, which are referred to under article 2 of Law 30/2007 of November 30, 2007, on Public Sector Contracts, totalling a cumulative amount of more than 600,000 euros during a financial year, and said contracts represent more than 50% of the net turnover, will be required to audit the annual accounts of said financial year and those of the following one.
The actions referred to in the previous paragraph, for the purposes of this provision, shall be deemed to have been carried out at the time the corresponding collection right is recorded in the accounting books of the entity.
f) All other entities that exceed certain LIMITS defined by the government in a royal decree. These limits shall refer, as a minimum, to turnover, total assets according to the balance sheet and the average number of employees for the year and shall be applicable—all of them or each one individually—to the extent possible given the legal structure of each company or entity.
This additional provision does not apply to entities forming part of the public sector, whether State, regional or local, without prejudice to the requirements of the regulations governing those public sector entities. In any event, this additional provision shall apply to commercial companies forming part of the public sector, whether State, regional or local.
Regarding the limits cited in subparagraph (f) above, these are set out in Article 263 of the Capital Companies Law. At least two of these limits must be met for a period of two consecutive years leading up to the balance sheet date.
The LIMITS are:
| Parameters | Amount |
|---|---|
| Total assets | 2.850.000 € |
| Annual turnover | 5.700.000 € |
| Average number of employed workers | 50 empleados |
The article also states that those companies, which in the exercise of their constitution exceed two of the limits, will already at that time be legally required to audit that financial year without having to wait for it to occur over two consecutive years.
In addition, other legislation that establishes the obligation to audit the annual accounts of certain entities:
- Declared Public Utility Associations (state level) are subject to the same limits as commercial companies under Article 5 of the Royal Decree 1740/2003 of December 19, 2003.
- Foundations (state level) under Article 25 of Law 50/2002 of December 26, 2002 (Foundation Act) are required to audit their annual accounts if they exceed two out of the three limits for a period of two consecutive years.
| Parameters | Amount |
|---|---|
| Total Assets | 2.400.000 € |
| Annual net turnover | 2.400.000 € |
| Average number of employed workers | 50 empleados |
- Credit Unions will be required to audit their annual accounts in any case, as required under Article 11 of Credit Union Law 13/1989 and Article 37 of its regulations.
- Housing cooperatives, under Article 91 of Law 27/1999 of July 16, 1999, on Cooperatives, must audit their annual accounts when any one of the following requirements is met:
- a) That the cooperative has in promotion, between housing and premises, a number superior to fifty.
- b) Whatever the number of dwellings and premises in promotion, when they correspond to different phases or built as separate blocks that constitute, for economic purposes, independent promotions.
- c) That the cooperative has granted powers relating to business management to natural or legal persons other than the Governing Council members.
- d) When provided for in the Statutes or agreed by the General Assembly.
In addition to the provisions of Article 91, consideration must be given to the provisions of Article 62 concerning the obligation to audit for all cooperative societies, i.e. to go beyond the limits of commercial companies.
- Under Article 62 of Law 27/1999 of July 16, 1999, on Cooperatives, other Cooperatives shall be audited following the provisions set out in the LAC, with the exact requirements and limits as those cited for commercial companies.
- Public Limited Sports companies will be required to audit their annual accounts in all cases as is needed of all public limited sports companies under Article 20 of the Royal Decree 1251/1999 of July 16, 1999.
It should be considered that for foundations, associations, and cooperatives, a range of regional or even local regulations exists. While generally following national rules, they can still establish other separate requirements concerning auditing the entities' annual accounts.