Since July 2005, the German Financial Reporting Enforcement Panel (FREP) “Deutsche Prüfstelle für Rechnungslegung” (DPR) has been responsible for supervising annual and consolidated financial statements. In addition, they are responsible for the corresponding (group) management reports of publicly listed companies in Germany. For all of these companies the FREP conducts either an indication-based examination or sampling examination. The auditing procedure is performed in two stages. If the companies do not cooperate on voluntary grounds or do not agree with the FREP findings, the Federal Financial Supervisory Authority “Bundesanstalt für Finanzdienstleistungsaufsicht” (BaFin) comes into play.
Since the commencement of their activities in 2005, the FREP has completed a total of 1,140 examinations. Almost all companies undergoing the enforcement have already been reviewed by the FREP once – many of them three times. The publication does not only have a detrimental effect on the reputation of a company, but also on its valuation.
Irrespective of the risk of errors being found, the review of financial statements by the FREP represents a considerable challenge for a company, organizational and in regards tocontent. The questions posed by the FREP are complex and must be answered under time pressure. PwC can provide professional assistance in overcoming this special task by ensuring a rapid and successful completion of the review process. Additionally, PwC can assist in reducing the burden on a company’s human resources.
In a preparation workshop, PwC experts provide information about procedures and possibilities of preparing a company for a FREP review. As a further source of assistance, PwC has drawn up comprehensive practical guidelines for companies undergoing a FREP review process ("Enforcement Planner") in which the procedure involved is described.
In accordance with the published FREP areas of audit emphasis, collective PwC experiences with FREP examinations, and enterprise-specific peculiarities, a company’s critical accounting issues can beidentified with the assistance of PwC.
PwC experts support companies in identifying papers and documents which are relevant for the appropriate response of specific FREP questions. Furthermore, PwC provides guidance on the preparation and readiness of the required papers and documents which allow the companies to answer FREP questions within the usual deadline.
In addition, PwC provides assistance in setting up an appropriate project and process organization and the delegation of tasks among employees.
During a FREP review, PwC experts provide advice on the basis of their experience from a large number of FREP reviews. This advisory service covers information about the individual stages of the respective process, the examination, and responses to questions from the FREP. In the course of a FREP review, it may be advisable to discuss complex topics with the FREP. PwC assists and advises companies to carry out these discussions in a competent and professional manner.
PwC experts also provide advice at the end of the process with the implementation of experience gained from the FREP review. In this course, companies are supported with the analysis of time and resourceconsuming response processes and suggestions for improvement are elaborated. If errors are found during the review, PwC gives advise on the strategy for capital market communication and the necessary rectification of errors. Furthermore, specialists are also available to advise and support companies in the event that the process is passed on to the Federal Financial Supervisory Authority "Bundesanstalt für Finanzdienstleistungsaufsicht" (BaFin).
Dr. Bernd Kliem
Tel: +49 89 5790-5549