Dörschell continued: “An audit is not a one-way street. It is sustained by the idea of cooperation between the company to be audited and its public auditor. The law gives the public auditor the right to explanations and the submission of evidence by the company being audited. The public auditor is actually required to investigate which explanations and evidence he needs to carry out his audit. This is the case before accepting the commission and even during the audit. If the required documents are not presented to him, there may be an obstacle to completing the audit, which, if sufficiently serious, results in an adverse opinion.

This is what happened at the end of April 2022 in the Adler case, when the auditing firm KPMG issued an adverse opinion and resigned. According to the adverse opinion, it was not possible for KPMG to obtain sufficient suitable audit evidence as a basis for audit opinions on the annual report and the consolidated management report because the presentation of - according to press reports - approx. 800,000 emails had been refused.

Against this background, it does not surprise me that KPMG refused the appointment as public auditor in the court procedure for replacing an auditor (Article 318 para. 3 German Commercial Code) by Charlottenburg Local Court in January 2023.

Recently, there have been loud calls in the press for an obligation to contract for public auditors. There are good reasons why there is not such an instrument for public auditors. The obligation to contract that applies to notaries and is used by way of comparison cannot be extrapolated to the commissioning of public auditors. For example, the remit for notaries is different and even then a notary can refuse his notarisation duties if there is an adequate reason (Article 15 para. 1 sentence 1 Federal Notary Code).

But, above all, an obligation to contract would run counter to the explicit will of the legislator for cooperation in audits. It would be counterproductive for the successful conduct of an audit to force the public auditor to accept a commission although the client’s lack of willingness to cooperate is already apparent. It is precisely the examination of the 800,000 emails by a law firm that has been commissioned by Adler and Adler’s offer to present only this report that shows that Adler, according to press reports, apparently still does not intend to fully cooperate.

It remains to be said that if a company decides not to fully cooperate with the public auditor and does not want to present all of the necessary documents, the public auditor cannot properly fulfil his remit. And the public auditor alone decides which documents he needs for the audit.

I would also like to add that until the German Finance Market Integrity Strengthening Act (Finanzmarktintegritätsstärkungsgesetz - FISG) came into force in 2021, publicly traded companies did not have a problem finding a public auditor. Since the FISG, there has been a risk for public auditors auditing publicly traded companies - like Adler - that a court will deem an action or omission to be grossly negligent. In this case, there is the threat of unlimited personal liability, even of the active players, and this applies even in the case of a qualification or refusal of the audit opinion. Only the possible plaintiffs may differ.”