Internal auditors are an important component in ensuring transparency and legal compliance within companies. They play an essential role in monitoring and controlling a company’s financial activity.

Although internal auditors are a body with control and verification powers specific also to joint-stock companies, in this article we will focus on the appointment and activity of internal auditors in limited liability companies (LLCs).

1. What are internal auditors?

They are natural or legal persons appointed by the general meeting of shareholders / sole shareholder to supervise the financial activities of a limited liability company.

2. When is it mandatory to appoint internal auditors in limited liability companies?

According to Law 31/1990, the rule is that a limited liability company shall appoint internal auditors when the number of shareholders exceeds 15 - in other words, when the 16th shareholder is appointed.

However, internal auditors can also be appointed when the number of shareholders is less than 16 - but in this case, there is no obligation.

3. How internal auditors are appointed?

Internal auditors shall be appointed by the general meeting of shareholders’ resolution or, where appropriate, by the sole shareholder’s decision, for a mandate of 3 years and may be re-elected;

Even if internal auditors are appointed after the company is established, they should still be mentioned in the company’s articles of association - so when they are appointed, the articles of association should be amended to include the identification details of internal auditors and their duties.

4. How many internal auditors should be appointed and who can be an internal auditor?

There can be appointed one or more internal auditors, but their number shall always be odd; A substitute internal auditor should also be appointed.

Internal auditors may be appointed from among the shareholders, but other persons who are not shareholders may also be appointed.

The legislation provides for some incompatibilities - for example, they cannot be internal auditors:

• company directors;
• relatives up to and including the fourth degree or spouses of company directors;
• persons who receive in any form whatsoever, for other positions than that of internal auditor, a salary or remuneration from directors or the company or whose employers have contractual relationship or are competitors of the company.

5. What duties do internal auditors have?

Briefly, internal auditors check the company’s activity and management and also carry out an accounting control - they perform an additional control on the company’s activity. More specifically, internal auditors:

• supervise the management of the company, verify that the financial statements are drawn up in accordance with the law and in line with the accounting registers, that these registers are kept regularly, and that the valuation of patrimonial elements has been carried out in accordance with the rules laid down for the preparation and presentation of financial statements;
• report to the general meeting of shareholders / sole shareholder on the issues identified above, as well as their proposals on the financial statements and profit distribution;
• inform the company directors of irregularities in the administration and infringements of legal provisions and of the articles of association’s provisions which they discover, and bring the more important cases to the attention of the general meeting of shareholders / sole shareholder;
• in certain cases, they may even convene a general meeting of shareholders / sole shareholder;
• in addition to the above duties, others may also be established, if they fall within the category of corporate management or accounting control.

6. Formalities before the Trade Register

Any change of internal auditors shall be registered with the Trade Register - in other words, the appointment of the first internal auditors and any subsequent changes are to be registered.