Institut der Wirtschaftsprüfer

History

Genesis and Early Institutionalization (1884–1929)

1884 saw the introduction of the foundation audit (Gründungsprüfung) for stock corporations (Aktiengesellschaften). As a result, courts began appointing so-called Sworn Book Auditors (Beeidete Bücherrevisoren) as sworn experts in accounting matters. The North German Hanseatic cities created legal frameworks for the activities of this profession. Later, the opportunity to appoint Book Auditors was established at the national level through Section 36 of the Trade Regulation Act (Gewerbeordnung). In 1890, the Deutsche Treuhandgesellschaft (German Trust Company) was established. The Association of German Book Auditors (VDB), which emerged from a merger of Berlin-based auditors, was constituted in 1900. English and American firms, such as Price Waterhouse and Whinney's, established branch offices in Berlin.

Crisis, Legislative Birth, and IDW Foundation (1929–1936)

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By 1929, the VDB counted 853 Book Auditors as its members. In the summer of 1929, the Frankfurter Allgemeine Versicherungs AG (FAVAG), the second-largest insurance company in the German Reich, collapsed. Against the backdrop of the FAVAG collapse and to accelerate parts of the reform, the "Ordinance of the Reich President on Stock Corporation Law, Bank Supervision, and Tax Amnesty (VO) was published on September 19, 1931. Among other things, it contained regulations on the duty of disclosure (annual report, annual financial statements, and audit). Balance sheet auditors were only permitted to be individuals experienced and educated in bookkeeping. Auditing firms were only permitted to audit balance sheets if one of their owners, board members, or managing directors was experienced and educated in bookkeeping.

The Institut für das Revisions- und Treuhandwesen e.V. (IRT) was founded in August 1930 based in Berlin by several professional associations from the German auditing and fiduciary sector (Verband deutscher Bücherrevisionen (VDB), Fachgruppe der Treuhänder im Verband Deutscher Diplom-Kaufleute (VDDK), Verband Deutscher Treuhand- und Revisionsgesellschaften e.V., and Reichsbund Deutscher Treuhand-Aktiengesellschaften). In 1930 the Main Office for publicly appointed auditors (Wirtschaftsprüfer) was established.The IRT's goal was to participate in the legislation for the auditing profession. Simultaneously, the IRT attempted to bridge the differing interests between individual auditors and the larger fiduciary companies. The states of the German Reich established the legal and institutional framework for the new profession. In 1931, twelve admission and examination bodies for Public Auditors were created. The profession of the Wirtschaftsprüfer (Public Auditor) was created by the 1st Implementing Ordinance to the VO on December 15, 1931. Public Auditors had to be publicly appointed, and auditing firms had to be registered.

On February 1, 1932, the Institut der Wirtschaftsprüfer e.V. (IDW) [Institute of Public Auditors, Incorporated Association] was established in Berlin through a renaming of the IRT. Only Public Auditors (Wirtschaftsprüfer) and Public Audit firms (Wirtschaftsprüfungsgesellschaften) could become members of the IDW. One of the goals of the IDW was to develop into a professional representative body that could uniformly advocate for its interests externally. The IDW published its first professional opinion in 1933; the topic was 'The Level of Detail in the Audit Report,' followed by 17 further professional opinions later that same year. The journal's inaugural issue in January 1932 cemented the name 'Der Wirtschaftsprüfer' as the essential professional reading for all publicly appointed auditors. The first managing directors were Dr. Hans Adler and Dr. Paul-Ludwig Buchholz. It was a private association without a public-law character, with the intention of developing into a professional representative body. A professional liability insurance policy for the members was concluded with Lloyd's. The “Confidential News” (Vertraulichen Nachrichten) was published as the members' magazine. The first technical committee—shortly thereafter renamed the Main Technical Committee (HFA)—was constituted with the task of clarifying important issues concerning mandatory audits. The first annual meeting took place on February 19, 1933. In May 1933, the Third Reich recognized the IDW as the official professional representative body for Public Auditors. In June 1934, membership in the IDW became mandatory for Public Auditors. The mandatory audit requirement for all stock corporations (Aktiengesellschaften) is introduced in 1934. In 1935 a loose-leaf collection of professional opinions (Fachgutachten) is published for the first time. The statutory annual audit is suspended by regulations dated September 4th 1934. In 1936 the auditing of cooperatives by certified public auditors is regulated.

Dissolution, Post-War Re-establishment, and WPO (1939–1966)

After its integration and dissolution into the Reich Chamber of Economic Trustees in April 1943, the Chamber itself was dissolved in October 1945 following the end of World War II. In 1946, individual institutes reformed in Germany, and the associations in the British Occupation Zone merged in the same year to form the Institut der Wirtschaftsprüfer e.V. with 440 voluntary members starting in Nord-Rheinprovinz/Westfalen and began publishing the "Fachnachrichten" newsletter. Further state representations were founded in the following years. The association moved to Düsseldorf in 1948. On September 18, 1950, its own publishing house, Verlagsbuchhandlung des Instituts der Wirtschaftsprüfer [Publishing House of the Institute of Public Auditors], was founded as a GmbH (limited liability company). In 1954, the IDW was a founding member of the Union Europénne des Experts Comptables Economiques et Financiers [European Union of Economic and Financial Accountants]. In the same year, the association's name was changed to Institut der Wirtschaftsprüfer in Deutschland e.V. [Institute of Public Auditors in Germany, Incorporated Association]. The year 1961 saw the enactment of the federal Auditors' Act (WPO), which established the Chamber of Public Auditors (WPK) to take over the professional regulatory functions for the auditing profession. The IDW offered preparatory courses for the Public Auditor examination for the first time in 1966.

Global Integration and Quality Standards (1972–1995)

The publishing house has operated as IDW-Verlag GmbH since 1972. When the IASC (International Accounting Standards Committee) was founded in 1973 and the International Federation of Accountants (IFAC) was founded in 1977 at The 11th International Congress of Accountants in Munich, the IDW was again involved as a founding member in each instance. In 1995, the IDW and the WPK reinforced auditing standards by issuing a joint statement (VO 1/1995) focused on Quality Assurance in Auditing Practice.

Capital Markets and Regulatory Tightening (1998–2005)

The 1998 KonTraG Act increased auditor liability limits and mandated internal rotation for auditors of listed companies, while also establishing the DRSC. The 1998 Capital Market Access Facilitation Act (KapAEG) allowed listed companies to prepare consolidated financial statements using IAS or US-GAAP, providing an exemption from German HGB rules. In 2000, the KapCoRiLiG Act was published, subjecting limited-liability commercial partnerships to the same accounting and auditing requirements as corporations. The 2002 Transparency and Disclosure Act (TransPuG) was enacted, primarily resulting in changes to the content of the audit report. On July 30, 2002, the Sarbanes-Oxley Act (SOX) came into effect in the US, significantly impacting the German auditing market. The 2005 Auditor Oversight Act (APAG) established an independent commission to supervise auditors and sworn book auditors conducting statutory audits.