The board of statutory auditors is the audit body of the joint-stock companies that adopt the traditional system: it has the task of monitoring the company’s compliance with the law and the Memorandum of Association and has a supervisory function with regard to the actions of management.
The Board of Auditors only exceptionally exercise accountancy control and they do so only in closed companies, that is, companies which do not have recourse to the venture capital market, and only if envisaged in the by-laws. In all other cases, this function is fulfilled by a certified public accountant or an audit firms.
Control by the board of statutory auditors is of a general nature and is extended to any administrative activity, including the activities undertaken by the individual directors, by the managing directors and the general managers. Monitoring the company’s compliance with the law and with the Memorandum of Association also encompasses the work of the shareholders’ meeting and consists in the obligation for the auditors to impugn any resolution which is not valid, and to act in place of the meeting in case of obligatory reduction of the capital due to losses, as well as in case of constituting or increasing the share capital as a result of the appraisal of assets contributed in kind.
The implications of the monitoring activity exercised by the auditors affects not only the checking of purely formal data, but also the substance of management, but not the merits of management, which would imply an invasion of the sphere of competence of the directors.
The law still attributes to the board of statutory auditors some specific book-keeping competencies, as well as a series of powers and duties which are not directly monitoring activities; they are substitutive of some of the duties of the directors or of the meeting, and are mainly functions of active administration (limited to the carrying out of acts of ordinary administration), or, they may be consultative tasks (formulation of obligatory, preventive, non-binding opinions).
In the companies that adopt the two-tier system, it is the supervisory board that controls management and checks to see that actions do not infringe the law; as said earlier this body also takes on some of the competencies of the ordinary meeting (appointment of the directors of the board, exercising responsibility and approval of the financial statements).
In the companies that have adopted the monistic system instead, control is exercised by an ad hoc management control committee appointed from among the board of directors which has the power of appointment, annulment and replacement.
The rules governing the auditing of accounts apply also to the companies that adopt these systems, including the rule that the auditor must come from outside the company. Hence none of the members of the supervisory board or of the management control committee can be the auditors of the company.