Audit Requirements in France: Which Companies Need Auditors?

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Table of Contents

• Introduction to French Audit Requirements
• The Legal Framework for Statutory Audits in France
• Threshold Requirements: Understanding When Audit Becomes Mandatory
• Audit Requirements by Company Type
• Exemptions and Special Cases
• Appointing and Working with a Statutory Auditor
• Consequences of Non-Compliance
• Current Trends and Future Developments
• Conclusion
• Frequently Asked Questions

Introduction to French Audit Requirements

Navigating the French audit landscape can feel like deciphering a complex legal puzzle. Whether you’re launching a startup in Paris, running a mid-sized enterprise in Lyon, or managing a subsidiary of an international company, understanding when you need a statutory auditor (Commissaire aux Comptes or CAC) isn’t just about compliance—it’s about strategic business management.

Let’s cut through the complexity: French audit requirements aren’t designed merely as administrative hurdles; they serve as guardrails for financial transparency and stakeholder protection. But the rules aren’t one-size-fits-all, and misinterpreting them can lead to significant legal and financial consequences.

Consider this scenario: You’ve successfully grown your French SAS (Société par Actions Simplifiée) over several years, gradually increasing revenue and staff. What you might not realize is that crossing certain thresholds quietly triggers audit obligations—even if no authority has specifically notified you. This oversight has left many business leaders facing unexpected compliance issues.

This guide will provide you with clear, actionable intelligence on French audit requirements, helping you transform a potential regulatory headache into an opportunity for better governance and financial credibility.

The Legal Framework for Statutory Audits in France

France’s audit framework rests on several legislative pillars that have evolved considerably in recent years. The foundation remains the French Commercial Code (Code de Commerce), particularly Articles L.823-1 through L.823-8, which establish the core statutory audit requirements.

However, a significant shift occurred with the implementation of the Pacte Law (Loi Pacte) in May 2019. This legislation dramatically reformed French business regulations, including raising the thresholds that trigger mandatory statutory audits. The explicit goal? Reducing regulatory burdens on smaller enterprises while maintaining appropriate oversight for larger entities.

This reform aligned French practices more closely with European standards, specifically EU Directive 2013/34/EU on annual financial statements, which had established higher audit thresholds across Europe.

As Jean-Michel Durant, Partner at a leading French audit firm, explains: “The Pacte Law represents a fundamental rebalancing of the French audit landscape. While raising thresholds has removed requirements for thousands of smaller companies, it has sharpened focus on entities where stakeholder interests and economic impact justify greater scrutiny.”

It’s worth noting that these regulations don’t exist in isolation. They interface with broader regulatory frameworks, including:

• The French Monetary and Financial Code
• Regulations from the French Financial Markets Authority (AMF)
• Standards issued by the National Company of Auditors (CNCC)

For international businesses, understanding how these French requirements interact with global standards like IFRS or group reporting obligations becomes another critical consideration.

Threshold Requirements: Understanding When Audit Becomes Mandatory

The heart of French audit requirements lies in its threshold system. Since the Pacte Law’s implementation, companies must meet or exceed two of the following three criteria for two consecutive financial years to trigger mandatory audit requirements:

These thresholds apply to most commercial entities, but the practical application requires close attention to specific calculation methods:

Calculating Balance Sheet Total

This refers to the total assets on your balance sheet without deducting liabilities. Common mistakes include overlooking certain asset categories or failing to account for year-end adjustments that might push you over the threshold.

For example, a manufacturing company with equipment valued at €2.5 million, inventory worth €800,000, and receivables of €1.2 million would have a balance sheet total of €4.5 million—exceeding the €4 million threshold regardless of its liabilities.

Determining Net Turnover

Net turnover encompasses your company’s ordinary activities, excluding VAT and other indirect taxes. This isn’t simply your total revenue—it requires specific adjustments.

Consider this real-world scenario: A Paris-based digital marketing agency reported €7.5 million in annual revenue. However, after excluding extraordinary gains from a one-time asset sale (€600,000) and VAT, their adjusted net turnover for threshold purposes was actually €5.8 million—still below the €8 million threshold.

One frequent oversight involves international groups failing to recognize that these calculations apply on a standalone entity basis, not consolidated figures. Your French subsidiary might require an audit based on its individual metrics, even if it seems small within your overall corporate structure.

Audit Requirements by Company Type

While thresholds provide general guidance, specific audit requirements vary significantly by company type, creating nuanced obligations that depend on your legal structure.

SA (Société Anonyme)

For traditional public limited companies (SAs), audit requirements are particularly stringent, reflecting their potential for broader shareholder bases:

• Mandatory requirement: All SAs must appoint at least one statutory auditor regardless of size
• Dual auditor requirement: SAs publishing consolidated accounts or listed on regulated markets must appoint two statutory auditors
• Term length: Auditors are appointed for renewable six-year terms

This creates an important strategic consideration for entrepreneurs. As Laure Moreau, a Paris-based business formation specialist, notes: “I’ve advised numerous clients to consider the SAS structure instead of SA when appropriate, since the mandatory audit requirement for all SAs represents a significant compliance cost for smaller operations.”

SAS (Société par Actions Simplifiée)

The SAS structure—increasingly France’s preferred corporate form—follows the standard threshold rules, making it more flexible for growing businesses:

• Audit required only when exceeding two of the three thresholds for two consecutive years
• Controlled subsidiaries may face different requirements (see below)
• Term length matches the SA requirement at six years

SARL (Société à Responsabilité Limitée)

France’s equivalent to limited liability companies follow the standard thresholds with some variations:

• Standard threshold rules apply for mandatory audits
• Partnership-like SARLs (SEL, SELARL) may have profession-specific requirements

Corporate Groups and Subsidiaries

Perhaps the most complex area involves French subsidiaries within larger corporate structures:

• Control test: A French subsidiary controlled by a company that prepares consolidated accounts must appoint an auditor, even if below the standard thresholds
• Exemption possibility: Subsidiaries may be exempt if they’re included in the group’s consolidated accounts reviewed by a group auditor, subject to specific conditions

This creates particularly challenging situations for international groups. Consider this case: A German manufacturing company established a French SAS subsidiary generating €5 million in revenue with 30 employees—both below the standard thresholds. However, because the subsidiary was controlled by the parent company which prepared consolidated accounts, an audit was required despite not exceeding the usual thresholds.

Exemptions and Special Cases

While the threshold system provides the general framework, French audit regulations include several notable exemptions and special cases that may affect your compliance obligations:

Small Group Exemptions

Small groups meeting specific criteria may qualify for exemptions from consolidated account requirements, which in turn affects audit obligations. To qualify, the group must not exceed two of these thresholds on a consolidated basis:

• €24 million balance sheet total
• €48 million net turnover
• 250 employees

However, utilizing this exemption requires careful planning and consistent application.

Sector-Specific Requirements

Certain sectors face enhanced audit requirements regardless of size, highlighting France’s risk-based approach to financial oversight:

• Financial institutions: Banks, insurance companies, and investment firms always require statutory auditors
• Regulated professions: Legal entities practicing regulated professions (law firms, accounting firms) have profession-specific requirements
• Associations and foundations: Those receiving significant public funding (above €153,000) must appoint an auditor

For instance, a small asset management firm in Nice with just 15 employees and €1.5 million in annual revenue—well below standard thresholds—still required a statutory auditor due to its regulated status under financial services rules.

Voluntary Appointments

While much focus remains on mandatory requirements, voluntary audit appointments are increasingly common for strategic reasons:

• Companies seeking external financing or preparing for sale often voluntarily appoint auditors to enhance credibility
• Businesses approaching thresholds may appoint auditors preemptively to ensure smoother transitions
• International subsidiaries may align with group practices even when not locally required

Bernard Lavigne, CFO of a Lyon-based technology company, explains their decision: “Though we weren’t required to have a statutory audit under French law, we voluntarily appointed an auditor three years before we anticipated crossing the thresholds. This gave us time to improve our financial systems progressively rather than scrambling to meet audit standards when it became mandatory.”

Appointing and Working with a Statutory Auditor

Once you’ve determined that your company requires a statutory auditor, the appointment process and working relationship demand careful attention:

Selection and Appointment Process

The appointment follows a specific procedure:

1. Identification: Identify qualified auditors registered with the French professional body (CNCC)
2. Proposal: The proposed appointment is presented at the general shareholders’ meeting
3. Approval: Shareholders vote to approve the appointment
4. Registration: The appointment must be registered with the clerk of the commercial court

When selecting an auditor, consider not just compliance capability but sector expertise. A tech company might benefit from an auditor with digital business experience, while a manufacturing operation might prioritize auditors with production accounting knowledge.

Audit Timeline and Requirements

Understanding the typical audit calendar helps businesses prepare effectively:

• Planning stage: Usually 3-4 months before fiscal year-end
• Preliminary work: Often conducted 1-2 months before year-end
• Year-end fieldwork: Typically 2-3 months after the closing date
• Report issuance: Must be completed before the annual general meeting approving the accounts

Pro tip: Don’t underestimate preparation time. Companies facing their first audit often struggle with documentation requirements and process formalization. Starting preparations 6-12 months before your first anticipated audit can significantly reduce stress and potential issues.

Cost Considerations

Audit fees in France vary considerably based on company size, complexity, and location:

• Small companies near threshold levels: Approximately €5,000-€15,000
• Mid-sized operations: €15,000-€50,000
• Large or complex entities: €50,000+

These fees reflect not only the auditor’s time but also the firm’s risk exposure and the specialized knowledge required. While cost-shopping is understandable, selecting solely on price can lead to quality issues or insufficient attention to company-specific risks.

Consequences of Non-Compliance

Failing to appoint a statutory auditor when required carries significant risks that extend beyond simple regulatory penalties:

Legal and Financial Penalties

The direct consequences of non-compliance include:

• Financial penalties: Fines can reach tens of thousands of euros
• Personal liability: Company directors may face personal liability for failing to ensure proper audit appointments
• Transaction validity: Certain key corporate decisions made without required auditor involvement may be deemed invalid

A cautionary example comes from a medium-sized retail business in Bordeaux that failed to appoint an auditor despite exceeding thresholds. When subsequently seeking bank financing, their non-compliance was discovered, leading to delayed financing, regulatory penalties, and the need to restate two years of financial reports under proper audit supervision—a costly and reputation-damaging process.

Business Impact

Beyond regulatory consequences, non-compliance creates significant business challenges:

• Financing obstacles: Banks and investors typically require properly audited accounts
• Transaction complications: M&A activities are significantly complicated by audit compliance issues
• Relationship damage: Business partners may question overall governance when basic compliance requirements aren’t met

Claire Dumont, a Paris-based M&A advisor, notes: “I’ve seen acquisition deals fall apart or require substantial price reductions when target companies weren’t properly audited according to French requirements. Buyers simply won’t accept the unknown risks associated with unaudited financial statements when they should have been subject to statutory audit.”

Current Trends and Future Developments

The French audit landscape continues to evolve, with several important trends shaping future requirements:

Regulatory Evolution

Key regulatory developments to monitor include:

• European harmonization: Ongoing efforts to align French requirements with broader EU standards
• Sustainability reporting: Emerging requirements for auditor involvement in non-financial reporting, particularly ESG disclosures
• Digital transformation: Evolving standards for auditing digital assets, cryptocurrency holdings, and automated processes

As Philippe Lamberts, an EU lawmaker involved in audit regulation, recently stated: “The future of European audit regulation lies in balancing meaningful oversight with technological adaptation. We’re particularly focused on ensuring new digital business models receive appropriate financial scrutiny.”

Practical Implications for Businesses

For businesses operating in France, these evolving requirements suggest several strategic considerations:

• Proactive monitoring: Track your company’s growth against thresholds to anticipate audit requirements
• Governance planning: Develop audit committee structures before they become mandatory
• Systems development: Invest in financial systems that will support audit requirements as your company grows

The most sophisticated companies are now treating potential audit requirements as an opportunity rather than merely a compliance obligation—using the possibility of future audits as motivation to improve financial controls, documentation, and governance practices that create broader business benefits.

Conclusion

Navigating French audit requirements demands a balanced understanding of both technical thresholds and strategic implications. While the 2019 Pacte Law provided welcome relief for many smaller businesses, the remaining requirements serve important economic functions in ensuring financial transparency and protecting stakeholder interests.

For businesses operating in France, the key takeaways include:

1. Know your thresholds: Understand the specific metrics that trigger audit requirements for your company type
2. Plan proactively: Anticipate crossing thresholds rather than reacting after obligations arise
3. Consider strategic benefits: View audits not merely as compliance exercises but as opportunities to strengthen financial governance
4. Seek specialized advice: Given the complexity of French audit regulations, expert guidance often pays significant dividends

Whether you’re launching, growing, or restructuring a business in France, audit requirements represent a significant aspect of your regulatory landscape. By approaching these requirements with strategic foresight rather than mere compliance mindset, you can transform a potential regulatory burden into a valuable business discipline that enhances credibility, improves processes, and supports sustainable growth.

Frequently Asked Questions

What happens if my company crosses the audit thresholds for one year, then falls below them the following year?

French audit requirements are triggered when you exceed two of the three thresholds for two consecutive years. If you cross the thresholds in Year 1 but fall below in Year 2, you would not yet face mandatory audit requirements. However, if you exceed thresholds in Years 1 and 2, then fall below in Year 3, you would still require an audit for Year 3. The obligation only ceases when you’ve remained below thresholds for two consecutive years. This creates a “sticky” effect where audit requirements persist even through temporary business contractions.

As a foreign company establishing a French subsidiary, what audit considerations should we prioritize?

Foreign companies establishing French subsidiaries should focus on three critical areas. First, understand that thresholds apply to the French entity individually, not your global operation. Second, recognize that if your parent company prepares consolidated accounts, your French subsidiary may require an audit regardless of size unless specific exemption conditions are met. Third, consider voluntary audit appointment even when not required if you anticipate growth, as it establishes proper governance from the outset and avoids scrambling to implement audit-ready processes later. Early consultation with a French audit specialist is highly recommended, particularly given the interaction between local requirements and international group structures.

How do French audit requirements compare to those in other European countries?

Since the 2019 Pacte Law reforms, French audit thresholds have become more aligned with broader European standards, though variations persist. France’s current thresholds (€8 million revenue, €4 million balance sheet, 50 employees) are similar to those in Germany but still more stringent than the UK’s higher thresholds. The most significant difference lies in sector-specific requirements—France maintains stronger audit obligations for regulated sectors regardless of size. Additionally, France’s approach to group structures tends to be more stringent, with French subsidiaries of groups more likely to require audits than in some other EU jurisdictions. These differences reflect France’s traditional emphasis on formal oversight and stakeholder protection, despite recent moves toward regulatory simplification.