The German Supervisory Board on Its Way to Professionalism
2. Supervisory Board as Direct Recipient of the Auditor’s Report
Since the supervisory board, under the new law, receives the auditor’s report directly from the auditor, the management board is no longer able to falsify the content of those reports. Under the former legal situation, the management board received the auditor’s report (Section 321(3) GCC as of 1985). It was common practice that the auditor firstly sent a draft to the management board, before both discussed the content of the report with each other.40 Only after this final discussion, the auditor sent an ultimate version of the auditor’s report to the management board. Many times, critical passages of that report had been removed at the instance of the management board in order to make sure that the supervisory board did not ask bothersome questions. The auditor frequently complied with such kind of requests, because she had an interest to audit the company in the next years again. As a result, the management board gained control over the auditor what significantly interfered with the audit assignment that was focusing on the legality and regularity of the management board’s accounting.41 Therefore, the newly established Section 321(5) GCC requires the auditor to directly deliver her report to the supervisory board in lieu of the management board. Moreover, under the new legal situation, both the management board and the supervisory board have to make sure that the management board does not influence the auditing process and the auditor’s report in a manner that would interfere with the ratio legis of Section 321(5) GCC.42
3. Individual Receiving the Auditor’s Report
Since every member of the supervisory board, as a rule, receives a copy of the auditor’s report, the level of information of the supervisory board members has increased with the result that they are able to monitor the management board more efficiently. Under the former law, only in a few corporations all of the members of the supervisory board received the auditor’s report. In most cases, the report was handed out at the beginning of the supervisory board meeting and was collected immediately afterwards (“table
40 See, Peter Hommelhoff, Störungen im Recht der Aufsichtsrats‐Überwachung, in CORPORATE GOVERNANCE, 1, 15‐16 (Arnold Picot ed., 1995), compared to Id. Dörner, 5.
See, LIEDER (note 2), 528; Hommelhoff (note 23), 2628.
42 See, Holger Altmeppen, Der Prüfungsausschuss – Arbeitsteilung im Aufsichtsrat, 33 ZEITSCHRIFT FÜR UNTERNEHMENS‐ UND GESELLSCHAFTSRECHT (ZGR) 390, 407 (2004); Hommelhoff (note 23), 2628; LIEDER (note 2), 529‐30 compared to Dörner (note 39), 5‐6; Dietrich Dörner, Zusammenarbeit von Aufsichtsrat und Wirtschaftsprüfer im Lichte des KonTraG – Schlüssel zur Verbesserung der Corporate Governance –, 53 DB 101, 104‐105 (2000); Christina Escher‐Weingart, Die gewandelte Rolle des Wirtschaftsprüfers als Partner des Aufsichtsrats nach den Vorschriften des KonTraG, 2 NZG 909, 918 (1999); Karl‐Heinz Forster, Das Zusammenspiel von Aufsichtsrat and Abschlussprüfer nach dem KonTraG, 44 AG 193, 197 (1999).