Biased foundation auditor: recusal and independent reappointment

Bias describes a relationship that calls independent auditing into question. The review therefore focuses on the verifiable connection between the auditor and the foundation, a foundation body, a beneficiary or a connected company. An unfavourable report may prompt a concern, but it does not replace the review of the actual relationship.

The first assessment should record current roles, former activities, employment, professional cooperation and family proximity. It should also identify holdings and companies over which the private foundation can exercise material influence. Each fact must be assigned to a person, a company and a period.

The review should distinguish statutory ineligibility from a separate loss of confidence. A statutory exclusion calls for a different next step than dissatisfaction with a professional assessment.

Section 20(3) PSG excludes certain personal and professional connections. In particular, the foundation auditor may not be a beneficiary, a member of another foundation body or an employee of the private foundation. The provision also covers certain employment relationships with companies over which the private foundation can exercise material influence.

The statutory review extends beyond the date of appointment. Section 20(3) PSG also takes account of a corresponding former position during the preceding three years. Professional practice with an excluded person and close relatives of an excluded person must also be considered. A declaration simply stating “independent” is therefore insufficient by itself.

The foundation should address each statutory requirement separately and record the answer as at a defined date. If the bodies, beneficiary group, employment or ownership structure changes, the independence review must be updated. This shows whether the situation has changed since appointment.

A reliable file starts with the current foundation deed and a list of all foundation bodies. It should also contain the beneficiary position, the private foundation’s holdings, material influence and the proposed auditor’s business connections. Former roles should be recorded with their start and end dates.

The auditor’s declaration should address each statutory exclusion separately. Where a professional entity is involved, the foundation must also identify the person performing the audit and the professional or economic relationships within that entity. A company name alone does not answer this question.

Each entry should identify its source: Companies Register extract, body resolution, ownership chart, employment record, agreement or written declaration. Conflicts between records belong on an open review list. An unresolved connection cannot be replaced by a general statement of confidence.

Once a relevant connection becomes known, the facts should be documented as one file. Record the person or company concerned, the nature of the connection, its start and end and whether section 20(3) PSG applies. Body members affected by the connection should disclose their own involvement in the further handling.

The audit file and communications about possible bias should be kept separate from general criticism of the report. This makes it possible to trace when the information became known and which body must decide the further appointment. The mere allegation does not by itself determine the legal consequence.

Where there is no supervisory board, the documents should be prepared for the court with responsibility for the appointment. If a supervisory board exists, its statutory appointment authority must be observed. The foundation deed may contain additional rules on appointment, removal and term, but those rules do not automatically displace the statutory authority.

A reappointment requires a joint review of the candidate’s eligibility, independence and the competent appointing body. Under section 20(1) PSG, the court generally appoints the foundation auditor. Where a supervisory board exists, that body appoints the auditor. A proposal in the foundation deed may be considered, but it does not bind the court.

In 6 Ob 2/25z of 26 March 2025, the Austrian Supreme Court described the foundation auditor as the second mandatory body and an independent control body. In a court appointment, the court may therefore consider the welfare of the particular foundation and select a suitable independent auditor. A proposal does not replace that selection review.

The new candidate’s complete declaration, professional qualification, previous work and relevant connections should be available. The change should be recorded as a separate appointment. Only then can the audit file be aligned with the new person and authority.

Recusal does not amend the foundation deed. If the issue concerns use of an existing amendment reservation, the separate article on amending the foundation deed under section 33 PSG addresses the power to amend. This article focuses on the auditor’s independence as a control body.

Dissolution of the private foundation is also not a substitute for clarifying possible bias. Grounds for dissolution, winding up and deletion follow their own requirements. These questions are discussed in the article on dissolution of a private foundation. For recusal, the evidence of the specific relationship remains decisive.