On April 6, 2022, the Minister of Business and Industry proposed amendments to a number of laws, which among other things means increased auditor involvement in the form of "auditor duty" in financial reporting for certain smaller companies

The purpose is to strengthen compliance and reduce the number of errors in the reported annual reports, in bookkeeping routines and in tax and VAT returns. The need for changed rules is based on the recognition that increased involvement of an approved auditor creates value for both companies and society as a whole.

Increased auditor involvement

The part of the bill that involves increased auditor involvement means:

  • Requirement to choose either audit or extended review of annual reports for companies with a balance sheet total exceeding DKK 50 million for two consecutive financial years, regardless of the company's net turnover and number of employees. The tightening is primarily aimed at investment companies that manage significant funds and have significant debt, but have few employees and low turnover.
  • An auditor's report from an independent auditor is required for companies included in accounting class B in special risk industries with an annual net turnover between DKK 5-8 million. Covered companies can choose whether it should be a statement on assistance, review, extended review or audit of the financial statements.
  • the possibility of ordering an audit or extended review of the annual report if the Danish Business Authority has found significant errors or deficiencies in the company's bookkeeping during an inspection.
  • Loss of the possibility to opt out of auditing in the event of a fine or conviction for violation of anti-money laundering legislation

The different types of auditor's reports

An auditor's report creates trust and credibility in the content of a company's annual report. Only an approved auditor can issue statements on annual reports that are reported to the Danish Business Authority. In Denmark, an approved auditor is either a state-authorized or registered auditor.

Auditor involvement also creates value for the business

When an auditor has to express an opinion on an annual report, it requires an in-depth understanding of the nature of the business, its operations, the types of investments made or planned, and its structure and financing. This understanding must always be obtained in order to assess the company's choice of accounting policies. It also means that the auditor must obtain a thorough understanding of parts of the company's business processes and internal controls.

Entry into force

The "auditor obligation" bill was passed on May 19, 2022, and the changes to increase auditor involvement in financial reporting are effective for financial years beginning on or after January 1, 2023.

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