The new Finnish Audit Act (Act 459, April 13 2007) and related legislation entered into force on July 1 2007. The Act implements Directive 2006/43/EC, the Statutory Audit Directive, on statutory audits of annual accounts and consolidated accounts, ensuring transparency and quality assurance for statutory audits, and statutory auditors' independence within the EU. The Act also features some small amendments based on national needs and further introduces the international auditing standards adopted by the EU, aiming to achieve a maximum degree of harmonization in all statutory audits throughout the EU.
Under the new regime, the smallest companies (excluding associations) are exempted from the statutory audit requirement. However, a company choosing not to appoint an auditor must first amend its articles of association by removing the stipulation concerning the appointment of auditors. This can be done provided the company meets no more than one of the following criteria during its two latest financial years:
- Its balance sheet total exceeds €100,000.
- Its annual turnover or equivalent exceeds €200,000.
- Its average number of employees is three or more.
For group companies, the above limits are determined on the basis of the consolidated financial statements.
However, a company whose principal business is to own securities, and which exercises material control over another entity as defined in the Accounting Act, is not exempted from the statutory audit requirement.
Auditors carrying out the statutory audit of public-interest entities, which are defined as publicly traded companies, credit institutions and insurance undertakings, must annually provide the board of directors of the entity a written confirmation of the auditor's independence and publish certain information on the audit firm. Moreover, these auditors must produce a report on matters potentially affecting their independence and measures taken to mitigate any such matters.
The Act further facilitates cross-border activities by auditors and audit firms, and builds grounds for international cooperation in respect of the supervisory powers of competent national authorities.
To correspond to international audit standards and recent EU developments, the contents of audit reports have also been amended. For example, the report should contain a statement to the effect that it observes the international auditing standards and that the financial statements give a true and fair view of the entity, and whether the information contains any inconsistencies. Requirements on specific statements under the previous regime as to the approval of the financial statements, discharge of liability and distribution of funds have been removed.
A company incorporated after the Act entered into force may no longer appoint a non-practitioner as auditor, as the auditor must be authorized in accordance with the Act. A company incorporated before the Act entered into force may still appoint such an auditor up to and including the financial year ending December 31 2011. After the expiry of this transitional period, non-practitioners may only be appointed in associations.
The maximum mandate of an auditor in so-called public-interest entities is limited to seven years. An auditor is allowed to participate in the audit of the audited entity again after a minimum period of two years. In the case of an audit firm, the limitation applies only to the primarily responsible auditor.