Audit is an essential part of a company’s corporate governance system. Although the auditors act primarily in the interests of the company’s owners by monitoring the legality of the company’s governance and accounting, auditing provides benefits also to third parties, such as the company’s creditors and the society at large. In practice, the auditor performs an audit of the corporation’s accounts, financial statements, annual report and administration and, on the basis of the audit, presents an audit report regarding the reliability of the company’s financial statements. Auditing is primarily a review of legality, i.e. its purpose is to establish whether the company’s accounts comply with applicable law and regulations to the effect that the financial statements give true and fair view of the company's operating result and financial standing.
An auditor of a parent company shall also audit the consolidated financial statements, and ensure that the auditors of all group companies have conducted the audit appropriately.
In addition to the annual audit, the auditor’s statutory tasks in a limited liability company include the issuing of various certificates and statements:
a certificate in connection with the payment of share capital;
a statement regarding property received as contribution in kind;
other statements in accordance with the Limited Liability Companies Act;
a statement regarding draft terms of merger or demerger;
report of a special audit;
a certificate for an applicant for an authorization for carriage of goods by road, regarding the sufficiency of the applicant’s financial resources; and
other statements and certificates as required by law or regulations issued by public authorities.
In addition to the statutory duties, an auditor may also perform special assignments, reporting to the principal and only performing the separately agreed assignments. A special audit is commonly carried out e.g. in connection with a due diligence process.
In addition to the audit report, an auditor may issue remarks to the company’s governing body or bodies in a confidential audit memorandum, which is not included in the audit report. The responsible governing body shall process the memorandum including such remarks without delay.
The Board of Directors and the Managing Director or corresponding governing bodies are required to provide the auditor with all requested information, and to otherwise assist the auditor as requested. The auditor is also entitled to participate in the meetings of governing bodies to the extent the auditor’s presence is necessary due to the nature of the matters that are to be dealt with, and to speak in matters relating to the auditor’s duties.
An auditor’s most important qualification is that the auditor shall be independent in relation to the company. The auditor is entitled to a reasonable commission.
The title system of professional auditors is reformed on 1.12016, after which the KHT and HT are the new titles of professional auditors. HT auditors have received the basic auditing certification. The former HTM-degree is equivalent to the new HT degree. KHT auditors have received the additional certification required to carry an audit in major corporations.
The Auditing Act is based on the principle that only a certified auditor, i.e. a KHT or HT auditor or auditing firm can act as a company’s auditor. Small companies are released from the obligation to carry out an audit. A company is regarded as small, if no more than one of the following thresholds was exceeded in both the closing financial period and the immediately preceding financial period:
balance sheet total: 100,000 euros;
turnover: 200,000 euros;
average number of employees exceeds three.
However, an auditor must be chosen if it is required in the partnership agreement or the articles of association.
Notwithstanding the above thresholds, a parent company of a group of companies is always required to appoint a KHT or HT certified auditor or auditing firm, if the principal activities of such parent company consist of owning and holding of securities and it exercises significant influence over the operating and financial policies of another accountable entity.
Public limited liability companies, as well as larger private limited liability companies and groups of companies exceeding at least two of the following thresholds are, however, always required to appoint a KHT certified auditor or auditing firm: