System of Financial Audits in Finland Overhauled
by Mika Halme, Principal Financial Auditor
A new financial audit system was introduced in Finland on January 1, 2016. On that date, the new Auditing Act and the Act on Audits of Public Administration and General Government Finances entered into force and harmonized the system of auditor’s examinations and the supervision of audits. There are about 1,600 approved auditors in Finland.
Until the end of 2015, Finland had two systems of auditors (one for private-sector audits, the other for public-sector audits) and three categories of auditors and audit firms (KHT (C.P.A. (English)) HTM (Certified HTM-Auditor (English)) and JHTT (CPFA (English)).
The private-sector auditors (C.P.A and Certified HTM-Auditors) were approved auditors referred to in the EU audit directive. They had the right to audit corporations and foundations meeting the criteria put forth in the Auditing Act (net sales of 200,000 euros, balance sheet total of 100,000 euros and at least three employees). Compared with other EU countries, these limits are fairly low.
The difference between a C.P.A and a Certified HTM-Auditor was that the accounts of listed companies and other large corporations (public interest entities) had to be audited by C.P.A Auditors or C.P.A Audit Firms. The criteria for such companies and corporations were laid down in the Auditing Act (net sales of 50 million euros, balance sheet total of 25 million euros and at least 300 employees).
The accounts of municipalities, joint municipal authorities and other statutory public corporations had to be audited by CPFA Auditors. Each of the audit systems had its own auditor’s examinations, approval bodies and supervisors. C.P.A Auditors were approved and their work was supervised by the Finland Chamber of Commerce. Regional chambers of commerce approved and supervised the Certified HTM-Auditors, while the approval and supervision of the CPFA Auditors were the responsibility of the Board of Chartered Public Finance Auditing, which came under the purview of the Ministry of Finance.
The audits conducted by the National Audit Office (NAO) fell outside the scope of application of the old Auditing Act and the repealed Act on Chartered Public Finance Auditors. It is also laid down in the new Auditing Act and the Act on Audits of Public Administration and General Government Finances that they do not apply to the NAO. Furthermore, the NAO is not an audit firm referred to in these acts, and the auditors working at the NAO are not required to obtain authorization as auditors. However, a small number of CPFA Auditors have worked at the National Audit Office and most of them have been employed in the Financial and Compliance Audit Department.
As part of the audit system reform, the separate examination and supervision systems for private and public sector auditors were abolished and replaced with a new unified system in which the HT auditor’s examination is the basic audit examination. The approval requirements in the HT examination meet the requirements laid down for auditors in the audit directive of the EU. After passing the HT examination auditors can broaden their expertise by taking the C.P.A examination (intended for auditors specializing in public interest entities) and/or the CPFA examination (intended for auditors specializing in public administration and general government finances). In addition to introducing a unified system of examinations, the reform also abolished the separate supervision systems, and the supervision of all approved auditors is now the responsibility of the Auditor Oversight Unit in the Finnish Patent and Registration Office. The criteria for audited companies, corporations and foundations laid down in the Auditing Act will remain unchanged.