Denmark

Member Organizations

Member Organization Associate Other PAOs

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Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    Financial reporting requirements for commercial entities and financial institutions in Denmark are stipulated in European Union (EU) Directives and Regulations, which are then transposed into Danish law. The main applicable national laws are the Danish Financial Statements Act (2002), Danish Financial Business Act (2011), Danish Act on Public and Private Limited Companies (2009), Danish Securities Trading Act (2012), and the Danish Act on Approved Auditors and Audit Firms (2008). On May 21, 2015, the requirements of the new EU Accounting Directive were transposed into the Danish Financial Statements Act, effective for financial years starting on January 1, 2016, with early adoption permitted. It is expected that, to comply with the EU audit reform (regulation and directive) from 2014, the Danish Parliament will adopt the amendments to the Act on Approved Auditors and Audit Firms before June 2016.

    The Danish Parliament authorized two key governmental institutions to oversee the areas of financial reporting and auditing: the Danish Business Authority (DBA) and the Danish Financial Supervisory Authority (DFSA). The DBA and DFSA are also the designated accounting standard setters for the entities they are overseeing.

    The DBA (until 2012 known as the Danish Commerce and Companies Agency), which operates under the aegis of the Ministry of Business and Growth, oversees financial reporting for non-financial business entities. In practice, since 2007, the DBA has delegated to the Danish Accounting Standards Committee (DASC)—which is part of the FSR–Danish Auditors (FSR)—the authority to establish accounting standards. The DASC establishes standards for small, medium and large business entities that meet certain size criteria (B and C reporting classes of business entities under the Danish Financial Statements Act described below). The DASC has no legal mandate, but its technical guidance and standards are seen as the best expression from the profession of what constitutes good accounting practice in Denmark.

    Business enterprises in Denmark are subject to the requirements of the Danish Financial Statements Act. That Act defines types of entities that must prepare financial statements and provides exemptions for small entities that are below a certain size and turnover threshold. The Act divides companies into four reporting classes—A, B, C, and D—depending on the legal structure and size of the company, and stipulates the following accounting requirements:

    • Class A: This class comprises companies that are all privately owned firms, partnerships irrespective of size, and limited partnerships that meet the size criteria. There is no legal requirement for companies in class A to prepare financial statements for stakeholders other than the tax authorities. However, often the requirements to so are stated in an entity’s by-laws (articles of association).
    • Class B: This class contains small businesses, public and private limited companies, limited partnerships, commercial foundations, and limited partnership companies that meet the size criteria. Class B companies must apply the rules set out in the Danish Financial Statements Act. Furthermore, they may choose to apply the additional guidance in the standard issued in 2013 by the DASC or full IFRS.
    • Class C: This includes medium-sized and large companies, public and private limited companies, limited partnerships, commercial foundations, and limited partnership companies that meet the size criteria. Class C companies follow the same standards as Class B companies. Some of the requirements on recognition, measurement, and disclosures are mandated in Class C, but are voluntary for Class B.
    • Class D: This comprises listed companies and stock-based State-Owned Companies. These companies are required to apply EU-endorsed IFRSs in the consolidated financial statements and in separate financial statements for listed companies that do not prepare consolidated statements.

    In addition, the Danish Financial Statements Act stipulates auditing requirements in Denmark. Annual reports must generally be audited by external and independent state-authorized or registered public auditors. Audit is mandatory for Class C and D companies. Some companies in Class B can choose between having their accounts audited or undergo a modified form of audit (audit-light) that is available for financial reports with financial years starting January 1, 2013 onwards. All of Class A and companies from Class B that are below a stipulated threshold can voluntarily choose which kind of assurance service they need from their auditors, i.e., audit, audit-light, or review or accounting assistance, if any.

    Article 16 of the Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008 and Executive Order No. 487 (2013) on Quality Assurance Reviews stipulate that audits must be conducted in accordance with “generally accepted auditing practices.” The authorities have, however, never defined what “generally accepted auditing practices” actually means. De facto, the auditing standards issued by the FSR are applied. Since 2010, Danish auditing standards are effectively International Standards on Auditing (ISAs) as promulgated by the IAASB and translated by the FSR. Under the Danish Financial Business Act, supplemented by several executive orders and provisions contained within other acts, the DFSA oversees financial reporting of financial institutions in Denmark. Non-listed financial institutions are mandated by the DFSA to apply standards defined in the Danish Financial Statements Act. Auditors of the financial institutions are also subject to the requirements of the Audit Act and apply ISAs.

  • Regulation of Accountancy Profession

    Only auditors are regulated in Denmark at the state level. Until 2013, there were two auditor designations offered by two professional accountancy organizations (PAOs) in Denmark. The State Authorized Public Accountant (SPA) designation was offered by FSR–Danish Auditors (FSR), while the Registered Public Accountant (RPA) designation was offered by the Danish Institute of Certified Public Accountants (FRR). In 2011, FSR, FRR, and REVIFORA, an association for younger accountants or trainees, merged to form the FSR. The FSR is Denmark's umbrella trade organization for auditing, (including audit firms), accounting, tax, and corporate finance professionals.

    The FSR is the only PAO in Denmark. Although auditors in Denmark are not required to be members of the FSR, the vast majority of accountants in public practice are members voluntarily.

    In 2013, Act No. 617 of June 12, 2013 repealed the former two-tier system of professional qualifications for auditors, and the SPA became the only auditor designation in Denmark. According to transitional provisions, an RPA may keep the title as long as he or she wishes.

    The Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008 is the key law regulating the audit profession in Denmark. Paragraph 32 of the Audit Act gives the responsibility for public oversight of the audit profession to the Danish Business Authority (DBA), as part of the Ministry of Business and Growth, overseen by the Danish Parliament.

    The Audit Act authorizes the DBA to approve, register, and license auditors and audit firms; establish initial professional development (IPD) and continuing professional development (CPD) requirements; protect the SPA designation; define the duties and responsibilities of members (individuals and companies) of the profession; and set reporting requirements. In addition, the DBA is responsible for the adoption of standards and regulations (education, CPD, ethics, auditing and reporting); quality assurance) reviews; investigation and discipline; and cooperation and exchange of information with authorities in other countries on audit supervision.

    In addition to the state regulation, the FSR self-governs its members by prescribing additional requirements.

    The financial sector regulator, the Danish Financial Supervisory Authority, has the authority to establish additional educational requirements for auditors. Under Executive order No. 1406 of December 11, 2013 on CPD for SPAs, auditors who perform statutory audits for financial institutions are required to obtain a minimum of 180 CPD hours over a three-year period, with a mandatory 60 hours of extra CPD specific to performing accounting and auditing services in such institutions.

  • Audit Oversight Arrangements

    The Danish Business Authority (DBA), an agency within the Ministry of Business and Growth, is the public audit oversight authority in accordance with the Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008. The DBA is responsible for (i) registration, approval, and withdrawal of auditors; (ii) adoption of standards and regulations (education, continuing professional development, ethics, auditing and reporting); (iii) quality assurance (QA) reviews; (iv) investigation and discipline; and (v) cooperation and exchange of information with authorities in other countries on audit supervision. The DBA established the Danish Supervisory Authority on Auditing to operate the QA review system mandated by the Audit Act. The DBA is a member of the International Forum of Independent Audit Regulators.

  • Professional Accountancy Organizations

    The FSR–Danish Auditors (FSR) is the Danish umbrella trade organization for auditing (including audit firms), accounting, tax, and corporate finance professionals working predominantly in public practice, business, and industry, with a very small percentage working in the public sector. The FSR was established in 1912. In 2011, three audit institutes—the FSR (chartered accountants), the FRR (Danish Institute of Certified Public Accountants), and the REVIFORA (association for younger accountants or trainees)—merged into one association under the FSR name. The FSR is the only professional accountancy organization in Denmark. It has both corporate and individual types of membership, with more than 700 public accounting firms as members. Auditors in Denmark are not mandated to be members of the FSR, but the vast majority of State Authorized Public Accountants and Registered Public Accountants in public practice are voluntary members.

    The FSR self-regulates its members, the SPAs, by prescribing additional requirements for its membership. Under the existing system of regulation of accountancy profession, the FSR is authorized to:

    • prescribe accounting and auditing standards;
    • define and enforce ethical codes and discipline of its members;
    • collaborate with the Danish Business Agency and the Danish Financial Supervisory Authority on matters affecting the establishment of overall initial professional development and continuing professional development requirements; and
    • implement continuing professional education for its members and monitor compliance.

    In addition to being an IFAC member, the FSR is a member of the Fédération des Experts-comptables de Européen and the Nordic Federation of Accountants, represented by the leading national institutes of professional accountants in the five Nordic Countries.

  • Projects or Other Information

    In July of 2015, the Nordic Federation of Accountants published a consultation document with a deadline of October 19, 2015 on a new Standard for Audits of Smaller Entities that, if finalized, will apply in Norway, Sweden, Iceland, Finland, and Denmark. The proposed standard emphasizes the importance of robust and comprehensive documentation as well as compliance with ethical and quality control standards. Where it differs from ISAs is in the absence of detailed application material directing auditors as to how to exercise their judgment and exactly what to document.

    Being a European Union (EU) Member State, in June 2016, Denmark will be transposing into national law the requirements of Audit Directive 2014/56/EU on Statutory Audit, which amends Directive 2006/43/EC and Regulation (EU) No 537/2014 on specific requirements for statutory audits of public interest entities.

Adoption of International Standards

  • Quality Assurance

    Denmark has a mandatory quality assurance (QA) review system that covers audits of financial statements and other assurance engagements. The Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008 and Executive Order No. 985 (2014) on QA Reviews provide the legislative basis for the QA review system and grants authority to the Danish Business Authority (DBA) to supervise auditors and audit firms. The DBA established the Danish Supervisory Authority on Auditing (DSAA) to manage the QA review system outlined in the Audit Act. Clarified ISQC 1 and ISA 220, Quality Control for an Audit of Financial Statements, have been adopted in accordance with the Audit Act. The DBA conducts reviews of auditors and audit firms that audit public interest entities (PIE) on a three-year review cycle, while the DSAA reviews auditors and audit firms of non-PIEs at least every six years. The DSAA recommends appropriate follow-up actions to firms based on the findings of the QA reviews, and imposes relevant sanctions where necessary.

    FSR reports that, based on its assessment conducted in Q2 of 2015, the QA review system operated by the DBA and DSAA fulfills the requirements of SMO 1 (revised 2012).

    Current Status: Adopted

  • International Education Standards

    The State Authorized Public Accountant (SPA), the designation for statutory auditors, is the only category of professional accountants regulated at the state level in Denmark. The Danish Business Authority (DBA), the Danish Financial Supervisory Authority (DFSA), and universities share the responsibility for establishing and administering initial professional development (IPD) and continuing professional development (CPD) requirements for auditors in Denmark. The Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008 authorized the DBA to establish IPD and CPD requirements for statutory auditors. Executive Order No. 1406 of December 11, 2013 on the Examination for SPAs further clarifies the CPD requirements for SPAs who provide services to financial industry entities supervised by the DFSA.

    According to the UNCTAD’s 2013 report, accounting education requirements in Denmark for auditors are aligned with the requirements of IESs.

    The FSR–Danish Auditors (FSR) sets IPD and CPD requirements for its members. It reports that, while it is not legally mandated, in practice all candidates who plan to apply for a license as an SPA choose to enroll in the FSR’s IPD program. Furthermore, the FSR reports that most auditors also take CPD education/courses provided by FSR; however, members may also fulfill CPD requirements by taking training offered by the big accounting firms and some networks of smaller firms that provide CPD in different areas. The FSR reports that it addresses all IES IPD and CPD requirements on an ongoing basis.

    Current Status: Adopted

  • International Standards on Auditing

    Article 16 of the Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008 and Executive Order No. 985 (2014) on QA Reviews stipulate that audits must be conducted in accordance with “generally accepted auditing practices” and authorizes the Danish Business Authority (DBA) to set the auditing standards in Denmark. In practice, the “generally accepted auditing practices” are not defined and, de facto, the auditing standards issued by the FSR–Danish Auditors (FSR) are applied for audits in Denmark. Since 2010, Danish auditing standards are effectively International Standards on Auditing (ISAs) as promulgated by the IAASB and translated by the FSR. In addition, audit and assurance engagements are required to be conducted in accordance with Danish legislation where the requirements of the legislation exceed those established in IAASB pronouncements. Auditors of financial institutions are also subject to the requirements of the Audit Act and apply ISAs.

    ISAs as translated and adopted by the FSR are regarded as the generally accepted auditing standards in Denmark since the DBA has not issued such standards.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    Article 16 of the Danish Act on Approved Auditors and Audit Firms No. 468 of June 17, 2008 establishes ethical principles for State Authorized Public Accountants without reference to the IESBA’s Code of Ethics. It also gives the Danish Business Authority (DBA) the ultimate authority in setting ethical standards. The DBA delegated to the FSR–Danish Auditors (FSR) the authority to adopt ethical requirements for its members. FSR reports in its 2015 Action Plan that the IESBA Code of Ethics has been effective in Denmark since 2000. The FSR has an ongoing process to incorporate amendments to the Code and it has adopted and translated the 2013 version of the IESBA Code of Ethics for application by its members. Additional requirements have been included in the Code of Ethics in order to comply with Danish legal requirements. The FSR reports that the Code is also regarded as an important interpretative statement for non-members.

    Current Status: Adopted

  • International Public Sector Accounting Standards

    The Danish Ministry of Finance, which is responsible for the adoption of public sector accounting standards, has not adopted IPSASs in Denmark, and there is no timeline for doing so. Public sector bodies prepare financial statements on a cash basis. Nevertheless, the Central Government Accounts Council, which comprises representatives from various ministries, the National Audit Office, and the FSR–Danish Auditors (FSR), monitor the development of IPSASs and the use of the standards by other European Union member countries. IPSASs have not been translated into Danish.

    Government financial statements are prepared according to the rules prescribed by the Law on State Accounting. Financial statements for municipalities are prepared according to rules in the Law on Governance of Municipalities. The FSR reports that it is more and more common that governmental institutions and institutions run by municipalities prepare alternative, non-official financial statements based on the same principles as entities in the private sector, i.e., IPSAS-like principles.

    Current Status: Not Adopted

  • Investigation and Discipline

    In accordance with the Danish Act on Approved Auditors and Audit Firms (the Audit Act) No. 468 of June 17, 2008, the Danish Business Authority established the Auditors’ Tribunal, which has the ultimate responsibility for implementing the investigative and disciplinary (I&D) system in Denmark. The Auditors’ Tribunal is independent of the profession and has authority to impose various sanctions based on the findings of its investigations. The FSR–Danish Auditors (FSR), which has internal regulations governing members’ professional behavior, may forward cases to the Tribunal for investigation and, depending on the findings, has the authority to expel its members. According to Section 43 of the Auditors’ Act, the FSR is authorized by law to file a complaint against any state authorized and registered public accountant, whether he or she is a member or not.

    The FSR reports that, based on its review conducted in February 2015, the I&D system operated by the Auditors’ Tribunal fully complies with the revised SMO 6 requirements.

    The FSR reports that it also investigates suspicious actions performed by non-auditor members in order to protect the reputation of its membership.

    Current Status: Adopted

  • International Financial Reporting Standards

    The Danish Business Authority (DBA) and the Danish Financial Supervisory Authority (DFSA) are the designated accounting standard setters in Denmark for the entities they oversee.

    In line with EU requirements, as transposed into the Danish Financial Statements Act of 2002, listed companies in Denmark are required to apply EU-endorsed IFRS in their consolidated financial statements and in separate financial statements for listed non-group companies that do not prepare consolidated statements. Since 2009, Denmark has eliminated the requirement for listed companies to apply IFRS in their separate financial statements. Other companies are permitted to apply IFRS.

    Non-listed companies must also comply with the Danish Financial Statements Act. They may choose to apply IFRSs or the Danish Accounting Standards developed by the FSR–Danish Auditors’ Danish Accounting Standards Committee (DASC). Danish accounting standards issued by the DASC and/or IFRSs may be applied on a voluntary basis to provide transparency and to fulfill user information needs.

    Although based on IFRS, Danish accounting standards differ from IFRS in some respects.

    Under the Danish Financial Business Act, supplemented by several executive orders and provisions contained within other acts, the DFSA oversees financial reporting of financial institutions in Denmark. Non-listed financial institutions are mandated by DFSA to apply standards defined in the Danish Financial Statements Act.

    Denmark has not adopted IFRS for SME. In 2015, the Danish Parliament granted an authorization to the DBA to issue rules on deviations to be made from the Danish Financial Statements Act, if such deviations are needed to make IFRS for SME applicable for Danish companies. No such rules have been issued yet.

    The definitions of elements, recognition criteria, etc. noted in the Danish Financial Statements Act and in the DFSA’s executive orders are identical to the IFRS Framework and standards.

    Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 04/2016
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