Member Organization Associate Other PAOs
Legal and Regulatory Environment
Overview of Statuatory Framework for Accounting and Auditing
As a member of the European Union (EU), Finland is subject to the accounting, auditing and financial reporting requirements established in EU Regulations and Directives as transposed into national laws and regulations.
The Finnish Accounting Board, within the Ministry of Employment and Economy, is responsible for developing accounting legislation and related guidance. The Accounting Act No. 1620/2015 establishes the requirements for the preparation of corporate financial statements in Finland and transposes the EC Accounting Directive (2013/34/EU). The Act outlines the accounting standards, EU-endorsed IFRS or Finnish Generally Accepted Accounting Principles (Finnish GAAP), which entities should apply based on their size and type.
Application of EU-endorsed IFRS is required for the consolidated financial statements of public interest entities (PIEs). Under the Act, PIEs are defined as listed companies, credit institutions (including investment firms) and insurance companies (including pension foundations, pension funds and other entities that arrange employment pensions). In addition, Finland also requires EU-endorsed IFRS in the separate financial statements of companies whose securities trade in a regulated market but that do not prepare consolidated financial statements because they have no subsidiaries.
Companies that are not required to use EU-endorsed IFRS must follow the requirements set in Finnish GAAP. In addition, the reporting requirements for small-sized companies have been simplified and exemptions apply under a certain criteria. These firms are allowed to prepare abridged financial statements and to provide fewer disclosures provided that they meet two out of the three criteria in two consecutive years: financial year: (i) net turnover less than € 8 million; (ii) total assets not exceeding € 4 million; and (iii) average number of employees not greater than 50.
Other legislation such as the Credit Institutions Act (610/2014), Securities Market Act (746/2012), and the Insurance Act (424/2010), also outline additional financial reporting requirements for regulated entities.
The auditing requirements are set in the Auditing Act (1141/2015) which came into force on January 1, 2016. The Act was amended to transpose the provisions of the EU Audit Directive (2014/56/EU) and to establish a public oversight agency, the Audit Oversight Unit, responsible for setting auditing standards.
All companies, unless they are exempted based on size, are mandated to have an annual audit of financial statements. Small companies are determined according to the criteria enumerated above. However, companies whose primary activity involves owning and holding securities and which have significant influence over another entity, must appoint an auditor regardless of their size.
The Act also requires statutory audits to be performed according to international auditing standards as adopted by the European Commission. In Finland, the legal adoption of the International Standards on Auditing (ISA) as issued by the IAASB is pending upon the endorsement of the EC. However, according to the Finnish association of auditors, Suomen Tilintarkastajat ry, de facto ISA are being applied.
Regulation of Accountancy Profession
The Ministry of Economic Affairs and Employment is responsible for developing audit legislation and the Auditing Act (1141/2015) sets the qualifications and licensing requirements for the audit profession.
In Finland, three types of auditor certification are recognized:
- Kauppalamarin Hyväksymä Tilimies (HT) auditors;
- Keskuskaupparakamin Hyväksymä Tilintarkastaja (KHT) auditors who are qualified to audit public interest entities (PIEs); and
- Julkishallinnon Tilintarkastaja (JHT) auditors who are qualified to audit public sector entities.
The Auditing Act (1141/2015) introduced a revised Finnish auditor examination system in January 1, 2016. Under the regime, all aspiring auditors must first pass the HT examination, the basic examination in auditing. A person who has passed the HT examination can specialize either in (i) audits of PIEs) by passing a KHT examination and/or (ii) in audits of public administration and finance by passing a JHT examination.
The Act also created the Audit Oversight Unit (AOU), within the Finnish Patent and Registration Office, to oversee the audit profession. All former audit oversight bodies—the Auditing Board of the State, the Auditing Board of the Central Chamber of Commerce (AB3C), all 14 Auditing Committees of the regional Chambers of Commerce, and the Auditing Board of Public Sector Auditors—were abolished by the end of year 2015 and their responsibilities and authority were consolidated to the AOU. Personnel from AB3C were transferred to the AOU.
The AOU’s responsibilities include: (i) oversight of auditors and audit firms, including enforcement duties; (ii) licensing and registration of auditors and audit firms; (iii) organization of professional examinations; (iv) oversight of auditors´ professional competence, continuous education and maintenance of qualifications; (v) quality assurance and oversight of inspections of auditors and audit firms; (vi) general guidance and development of auditing standards; and (vii) international cooperation and exchange of information.
Audit Oversight Arrangements
The Audit Oversight Unit (AOU), established by the Auditing Act (1141/2015) centralizes and consolidates the responsibilities of the previous public oversight authorities which have been abolished: the Auditing Board of the State, the Auditing Board of the Central Chamber of Commerce, all 14 Auditing Committees of the regional Chambers of Commerce, and the Auditing Board of Public Sector Auditors.
The AOU is located within the Finnish Patent and Registration Office, and is responsible for the general direction, development, and oversight of auditors. Its responsibilities include: (i) oversight of auditors and audit firms, including enforcement duties; (ii) certification and registration of auditors and audit firms; (iii) organization of professional examinations; (iv) oversight of auditors´ professional competence, continuous education and maintenance of qualifications; (v) quality assurance and oversight of inspections of auditors and audit firms; (vi) general guidance and development of auditing standards; and (vii) international cooperation and exchange of information.
The AOU is a member of the International Forum of Independent Audit Regulators.
Professional Accountancy Organizations
Suomen Tilintarkastajat ry is a voluntary organization uniting all approved auditors in Finland since April 2014. All of its members are certified in accordance with the Auditing Act.
The association was formed as a result of a merger between two audit institutes, KHT-yhdistys and HTM-tilintarkastajat, which have integrated their operations into one association. Over 90% of all auditors from the former KHT and HTM audit institutes have joined since the merger.
The association supports its members in the performance of high quality-work and helps them meet ethical and professional requirements by developing sound auditing practices including the promotion of good accounting and financial reporting standards. The association also develops and strengthens the skills of its members by providing education, information on current industry issues, and opportunities for professional dialogue and networking. Suomen Tilintarkastajat ry also owns ST-Akatemia Oy, a limited liability company which specializes in training and development for accounting professionals.
In addition to its IFAC membership, the association is a member of the Fédération des Experts-Comptables Européens and the Nordic Federation of Public Accountants.
Projects or Other Information
Adoption of International Standards
In Finland, a mandatory quality assurance (QA) review system has existed since 2007, as established by the Auditing Act (459/2007). In this regime, the responsibility for the oversight of the QA review system was shared between the Auditing Board of the Central Chamber of Commerce and the Audit Committees of the Regional Chambers of Commerce.
On January 1, 2016, a new Auditing Act (1141/2015) came into force and consolidated the supervision of the mandatory QA review system under one agency, the Audit Oversight Unit (AOU). The responsibilities of AOU include: (i) establishing the scope, procedures, and processes of the QA system for both public interest entity (PIE) and non-PIE entities; (ii) designating the independent reviewers to conduct the QA reviews; (iii) processing the results of a quality assurance review; and (iv) deciding on measures to be taken on the basis of the review. All inspection results and reports of audit firms and auditors in PIEs and non-PIEs are approved by the AOU.
The Finnish association of auditors, Suomen Tilintarkastajat ry states in its 2016 SMO Action Plan that the current QA review system fulfills the requirements of SMO 1.
Clarified ISQC 1 is adopted in Finland since 2009.
Current Status: Adopted
International Education Standards
The Ministry of Employment and Economy and the Audit Oversight Unit are involved in establishing and administering initial professional development (IPD) and continuing professional development (CPD) requirements for the audit profession, the only segment of the profession that is regulated in Finland. Suomen Tilintarkastajat ry is involved in the training of auditors through a voluntary preparation program that it administers.
The Auditing Act (1141/2015) stipulates the IPD and CPD requirements. The Act details the education and experience requirements for professional auditors, which also contains a requirement for auditors to maintain professional competence on a sufficient level. In 2014, new CPD requirements required auditors to complete at least 120 hours CPD activities in a three year period, with at least 20 hours per year. Half of the required CPD activities must be verifiable.
The extent of alignment to the revised IES requirements needs to be established.
Current Status: Partially Adopted
International Standards on Auditing
The Auditing Act (1141/2015) specifies that audits must be carried out in according with the international auditing standards as adopted by the European Commission (EC). In Finland, the legal adoption of the International Standards on Auditing (ISA) as issued by the IAASB is pending upon the endorsement of EC on a European level. However according to Suomen Tilintarkastajat ry, de facto ISA are being applied.
As a professional accountancy organization, the association has adopted and translated ISA (according to IFAC Translation Policy) since 2006 and amendments have also been adopted to date. Most recently, it has translated the 2015 version of the Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements in accordance with the IFAC Translation Policy.
Current Status: Adopted
Code of Ethics for Professional Accountants
In Finland, only auditors are subject to ethical obligations, which are established in the Auditing Act (1141/2015). Although the law doesn’t refer to the IESBA Code of Ethics, Suomen Tilintarkastajat ry reports that the requirements are generally in line. Nevertheless, the extent of alignment needs to be established.
In addition to the requirements stipulated by law, the association requires its members, who join on a voluntary basis, to apply the IESBA Code of Ethics. It has adopted and translated the 2015 Handbook of the IESBA Code of Ethics.
Current Status: Partially Adopted
International Public Sector Accounting Standards
In Finland, the state is responsible for public sector accounting standards.
The central government accounting rules are established in the Budget Law (423/1988) and other statutes, while local government rules are mandated by the Local Government Accounting Act (410/2015). The Treasury, under the Ministry of Finance is responsible for establishing public sector accounting requirements, while the Local Government Sub-Committee of the Accounting Board of the Ministry of Employment and Economy specifies the accounting rules for local government.
Finland is using a modified cash basis accounting, a hybrid method of cash basis accounting with specific elements of accrual basis accounting. IPSAS have not been translated into Finnish and there are no plans in place for their adoption.
Current Status: Not Adopted
Investigation and Discipline
In Finland, a mandatory investigative and disciplinary (I&D) system has existed since 2007, as established by the Auditing Act (459/2007). In this regime, the responsibility for the oversight of the I&D system was shared between the Auditing Board of the Central Chamber of Commerce, the Auditing Committees of the Regional Chamber of Commerce, and the Auditing Board of the State.
The revised Auditing Act (1141/2015) establishes the Audit Oversight Unit (AOU) with the authority over the I&D system in the jurisdiction. The AOU consolidates the responsibilities of bodies that were involved in the investigation and discipline of auditors. The extent of alignment to SMO 6 requirements needs to be established.
Suomen Tilintarkastajat ry also has their own system of I&D for their members and for non-compliance with the IESBA Code of Ethics. The association reports that its I&D system fulfills the SMO 6 requirements.
Current Status: Partially Adopted
International Financial Reporting Standards
The Ministry of Employment and Economy is responsible for accounting legislation in Finland. The Accounting Act (1620/2015) was amended to transpose the content of the European Commission Accounting Directive (2013/34/EU) and the Act also mandates the implementation of EU IAS Regulation (1606/2002) which requires the application of International Financial Reporting Standards (IFRS) for the consolidated financial statements of public interest entities.
The Accounting Act also requires EU-endorsed IFRS for the separate financial statements of companies whose securities trade in a regulated market but that do not prepare consolidated financial statements because they have no subsidiaries. All other entities that are not required to use EU-endorsed IFRSs must prepare financial statements in accordance with Finnish Generally Accepted Accounting Principles.
IFRS for SMEs have not been adopted in Finland and there are no current plans to adopt the standards.
Current Status: Adopted
- Suomen Tilintarkastajat ry
- Audit Oversight Unit, Finnish Patent and Registration Office
- Auditing Board of the Central Chamber of Commerce
- Ministry of Employment and the Economy
- Auditing Act No. 1141, 2015
- Act on Chartered Public Finance Auditors No 467,1999
- Auditing Act No. 459, 2007
- Bellanca, S., and Vandernoot, J., “International Public Sector Accounting Standards (IPSAS) Implementation in the European Union Member States,” Journal of Modern Accounting and Auditing, March 2014.
- Crowe Horwath, “Country by Country Financial Reporting and Auditing Framework: Finland,” January 2015.
- Deloitte & Touche, IPSASs in Your Pocket, 2013.
- Finnish Audit Oversight Authority: “Organizational Reform of Auditor Oversight in Finland.”
- IFRS Foundation, “IFRS Application Around the World?Jurisdictional Profile: Finland,” 2016.
- International Forum of Independent Audit Regulators, IFIAR 2016 Member Profile 2016.
- Suomen Tilintarkastajat ry, SMO Action Plan, December 2016.
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