Denmark

As a member of the European Union (EU), Denmark is subject to the accounting, auditing and financial reporting requirements established in EU Regulations and Directives as transposed into national laws and regulations. Denmark has fully aligned its legal framework with the EU acquis communitaire as it relates to accounting and auditing.

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 standard setters for the entities they are overseeing.

Accounting Framework

In line with EU requirements, as transposed into the Danish Financial Statements Act of 2002 (as amended in 2014), 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 IFRS or the Danish Accounting Standards developed by the FSR - danske revisorer Danish Accounting Standards Committee (DASC). Danish accounting standards issued by the DASC and/or IFRS 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 small and medium-sized entities (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 as of the date of the assessment.

Auditing Framework

The EU audit reform (regulation and directive) from 2014, was transposed into the Act on Approved Auditors and Audit Firms in June 2016. The newest consolidated Act on Approved Auditors and Audit Firms was issued on November 20, 2018 (Consolidated Act No. 1287).

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. 968 (2016) on Quality Assurance Reviews stipulate that audits must be conducted in accordance with “generally accepted auditing practices.” DBA never defined what “generally accepted auditing practices” means. De facto, the auditing standards issued by the FSR are applied.

Since 2010, Danish auditing standards are effectively International Standards on Auditing (ISA) as promulgated by the IAASB and translated by the FSR. FSR reports that the translated standards have the same effective dates in Denmark as promulgated by IAASB.

Only auditors are regulated in Denmark at the state level. The Danish Act on Approved Auditors and Audit Firms (the Audit Act) Consolidated Act No. 1287 of November 20, 2018 is the key law regulating the audit profession in Denmark. The Act designates the responsibility for public oversight of the audit profession to the Danish Business Authority (DBA), as part of the Ministry of Industry, Business and Financial Affairs, overseen by the Danish Parliament.

Under Act No. 617 of June 12, 2013, the State Authorized Public Accountant (SPA) designation is reserved for auditors. The Danish Business Authority (DBA), the Danish Financial Supervisory Authority (DSFA), and universities share responsibility for establishing and administering Initial Professional Development (IPD) for SPAs in Denmark. Candidates are required to hold a masters degree, complete three (3) years of practical training and pass a final examination of professional competence offered by DBA and FSR. Since 2006, members of FSR - danske revisorer, the professional accountancy organization in the jurisdiction, have been required to complete a minimum of 120 hours of CPD over a 3-year period, and compliance is verified.

The Audit Act authorizes DBA to (i) approve, register, and license auditors and audit firms; (ii) protect the SPA designation; (iii) adopt standards and regulations (education, ethics, auditing, and reporting); (iv) conduct quality assurance reviews; (v) conduct investigation and discipline; and (vi) cooperate and exchange information with authorities in other countries on audit supervision.

In addition to the state regulation, the FSR governs its members. Its responsibilities include (i) prescribing accounting and auditing standards; (ii) establishing and enforcing ethical requirements; (iii) cooperating with DBA for investigation & discipline of FSR members; and (iv) collaborating with the Danish Business Agency and the Danish Financial Supervisory Authority on the establishment of initial and continuing professional development 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.

The Danish Act on Approved Auditors and Audit Firms (the Audit Act) Consolidated Act No. 1287 of November 20, 2018 is the key law regulating the audit profession in Denmark. The Act designates the responsibility for independent public oversight of the audit profession to the Danish Business Authority (DBA), as part of the Ministry of Industry, Business and Financial Affairs, overseen by the Danish Parliament.

The Audit Act authorizes the DBA to (i) approve, register, and license auditors and audit firms; (ii) protect the State Authorized Public Accountant (SPA) designation; (iii) adopt standards and regulations (education, ethics, auditing, and reporting); (iv) conduct quality assurance reviews; (v) conduct investigation and discipline; and (vi) cooperate and exchange information with authorities in other countries on audit supervision. The DBA is a member of the International Forum of Independent Audit Regulators (IFIAR).

FSR - danske revisorer

FSR was established in 1912 as a voluntary membership organization for accountancy professionals.

In 2011, three audit institutes—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. Auditors in Denmark are not required to be members of the FSR, but FSR states that the majority of State Authorized Public Accountants in public practice are members.

FSR’s responsibilities include (i) prescribing accounting and auditing standards; (ii) establishing and enforcing ethical requirements; (iii) cooperating with DBA for investigation & discipline of FSR members; and (iv) collaborating with the Danish Business Agency and the Danish Financial Supervisory Authority on the establishment of initial and continuing professional development requirements.

In addition to being an IFAC member, the FSR is a member of the Accountancy Europe and the Nordic Federation of Accountants.

Under the Danish Act on Approved Auditors and Audit Firms (the Audit Act) Consolidated Act No. 1287 of November 20, 2018, the Danish Business Authority (DBA), as part of the Ministry of Industry, Business and Financial Affairs, overseen by the Danish Parliament, is responsible for supervising the QA review system.

DBA conducts reviews of auditors and audit firms that audit public interest entities (PIE) on a three-year review cycle. It engages practitioners to review auditors and audit firms of non-PIEs at least every six years. DBA recommends appropriate follow-up actions to firms based on the findings of the QA reviews, and imposes relevant sanctions where necessary.

FSR - danske revisorer reports that the QA review system operated by DBA fulfills the requirements of SMO 1 (revised 2012).

Current Status: Adopted

Under Act No. 617 of June 12, 2013, the State Authorized Public Accountant (SPA) designation is reserved for auditors in public practice. The Danish Business Authority (DBA), the Danish Financial Supervisory Authority (DSFA), FSR, and universities share responsibility for establishing and administering Initial Professional Development (IPD) for SPAs in Denmark. Candidates are required to hold a masters degree, complete three (3) years of practical training and pass a final examination of professional competence. Since 2006, members of FSR - danske revisorer have been required to complete a minimum of 120 hours of CPD over a 3-year period, and compliance is verified.

According to the UNCTAD’s 2013 report, accountancy education requirements in Denmark are aligned with the requirements of IES. As of 2020, FSR - danske revisorer further reports that the education requirements are aligned with revised 2015 IES; additional confirmation regarding incorporation of revised IES 2, 3, 4, and 8 that are now effective, as of January 1, 2021 is needed to confirm Adopted status.

Current Status: Partially Adopted

The EU audit reform (regulation and directive) from 2014, was transposed into the Act on Approved Auditors and Audit Firms in June 2016. The newest consolidated Act on Approved Auditors and Audit Firms was issued on November 20, 2018 (Consolidated Act No. 1287).

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. 968 (2016) on Quality Assurance Reviews stipulate that audits must be conducted in accordance with “generally accepted auditing practices.” In practice, the auditing standards issued by FSR - danske revisorer are applied.

Since 2010, Danish auditing standards are effectively International Standards on Auditing (ISA) as promulgated by the IAASB and translated by FSR. FSR reports that the translated standards have the same effective dates in Denmark as promulgated by IAASB.

Current Status: Adopted

The Danish Act on Approved Auditors and Audit Firms (the Audit Act) Consolidated Act No. 1287 of November 20, 2018 authorizes the Danish Business Authority (DBA) to establish ethical requirements for State Authorized Public Accountants. In practice, the ethical requirements issued by FSR - danske revisorer are applied.

FSR reports that the IESBA Code of Ethics has been effective in Denmark since 2000. FSR has an ongoing process to incorporate amendments to the Code and it has adopted and translated the 2018 version of the International Code of Ethics for application by its members. Additional requirements have been included in the Code of Ethics to comply with Danish legal requirements.

Current Status: Adopted

The Danish Ministry of Finance, which is responsible for the adoption of public sector accounting standards, has not adopted IPSAS in Denmark, and there is no timeline for doing so. Public sector bodies prepare financial statements on an accrual basis (IFAC, CIPFA 2018). Nevertheless, the Central Government Accounts Council, which comprises representatives from various ministries, the National Audit Office, and FSR - danske revisorer, monitor the development of IPSAS and the use of the standards by other European Union member countries. IPSAS have not been translated into Danish.

Current Status: Not Adopted

In accordance with the Danish Act on Approved Auditors and Audit Firms (the Audit Act) Consolidated Act No. 1287 of November 20, 2018, the Danish Business Authority (DBA) established the Auditors’ Tribunal, which together with FSR - danske revisorer, implement the investigative and disciplinary (I&D) system in Denmark for State Authorized Public Accountants (SPA)—statutory auditors. FSR reports that it also investigates suspicious actions performed by members that are not auditors to protect the reputation of its membership.

DBA initiates and conducts investigations to identify, correct and prevent violations of duties according to the Audit Act, section 37. The Auditors’ Tribunal is independent of the profession and has authority to impose various sanctions based on the findings of its investigations.

FSR - danske revisorer, which has internal regulations governing members’ professional behavior, may forward cases related to members that are auditors 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, FSR is authorized by law to file a complaint against any professional accountant, regardless of whether they are members or not.

FSR indicates that the I&D processes in the jurisdiction fully align with the revised SMO 6 requirements.

Current Status: Adopted

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

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.

Non-listed companies must comply with the Danish Financial Statements Act. They may choose to apply IFRS or the Danish Accounting Standards developed by FSR - danske revisorer’ Danish Accounting Standards Committee (DASC). Danish accounting standards issued by DASC and/or IFRS 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, 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 alongside DFSA directives. 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.

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.

Current Status: Partially Adopted

Relevant Organizations

• Danish Business Authority (DBA)
• Danish Financial Supervisory Authority (DFSA)
• FSR - danske revisorer

Relevant Legislation

• Danish Act on Approved Auditors and Audit Firms (the Audit Act) Consolidated Act No. 1287 of November 20, 2018
• Danish Act on Public and Private Limited Companies of 2010 (as amended)
• Danish Capital Market Act of 2017 (as amended),
• Danish Financial Business Act of 2017 (as amended)
• Danish Financial Statements Act of 2014 (as amended)

Relevant Publications

• Accountancy Europe, Audit Exemption Thresholds in Europe: Update After the Transposition of the Accounting Directive, May 2016
• Accountancy Europe, Definition of Public Interest Entities in Europe: State of Play After the Implementation of the 2014 Audit Reform, November 2017
• Accountancy Europe, Organisation of the Public Oversight of the Audit Profession in Europe: State of Affairs after the Implementation of the 2014 Audit Reform, March 2018
• Deloitte & Touche, IPSASs in Your Pocket, 2019.
• Deloitte & Touche, New EU Audit Regulation, November 2019.
• European Commission, Implementation of the IAS Regulation 1606/2002 in the EU and EEA, February 2012.
• European Commission, SME Business Environment in the EU and EEA: Annex 1D, Case of Denmark, 2011.
• European Financial Reporting Advisory Group (EFRAG), Setting Accounting Standards in Europe and the Endorsement Process, 2014.
• Fédération des Experts Comptables Européens (FEE), FEE Survey on Structure and Organization of the Accountancy Profession across 30 European Countries, 2012.
• FSR – Danish Auditors, SMO Action Plan, July 2021
• International Forum of Independent Audit Regulators (IFIAR), IFIAR Member Profile: Denmark, 2019.
• IFRS Foundation, IFRS Application Around the World-Jurisdiction Profile: Denmark, March 2019.
• RSM plus, Accounting and Statutory Audit Requirements in Denmark.
• World Bank, Danish Public Oversight System, April 2011.
• UNCTAD, International Accounting and Reporting Issues—2013 Review, 2013.