Finland

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. Finland has fully aligned its legal framework with the EU acquis communitaire as it relates to accounting and auditing.

Accounting Framework

In Finland, the Accounting Act No. 1620/2015 stipulates the requirements for preparation of financial statements, including applicable accounting standards and financial reporting thresholds that are in line with the European Commission (EC) Regulations. Authority to set accounting standards in Finland rests with the Ministry of Economic Affairs and Employment.

The Finnish Accounting Board, within the Ministry of Employment and Economy, is responsible for developing accounting legislation and related guidance. The Accounting Act No. establishes the requirements for the preparation of corporate financial statements in Finland and 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 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: (i) net turnover less than € 8 million; (ii) total assets not exceeding € 4 million; and (iii) average number of employees not greater than 50. Small- and medium-sized enterprises (SMEs) are allowed to use IFRS for SMEs provided their financial statements are audited.

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.

Auditing Framework

The Auditing Act (1141/2015) requires application of international auditing standards as adopted by the European Commission and authorizes the Audit Oversight Unit (AOU) to develop auditing standards and guidance. As of the date of this assessment, pending formal endorsement of ISA by the EC, the AOU has not been engaged in auditing standard-setting activity. De facto, according to Suomen Tilintarkastajat ry, ISA are being applied. The 2018 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements as translated into Finnish is in effect as of 2021.

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.

Only the provision of auditing services is regulated in Finland. The Ministry of Economic Affairs and Employment is responsible for developing audit legislation.

The Auditing Act No. 1141 of 2015 contains provisions on rendering auditing services, establishes initial professional development (IPD) and continuing professional development (CPD) requirements for the audit profession, and authorizes the Audit Oversight Unit (AOU) to regulate the audit profession.

The AOU is responsible for: (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.

Kauppalamarin Hyväksymä Tilimies (HT) (hereinafter referred to as ‘Authorized Auditors, HT’), Keskuskaupparakamin Hyväksymä Tilintarkastaja (KHT) (hereinafter referred to as ‘Authorized Public Accountants, KHT’), and Julkishallinnon Tilintarkastaja (JHT) (hereinafter referred to as ‘Public Sector Auditors, JHT’) are the only categories of accountancy professionals regulated by law in Finland.

The HT qualification is foundational for provision of auditing services. 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 as detailed below.

To be approved as an HT auditor, the candidate must, among other requirements, (i) complete a university degree or obtain at least seven years of experience in accounting, finance and law; (ii) complete studies in accounting, law and other subjects in the field of business and economics; (iii) have a minimum of three years’ practical experience in the auditing or a minimum of 15 years of practical experience in accounting, finance and law; and (iv) pass professional examination for HT auditors.

To be approved as a KHT auditor, the candidate must (i) be an HT auditor; (ii) complete a higher university degree or have worked as an HT auditor for at least five years, or have at least seven years of experience in accounting, finance and law; and (iii) pass an examination in auditing public-interest entities.

To be approved as a JHT auditor, the candidate must (i) be an HT auditor; (ii) complete a higher university degree or work as an HT auditor for at least five years, or have at least seven years of experience in accounting, finance and law; (iii) complete studies necessary for the performance of the duties of an auditor of public administration and public finances in accounting and law and obtain at least 18 months in public administration and public finances; and (iv) pass an examination in auditing public administration and public finances.

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.

Suomen Tilintarkastajat ry is a voluntary membership organization uniting Authorized Public Accountants, Authorized Auditors, and Public Sector Auditors in Finland since April 2014. All its members are certified by the Audit Oversight Unit (AOU) in accordance with the Auditing Act No. 1141 of 2015. Suomen Tilintarkastajat ry is involved in the training of auditors through a voluntary preparation program that it administers. It also conducts continuing professional development; requires its members to adhere to the IESBA Code of Ethics as issued by IESBA; and conducts investigation and disciplinary processes for its members.

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 being a member of IFAC, the association is a member of Accountancy Europe and the Nordic Federation of Public Accountants.

In Finland, a mandatory quality assurance (QA) review system has existed since 2007, and is regulated by the Auditing Act (1141/2015), which authorizes the Audit Oversight Unit (AOU) to (i) establish the scope, procedures, and processes of the QA system for both public interest entities (PIEs) and non-PIEs; (ii) designate the independent reviewers to conduct the QA reviews; (iii) process the results of QA reviews; and (iv) decide on measures to be taken on the basis of reviews. All inspection results and reports of audit firms and auditors in PIEs and non-PIEs are approved by the AOU. ISQC 1 has been adopted in Finland since 2009, and as of the date of this assessment, the new set of quality management standards, which will come into effect in December 2021, are in the process of being translated into Finnish.

The Finnish association of auditors, Suomen Tilintarkastajat ry reports in its 2021 SMO Action Plan that the current QA review system is in line with SMO 1 requirements.

Current Status: Adopted

Initial professional development (IPD) and continuing professional development (CPD) requirements for auditors, the only segment of the accountancy profession regulated in Finland, are established in the Auditing Act (1141/2015) and are further detailed and implemented by the Ministry of Employment and Economy through its Regulations No. 1442 of 2015. The Audit Oversight Unit is responsible for conducting examinations and registering and licensing all auditors.

Voluntary professional education programs are delivered by Suomen Tilintarkastajat ry, licensed state owned and/or private higher education institutions, and universities.

In Finland, three types of auditor certification are recognized:

• Kauppalamarin Hyväksymä Tilimies (HT) auditors;
• Keskuskaupparakamin Hyväksymä Tilintarkastaja (KHT); and
• Julkishallinnon Tilintarkastaja (JHT).

To be approved as an HT auditor, the candidate must, among other requirements, (i) complete a university degree or obtain at least seven years of experience in accounting, finance and law; (ii) complete studies in accounting, law and other subjects in the field of business and economics; (iii) have a minimum of three years’ practical experience in the auditing or a minimum of 15 years of practical experience in accounting, finance and law; and (iv) pass professional examination for HT auditors.

To be approved as a KHT auditor, the candidate must (i) be an HT auditor; (ii) complete a higher university degree or have worked as an HT auditor for at least five years, or have at least seven years of experience in accounting, finance and law; and (iii) pass an examination in auditing public-interest entities.

To be approved as a JHT auditor, the candidate must (i) be an HT auditor; (ii) complete a higher university degree or work as an HT auditor for at least five years, or have at least seven years of experience in accounting, finance and law; (iii) complete studies necessary for the performance of the duties of an auditor of public administration and public finances in accounting and law and obtain at least 18 months in public administration and public finances; and (iv) pass an examination in auditing public administration and public finances.

The extent of alignment of IPD and CPD requirements with those of the 2019 IES in effect as of 2021 needs to be established.

Current Status: Partially Adopted

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) issued by the IAASB is pending upon the endorsement of EC on a European level. De facto, ISA as translated by the Suomen Tilintarkastajat ry are being applied.

Suomen Tilintarkastajat ry has translated ISA since 2006, and the most recently translated handbook available is the 2018 IAASB Handbook translated into Finnish, in effect as of 2021.

Current Status: Adopted

In Finland, only Authorized Public Accountants / Keskuskaupparakamin Hyväksymä Tilintarkastaja (KHT), Authorized Auditors / Kauppalamarin Hyväksymä Tilimies (HT), and Public Sector Auditors / Julkishallinnon Tilintarkastaja (JHT) are subject to ethical requirements, which are established in the Auditing Act No. 1141 of 2015.

Suomen Tilintarkastajat ry reports that while the law does not directly refer to the IESBA Code of Ethics, the requirements incorporate elements from the Handbook of International Code of Ethics for Professional Accountants (although the version remains unclear).

In addition to the requirements stipulated by law, the association requires its members, who join on a voluntary basis, to adhere to the IESBA Code of Ethics. It has adopted and translated the 2018 version of the IESBA Handbook of the Code of Ethics for Professional Accountants.

Current Status: Partially Adopted

In Finland, 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.

The current public sector accounting standards In Finland are based on an accrual basis of accounting and are mainly in conformity with IPSASs, according to the Suomen Tilintarkastajat ry (ST), especially on the municipal side. ST also reports that the Finnish government supports the adoption of EPSASs, and no plans to adopt IPSASs have been reported.

Current Status: Not Adopted

The revised Auditing Act No. 1141 of 2015 establishes the Audit Oversight Unit (AOU) with the authority to investigate and discipline auditors in the jurisdiction, the only segment of the profession regulated in Finalnd. Suomen Tilintarkastajat ry reports that the system administered by the AOU is in line with the requirements of SMO 6.

Suomen Tilintarkastajat ry is a professional association that unites members of the profession on a voluntary basis. In its 2021 SMO Action Plan, the association reports that, while not required by law, it has established the Ethical Board that monitors compliance with ethical requirements and the constitution of the association.

Current Status: Adopted

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

Relevant Organizations

• Suomen Tilintarkastajat ry
• Audit Oversight Unit, Finnish Patent and Registration Office
• Ministry of Employment and the Economy

Relevant Legislation

• Accounting Act No. 1620, 2016
• Auditing Act (1141/2015)
• Act on Chartered Public Finance Auditors No 467,1999

Relevant Publications

• Accountancy Europe, Definition of Public Interest Entities in Europe - Accountancy Europe, 2017.
• Accountancy Europe, Structure and Organisation of the Profession: Key Features – 2020 Update, October 2020
• Accountancy Europe, Organisation of the public oversight of the audit profession in 30 European countries, 2020.
• 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.
• Deloitte & Touche, IPSASs in Your Pocket, 2013.
• IFRS Foundation, “IFRS Application Around the World?Jurisdictional Profile: Finland,” 2018.
• International Forum of Independent Audit Regulators, IFIAR 2021 Member Profile, 2021.
• Suomen Tilintarkastajat ry, SMO Action Plan, July 2021.