Påvirkningen af Forordning nr. 537/2014 på revisors kvalitetsniveau

Frederik Tvedeskov Jantzen & Martin Willemoes Riedel

Student thesis: Master thesis


The background to this thesis is the passing of the European Commission’s regulation no. 537/2014, and the public debate caused by the radical changes in the relationship between an auditor and his clients. These restrictions are primarily a mandatory audit firm rotation followed by a fixed maximum period, along with restrictions on auditors' options to offer non-audit services to audit clients. The purpose of this thesis is to analyze the impact of the regulation on the quality of auditors’ audit service as well as consultancy service. Initially it is shown that the concept of quality in relation to the services of auditor in accordance to the Danish and international regulation is both based on independence and professional expertise. Thus, the definition of auditors overall quality is twofold, as it appears that consultancy service cannot be defined by its own, as both independence and professional expertise are perceived as core concepts of auditor’s quality. However, qualitative analyses of the consultation responses to the Commission’s Green Paper and interviews with Danish audit professionals offer insight into two conflicting interpretations and concordant arguments in relation to above definition of quality. Abovementioned analysis has revealed the existence of two, in particular, different perspectives on quality. The first is represented by the audit profession, who place great emphasis on the professional expertise, which is perceived as the real quality. The public focuses on the independence, which to them constitutes the core concept of reliability, and hence the primary quality of audit. Moreover, the thesis discusses the two contradictory perspectives using a new theory, in which quality is found when the two concepts “quality in mind”, defined by the professional expertise and “quality in appearance”, defined by the independence, are in a state of equilibrium. The quantitative analysis conducted in the thesis is used to relate to the actual supply and demand situation on the market, and thus evaluate the real impact. It appears, that far from all PIEs will be affected by the regulation as only 40 % exceed the restrictions on non-audit services today. The analysis furthermore shows that the duration of the average audit relationship is shorter than the maximum allowed period. The conclusion indicates that “quality in mind” will be lower due to the decreased client-specific knowledge obtained by the auditor because of the mandatory firm rotation and restriction in non-audit services. On the other hand, quality in appearance will be higher, due to the greater independence of the very same rules. However, independence is only one of the two core concepts of quality, and it is therefore concluded that the result is an unbalance in the quality model.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2015
Number of pages169