Challenges in Auditing Housing Associations in 2024/25

Abstract

The purpose of this thesis is to provide auditors with a comprehensive overview of cooperative housing clients (Andelsboligforeninger) as of 2024/25 through analysis and review. Cooperative housing associations are entities established to own and operate properties on a cooperative basis. The members of the association own a share of the association's assets. The acquisition of rental properties under this model began in the late 1950s but increased significantly from the mid-1970s, especially after the introduction of the offer obligation in the Tenancy Act of 1975. As of 2025, there are approximately 210,000 cooperative housing units in Denmark. Cooperative housing is thus the second most common form of housing in the municipalities of Copenhagen and Frederiksberg, following private rentals. However, the cooperative model is increasingly challenged by rising prices due to higher property valuations—particularly in Copenhagen. As a result, the cooperative housing sector remains a highly regulated area, requiring auditors to stay informed about current legislation and accounting practices applicable to this specific sector. A key legislative development occurred on 4 April 2024, when the Danish Parliament adopted new rules related to the valuation of cooperative housing units. These include the use of acquisition value, the publicly indexed net price value, and—significantly—the extended option to apply fair value measurement. This change has posed challenges with the accounting policies applied in financial statements and has affected various stakeholders involved in the operation of cooperative housing associations. These new valuation methods have led to more choices—and thereby more complexity—for cooperative housing associations, especially in the preparation of financial statements that comply with both Årsregnskabsloven (ÅRL) and Andelsboligloven (ABFL). The legal amendments have caused confusion among stakeholders and may have created expectation gaps between the board of directors and the auditor. The audit process in this context involves identifying potential risks and an obligation to communicate these to the management, which in cooperative housing associations consists of the board. Auditors must recognize that this management structure differs significantly from that of traditional corporate entities and should therefore be particularly mindful of their role as the public’s trusted representative. This thesis aims to equip auditors with the necessary insight to understand the audit process in cooperative housing associations, identify key challenges, and provide recommendations for how auditors should act moving forward to address these challenges effectively.