Consequenses Due to the Relaxation of the Audit Obligation

Magnus Roed & Nikolaj Holst Mathiesen

Student thesis: Master thesis


This master’s thesis examines the consequences due to the relaxation of the audit obligation in Denmark from 2006 to 2016. At first, we give an overview of the companies’ choice of declaration standards in order to illustrate how huge impact the legislation has on the audit burden of the companies. Then, we make an estimate of the economic impact which the easing has had on respectively the Danish tax revenue and the companies’ credit rating. The study will be based on the difference and importance of the companies' choice of statement and, therefore, the basis for their tax payments, but also their ability, or lack of the same, to negotiate towards creditors. In continuation of this, relevant legislation will be included, economic findings reflected in general and in the form of graphs based on quantitative as well as qualitative data. The thesis thus attempt to make an evaluation report of the unintended consequences of the legislation, which Erhvervsstyrelsen has been responsible for preparing without having published any renewal since 2014. The conclusion is that almost half of the Danish companies has opted for audit, this half represents 112,522 companies. Back in 2006, only 6 companies opted for audit. In a decade, the legislation has cost the Danish society barely DKK 4 billion in lost tax revenue. Furthermore, the companies that have opted for auditing are getting worse credit rating, more expensive borrowing costs and for the average company, the savings of auditing can not generally be economically viable. The weakened control of the financial statements places greater burdens on SKAT's supervision, Therefore, the thesis takes into perspective on how and to what extent SKAT needs to upgrade to monitor the supervision of these companies and thereby minimize tax losses

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages127