How Does the Auditors Act and EU Regulation No. 537/2014 Affect the Role of the Auditor as Advisor and Public Trust Representative? Focusing on Growth Companies

Christina Refstrup

Student thesis: Master thesis


In the public, there has been a lot of debate in Denmark and Europe about the role of the auditor in the bankruptcy caused by the financial crisis. This has meant that the EU commission has conducted investigations into the auditor’s act and how to restore trust to auditors as representatives of the public. The increased focus on the accountant’s position in society means that there are constantly new demands to ensure professional skepticism, increase audit quality and enhance independence for the auditor. This has meant that the EU Commission has adopted EU Regulation No. 537/2014 on specific requirements for statutory audits of PIE companies and repealing Commission Decision 2005/909 / EC, which entered into force in all EU member states per. June 17 th 2016. The essential requirements of the EU Regulation for the Auditor-General Auditor are the requirements for forced rotation of the audit partner / company and the limitation of fees and advisory duties that may be done in parallel with the statutory audit. In Denmark, there are many entrepreneurs and it is generally easy to start a new company. The start-up companies often control their daily operations, but need help with construction and the strategic basis for growth. Therefore they often seek advice and guidance from their regular contacts which they trust, for example their auditor. This gives the auditor a new role as advisor and gives them second opinion on new business ideas, alongside regular auditing. The auditors have a deep insight into the business economics and the broad knowledge of best practice because they work with many different companies. It is a unique foundation for providing professional advice on business development. However, auditors are subject to strict requirements for independence and quality, and for that reason an accountant must never take a dual role that implicitly or explicitly creates a conflict of interests. The Danish auditors are pleased to note that the law does not prevent Danish companies from continuing to benefit from the insight that their auditor has in their company's financial situation in all areas. However what would it mean if the EU regulation would one day include other Danish companies as well, including growth companies that do not include the PIE definition? If this becomes applicable in the future, an expectation gap will arise between the auditor and the client, as they will not be able to fulfill the role as respectively adviser and representative of the public. This, due to both the expectation of independence, the level of information about the companies' financial situation must be adequately disclosed and for them to fulfill the role of representative of the public, where they have a responsibility to society

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2017
Number of pages79