The regulation of smaller companies´ annual reports has on several occasions been reduced, and thus adeclining number of Danish entities are now under subject to regulated accounting in 2016. The option ofnot conducting an officially regulated annual report, results in that smaller enterprise under certainrevenue-limits according to law can chose a declaration standard ISRS4410 – regarding the balance andoverview of financial details, which is essentially a declaration without any documented verifiability. Thethesis “ISRS 4410 – Presentation of annual reports – a critical review of the application of this on smallercompanies’ annual reports” are based on an exploration. Qualitative data has been the primary source ofdata, where the inductive method have been chosen during the exploration process.The thesis have illustrated, that the void for using the ISRS 4410 declaration has expanded over the latteryears. The declaration market has transformed from being dominated by verifiable declarations of financialstability, to smaller companies electing to use these declarations with no verifiable financial security, asthey now are able to do so. It has been decided, that the accountants play a significant role in relation tothe customers´ choice of using ISRS 4410. In some instances, it could be interpreted as a directrecommendation to use this declaration, which can stem from various reasons. The accountants behaviorcould, among other reasons, be motivated by the desire to be relieved from the obligations of submitting adeclaration of verifiable financial security, and thus avoiding to become a potential subject ofErhvervsstyrelsens quality-audits of their work.The costs for accountants are regarded in the AMWAB-polls to be an administrative burden, which smallercompanies can cut costs by choosing less detailed services from the accounting companies. It is establishedthat the banks by virtue of granting credit to their customers favor the security of the accounts declarationhighly and that in some cases therefore allot a direct risk-premium by higher credit costs as a consequenceof e.g. ISRS 4410. The result being that the cost saved with the accountant is instead exchanged to highercredit costs, thus no costs are actually saved.The investigation further show that the users of the annual reports have increasing difficulties inunderstanding the details of the various accounting declaration, and what level of verifiability and securityis associated with the various forms. The misconception of the accountant’s actions and span of these haveshown to be dependent on who the annual report user is. The theory around the expectancy gap hashistorically been treated by declaration of verifiable security. Although auditors against expectations largelyprefer ISRS declaration rather than a declaration of verifiable security perform the often more actions thanrequired and an opposite expectancy gap seems to be highly relevant in relation to the submission of ISRS4410 declarations.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||71|
|Supervisors||Jørgen Valther Hansen|