The Auditor's Impact on Companies' Compliance with Regulations

Eda Taskiran & Rukiye Mizrak

Student thesis: Master thesis

Abstract

As a result of the EU accounting directive, small companies were exempted from the statutory audit obligation in 2006, and later further easements were adopted in 2010 and 2012. According to the Danish Business Authority, the reason for easing the requirements for small businesses has been to reduce administrative burdens and to strengthen competitiveness among small companies in Denmark in comparison to other European countries. However, the topic has recently become a controversial political issue, and several parties involved in the case have questioned the value of an independent auditor reviewing the financial statements. Skepticism in the public debate has especially been directed towards the relaxations in the small business audit. This has led to discussions about whether the relaxations has resulted in several account mistakes regarding tax and VAT. There has been a significant number of companies that have decided to opt-out of auditing in favor of the auditor's other statements, or to completely opt-out of the audit services. This development has led to the title of this thesis: “What significance does an auditor have in relation to companies accounting mistakes and their compliance with the tax- and vat rules”. In continuation of this, this thesis presents various initiatives for a better regulatory compliance among companies. In order to explain this research question both quantitative and qualitative methods were used. Data were collected on the basis of both previous studies and a questionnaire survey addressed to auditors. Furthermore, interviews with Anders Lau, head of communication in the trade association FSR, and the Danish accountant and professor from Copenhagen Business School, Thomas Riise Johansen, were conducted. The findings of our questionnaire survey indicate that auditors experience more errors in relation to small companies in comparison to larger businesses. When looking into previous studies and the statements given in the two conducted interviews, it becomes apparent that conclusions from both parties are affected by their political stance. The consequences of this is significant methodological weaknesses and misleading interpretations from both sides, which again affects the reliability of these studies. However, in general the studies do point out a great difference between the level of accounting mistakes in the audited financial statements compared to non-audited financial statements.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages164