Auditing

Developments  

Due to the special requirements for auditors that audit public interest entities, the distinction between audit firms that audit such entities and other audit firms gets more pronounced. At the end of 2022, ten audit firms acted as statutory auditors for public interest entities.  
   
The largest audit firms, all of which are part of major international networks, act as statutory auditors for the majority of the public interest entities. These firms have a predominant market position in terms of statutory audit fees. There are nevertheless a number of small audit firms, although the number of firms with just one statutory auditor has fallen in recent years. Technological developments and their bearing on the auditing work are a key issue, especially in the major international audit networks.   

In 2022, two of the four largest international audit networks initiated processes to split their advisory and audit businesses. This may help ensure auditor independence, which is a fundamental requirement for the auditor role. The other two major networks have published no such plans.

Supervision, monitoring and control  

Finanstilsynet’s supervision of auditors comprises licensing of individuals and firms, registration and supervision of statutory audit work. Finanstilsynet oversees that auditors maintain their independence and perform their work in a satisfactory manner and in compliance with law and good audit practices. Moreover, Finanstilsynet supervises the firms’ compliance with the anti-money laundering (AML) legislation.

Periodic quality assurance reviews  

According to the Auditors Act, auditors and audit firms that audit public interest entities shall be subject to periodic on-site inspections at least every three years. These inspections are conducted by Finanstilsynet. Other auditors and audit firms are to be reviewed at least every six years. These reviews are conducted by the Norwegian Institute of Public Accountants (DnR) for members and by Finanstilsynet for non-members.  

Guidelines have been drawn up for DnR’s quality control of its members and for how DnR should relate to Finanstilsynet's supervisory responsibility. According to the guidelines, DnR shall refer the matter to Finanstilsynet if it identifies circumstances that may prompt revocation of an auditor’s licence. 
 
In 2022, Finanstilsynet carried out three periodic inspections. Not all of these inspections have been finalised. One of the audit firms that was reviewed has taken on audit engagements for entities which entail that the audit firm is also subject to periodic quality assurance reviews by the Public Company Accounting Oversight Board (PCAOB) in the United States. The inspection was conducted jointly with the PCAOB.   

 
Other supervisory matters

In 2021, Finanstilsynet carried out a thematic inspection of the admission process at Euronext Growth. Inspections were carried out at Oslo Børs, eight investment firms and four audit firms. The overall thematic inspection report was published on 24 January 2022. Inspection reports following inspections at the individual audit firms were published in autumn 2021.

In 2022, Finanstilsynet carried out a thematic inspection of external accountants’ and audit firms’ confirmations related to the government compensation scheme for businesses as a result of the Covid-19 pandemic. The thematic inspection encompassed 15 audit firms. Finanstilsynet's review showed that both external accountants and auditors had largely carried out the control procedures that were required to verify companies’ applications, whereby they would qualify for support, and that they had performed their task satisfactorily. A report has been published after the thematic inspection.

As part of a joint thematic inspection of selected listed companies’ reporting of climate-related matters in their 2021 annual financial reports, the auditors’ work related to this was reviewed. Although there are differences between the companies, their reporting was generally incomplete and often too general compared to what should be expected. Significant improvements are also required in the auditors' assessments and documentation of how climate risk affects financial reporting. The report ‘Information on climate-related matters in annual financial reports’ was published in December 2022.

Other supervision is carried out on the basis of Finanstilsynet’s risk assessments, where notifications of possible audit deficiencies are a factor in determining the type of supervision to be implemented.   
  
In 2022, Finanstilsynet registered 96 notifications of possible audit deficiencies from DnR, the tax authorities, bankruptcy administrators, the police and others. Media entries or matters identified by Finanstilsynet in other supervisory areas may also indicate audit deficiencies. All notifications are reviewed and assessed for further follow-up by Finanstilsynet. Matters that are not followed up by on-site inspections or some other form of closer control, are likely to conclude with the auditor being asked to conduct a self-evaluation, identify any deficiencies and correct these in future audits. Finanstilsynet informs the auditor that the evaluation and possible measures must be documented, and that it will review these cases in connection with future inspections.  
  
A total of 61 notifications were followed up in 2022, of which 22 prompted inspections. Finanstilsynet also sent 39 notifications to audit firms, asking them to carry out a documented self-evaluation of the reports received.  
  
Some of the inspections in 2022 have yet to be finalised. The most serious instances of non-compliance were that the auditor took on assignments that should not have been accepted, continued client relationships that ought to have been terminated and did not obtain sufficient and appropriate audit evidence as a basis for the issued audit report. The most serious findings concerned audits of revenues and valuations (estimates). Other serious instances of non-compliance concerned the auditor's lack of understanding of the client’s business, including agreements and regulatory requirement that the audit client is subject to. In order to properly perform the role as a representative of the general public, it is important that the auditor demonstrates professional scepticism to management’s assessments in connection with the performance of the audit and change of auditor. 

In 2022, administrative fines of NOK 10 000 and NOK 30 000, respectively, were imposed on two audit firms for non-compliance with the Auditors Act. One of the firms had carried out insufficient control procedures when confirming applications for compensation, while the other firm had made inconclusive acceptance assessments prior to taking on new audit engagements.

Supervision of audit firms includes the firms' compliance with the duties of the Anti-Money Laundering Act. After Finanstilsynet’s AML/CTF inspection in 2020/2021, compliance has improved, but supervisory activities reveal that some firms still have some way to go. In 2022, administrative fines of NOK 50 000 and NOK 60 000, respectively, were imposed on two audit firms for non-compliance with the AML legislation.  

 
Revocation of auditors’ licences  

	2018	2019	2020	2021	2022
State-authorised auditors	0	3	0	3	3
Registered auditors	2	2	0	0	–
Audit firms	0	1	1	0	0

Matters referred to the Board of Appeal for Audit and Accounting Matters 

In 2022, Finanstilsynet referred three complaints concerning audits to the Board of Appeal for Audit and Accounting Matters. The Board of Appeal settled two complaints during the year. In both cases, Finanstilsynet’s decisions were endorsed. 

Licensing  

Number of licensed auditors and audit firms as at 31 December 2022   

The new Auditors Act in effect from 2021 introduced new types of licences in the audit area. This means, among other things, that only licences as state-authorised auditors are granted, and that auditors that were registered in accordance with the previous Act automatically qualify as state-authorised auditors as from 2021. The were a total of 8 710 state-authorised auditors as at 31 December 2022.  
  
Pursuant to the new Act, auditor register numbers are allotted in connection with the authorisation as a state-authorised auditor. During a transitional period, not all state-authorised auditors are allowed to carry out statutory audits. This applied to 6 665 auditors as at 31 December 2021 and 6 368 auditors as at 31 December 2022. Auditors that are not licensed to carry out statutory audits are not included in the table below for 2021 and 2022. Licensed auditors who, according to the previous Auditors Act, qualified as statutory auditors have the same rights as state-authorised auditors as from 2021.
  

	2018	2019	2020	2021	2022	Licensed   in 2022
State-authorised auditors	4 326	4 476	4 658	1 752	2 342	650
Registered auditors	3 607	3 652	3 707	–	–
Of which statutory auditors	1 519	1 541	1 508	–	–
Audit firms	447	458	461	458	458	26

Finanstilsynet grants authorisations as state-authorised auditors. In order to be authorised, the auditor must pass a practical exam. In 2022, 335 candidates passed the exam. 

Regulatory development  

In 2022, Finanstilsynet was involved in preparing consultative statements submitted by the CEAOB (Committee of European Auditing Oversight Bodies) and IFIAR (International Forum of Independent Audit Regulators) to international standard-setters within auditing. 

Guidance and communication  

In 2022, Finanstilsynet provided guidance on finanstilsynet.no, where it has published inspection reports, decisions and information on new regulations and Finanstilsynet’s supervisory practices.  

Finanstilsynet has also held presentations at several seminars, including seminars arranged by the Norwegian Institute of Public Accountants.