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May, 2019.

Your accountant may never tell you this: you don’t need an audit of your financial statement, if your company has a turnover of maximum 8 million kroner and assets no larger than 4 million kroner, or you have maximum 12 employees.

According to the Danish Financial Statement Act, article 135, a company may opt out of an audit, if, two of the following criteria are not exceeded on the balance sheet date for two financial years in a row:

• assets of DKK 4 million
• net turnover of DKK 8 million
• average number of full-time employees of 12 during the year

Before 2006, all private and public limited companies were required to submit audited financial statements. However, after the law of audit exemption for small companies came into effect, the number of company that opted out of auditing financial statements increased annually.

For business owners, this could help to cut cost in accounting services by up to 50%, if the company makes their own bookkeeping. For the accounting service industry, it created a crisis. Occasionally, you will hear the Danish Auditors Association lobbies for the removal of this audit exemption. Their rationale is that companies risk committing accounting errors and fraud, and the state will not be able to detect fraud without auditors. In Denmark, there are two types of auditors: State-authorised public accountant (Statsautoriseret revisor) and Registered public accountant (Registreret revisor), with the former being more prestigious title than the latter.

Despite of audit exemption, some companies still need financial audit. Some may have this requirement stated in the letter of association that the financial statement must be audited. This is a common practice among trust funds and companies that need to be financially transparent, e.g. being partly public financed or a charity organisation. The bank may ask for a financial audit, if it has issued a big loan to the company.

The third reason that a company needs an audit, despite its size, likely will never be revealed to you. The Danish Financial Statement Act requires a company that has been charged for financial and tax fraud to submit audited financial statement in 3 following years. A company also must submit financial audit in 2 following years, if the authority detects significant accounting errors in its financial statement.

The deadline for submitting the annual financial statement for 2018 (January-December calendar) is the 30th of May, 2019.