On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force, requiring all statutory audits of annual and consolidated accounts to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission (EC). European Union (EU) member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. Finland is an EU member and, as such, adheres to the EC regulations. Auditing practices in Finland are governed by the Auditing Act. In July 2007, a new Auditing Act was adopted in Finland which complies with Directive 2006/43/EC, and detailed provisions on the enforcement of the Auditing Act were laid out in the Auditing Ordinance that came into effect the same year. The Finnish Institute of Authorized Public Accountants (KHT) issues generally accepted auditing standards (tilintarkastusstandardit) which, according to the 2006 KHT self-assessment, are based on ISAs, but with modifications that reflect the local legal environment.

General Overview

On May 17, 2006, Directive 2006/43/EC of the European Parliament and Council came into force requiring all statutory audits of annual and consolidated accounts be carried out on the basis of ISAs as adopted by the EC. The Directive aims at high-level -- though not full -- harmonization of statutory audit requirements. EU member states shall adopt and publish the provisions necessary to comply with the Directive before June 29, 2008. According to the Directive, member states should be allowed to impose additional national audit procedures or requirements only if those requirements have not been covered by the adopted ISAs. If, however, the adopted ISAs contain audit procedures which would lead to a specific legal conflict with national law, member states are allowed to carve out the conflicting part of the ISA. Member states may impose these additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. Finland is an EU member and therefore adheres to EC regulations.

According to a 2008 Central Chamber of Commerce (Centralhandelskammaren Keskuskauppakamari, or CCC) publication, a new Auditing Act came into force in July 2007 which complies with EC Directive 2006/43/EC, the Commission's Recommendation on Quality Assurance for the Statutory Audit in the European Union: Minimum Requirements (2001/256/EC), and the Commission Recommendation on Statutory Auditors' Independence in the EU: a Set of Fundamental Principles (2002/590/EC). Detailed provisions on the enforcement of the Auditing Act are laid out in the Auditing Ordinance, which came into effect simultaneously with the Auditing Act. The Auditing Act contains provisions for the statutory audit, the qualification requirements for auditors, authorization and supervision of auditors. Per the Act, all registered companies, foundations and other legal entities must appoint an auditor to audit their annual accounts, including consolidated accounts. Also, under the Auditing and Companies Acts, companies (subject to small company exemptions) must comply with the Finnish Institute of Authorized Public Accountants' (KHT yhdistys-Föreningen CGR ry, or KHT) audit rules. The report further pointed out that small companies satisfying one of the following requirements are exempt from audit: (1) "the balance sheet total in the annual accounts for the preceding financial period was in excess of EUR 100 000; (2) turnover or comparable net sales in the annual accounts for the preceding financial period was in excess of EUR 200 000; and (3) the average number of employees during the preceding financial period exceeded 3" (p. 6). According to a description of the regulatory framework provided in the 2005 self assessment of the KHT, under the Securities Markets Act the Finnish Financial Supervision Authority (FIN-FSA) regulates the securities and banking sectors and ensures compliance with the Auditing Act. However, it does not set any auditing or accounting standards. Governed by the Insurance Company Act, the insurance sector is regulated by the Insurance Supervisory Authority (ISA). The ISA does not regulate audit profession and does not set auditing standards.

Regulatory oversight of the accountancy profession is performed by the Auditing Board of the CCC, which ensures compliance with the Auditing Act and other professional requirements by the KHT auditors and the regional auditors of the Registered Association of Certified Auditors (HTM-tilintarkastajat ry, or HTM). The CCC paper explains that there are two categories of authorized auditors in Finland: the KHT auditors, authorized by the CCC, and the HTM auditors, authorized by the regional chamber of commerce. The KHT is a private, professional body responsible for setting national auditing standards and ethics requirements based on the International Federation of Accountants (IFAC) recommendations and standards. The 2006 KHT self-assessment noted that the KHT has adopted ISAs as Finnish auditing standards, but with modifications to reflect the local legal environment. The effective dates of the Finnish recommendations differed from the effective dates of the international standards. The HTM does not issue auditing standards, and auditors registered with HTM follow the KHT-issued standards. The KHT and the HTM are listed as members on the IFAC website.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastuksen tavoitteet ja yleiset periaatteet" became effective July 1, 2006. However, differences exist as modifications have been made in accordance with Finnish law. The KHT noted that the subsequently revised ISA 200 will be translated during 2006-2007. No further information is publicly available.

ISA 210 Terms of Audit Engagements (effective 2006)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastus- toimeksiannon ehdot" became effective July 1, 2000. However, differences exist as modifications have been made in accordance with Finnish law. Further, the International Auditing and Assurance Standards Board (IAASB) subsequently revised ISA 210 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced into Finnish requirements effective July 1, 2006. The KHT noted that the subsequently revised ISA 210 will be translated during 2006-2007. No further information is publicly available.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastustyön laadunvalvonta" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, ISA 220R was subsequently revised, and the KHT self-assessment noted that the revised ISA 220 will be translated in 2006-07. No further information is publicly available.

ISA 230R Documentation (effective 2006)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Dokumentointi" became effective July 1, 2000. However, the IAASB subsequently revised ISA 230 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in to Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastajan velvollisuus ottaa väärinkäytös huomioon tilintarkastuksessa" was expected to be approved in May 2006 . No further information is publicly available.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Säännösten ja määräysten huomioon ottaminen tilintarkastuksessa" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 250 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006 . No further information is publicly available.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastusta koskevien kysymysten kommunikaatio hallintoelinten jäsenten kanssa ja hallinnon tarkastus" became effective July 1, 2004. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 260 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Suunnittelu" became effective July 1, 2000. However, differences exist. ISA 300 was subsequently revised. The self-assessment noted that the revised ISA 300 has been translated and is expected to be approved in 2006. No further information is publicly available.

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

EN

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Yhteisön ja sen toimintaympäristön käsittäminen sekä olennaisen virheen tai puutteen riskien arviointi" became effective July 1, 2006. The KHT report stated that there are no differences between the Finnish standard and its international equivalent.

ISA 320 Audit Materiality (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Olennaisuus" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 320 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

EN

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Arvioituihin riskeihin vastaavat tarkastustoimenpiteet" became effective July 1, 2006. The KHT report stated that there are no differences between the Finnish standard and its international equivalent.

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Palveluyritystä käyttävien tarkastuskohteiden tilintarkastuksessa huomioonotettavaa" became effective July 1, 2000. However, the IAASB subsequently revised ISA 402 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 500 Audit Evidence (effective 2004)

EN

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastusevidenssi" became effective July 1, 2006. The KHT report stated that there are no differences between the Finnish standard and its international equivalent.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastusevidenssi - tietyt tarkastuserät" became effective July 1, 2000. However, the IAASB subsequently revised ISA 501 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 505 External Confirmations (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Vahvistukset ulkopuolisilta" became effective July 1, 2003. However, the IAASB subsequently revised ISA 505 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Uudet toimeksiannot- avaava tase" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 510 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 520 Analytical Procedures (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Analyyttinen tarkastus" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 520 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Otanta ja muita selektiivisiä testausmenetelmiä" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 530 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 540 Audit of Accounting Estimates (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Arvionvaraisten erien tarkastaminen" became effective July 1, 2000. However, the IAASB subsequently revised ISA 540 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Käyvän arvon määrityksen ja sitä koskevien tilinpäätöstietojen tilintarkastus" became effective July 1, 2005. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 545 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 550 Related Parties (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Lähipiiri" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 550 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 560 Subsequent Events (effective 2006)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilinpäätöspäivän jälkeiset tapahtumat" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 560 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. The KHT report noted that the subsequently revised ISA 560 will be translated during 2006-2007. No further information is publicly available.

ISA 570 Going Concern (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Epävarmuus toiminnan jatkuvuudesta" became effective July 1, 2004. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 570 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 580 Management Representations (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Johdon antamat tiedot" became effective July 1, 2000. However, per the self-assessment, differences exist. The IAASB subsequently revised ISA 580 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 600 Using the Work of Another Auditor (effective)

NC

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Toisen tilintarkastajan työn hyödyntäminen" became effective July 1, 2000. However, differences exist as "auditing recommendation 600 does not contain the Public Sector Perspective included in ISA 600. Paragraph 18 has been omitted to comply with national practices" (p. 13).

ISA 610 Considering the Work of Internal Auditing (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Sisäisen tarkastuksen työn hyödyntäminen" became effective July 1, 2000. However, differences exist. The IAASB subsequently revised ISA 610 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 620 Using the Work of an Expert (effective 2005)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Asiantuntijan työn käyttäminen" became effective July 1, 2000. However, the IAASB subsequently revised ISA 620 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

NC

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Tilintarkastuskertomus ja muu tilintarkastajan raportointi" became effective July 1, 2004. However, per the self-assessment, "Auditing Recommendation 700 does not contain the Public Sector Perspective included in ISA 700. The audit reports included in the Recommendation have been amended in accordance with Finnish law" (p. 14).

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

II

There is insufficient publicly available information addressing this principle.

ISA 710 Comparatives (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Vertailevat tiedot" became effective July 1, 2000. However, differences exist, as modifications have been made in accordance with Finnish law. Further, the IAASB subsequently revised ISA 710 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Muu informaatio tilintarkastetun tilinpäätöksen sisältävässä asiakirjassa" became effective July 1, 2000. However, differences exist. The IAASB subsequently revised ISA 720 to incorporate conforming amendments resulting from the adoption of the Audit Risk standards. These amendments were expected to be introduced in Finnish requirements effective July 1, 2006. No further information is publicly available.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

ID

According to the 2006 KHT self-assessment, the corresponding Finnish standard "Raportointi erityistä tarkoitusta varten tehdystä tarkastustoimeksiannosta" became effective July 1, 2003. The KHT noted that the revised ISA 800 will be translated during 2006-2007. No further information is publicly available.