According to a 2007 Institute of State Authorized Public Accountants (FSR) self-assessment, Denmark adopts International Auditing and Assurance Standards Board's pronouncements as national standards although with modifications to reflect the local legal environment. The self-assessment reiterates that all of the International Standards on Auditing (ISAs) promulgated by the IAASB have been adopted with the exception of ISA 320, ISA 501, and ISA 600. However, ISAs not adopted at the time of the self-assessment were expected to be adopted in the spring of 2007, the self-assessment adds, though as of November 2008 there is no publically available information confirming their adoption. With the enactment of Directive 2006/43/EC of the European Parliament and Council (effective May 2006), all statutory audits of annual and consolidated accounts must be carried out on the basis of ISAs as adopted by the European Commission (EC). European Union 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. According to the information provided on the EC website, Denmark has fully transposed the above-mentioned Directive into its national legislation.

General Overview

According to the description of the legal and regulatory framework provided in the 2004 Institute of State Authorized Public Accountants (FSR) self-assessment, the main acts governing auditing and reporting practices of listed and private companies include the Danish Public Companies Act, Act on Private Companies, and the Act on State Authorized Public Accountants and Registered Accountants. Companies must be audited in accordance with the generally accepted auditing practice. In practice, the Danish auditing standards issued by the FSR, a private organization established by the profession, are being used.

According to the 2007 self-assessment prepared by the FSR, Denmark adopts International Auditing and Assurance Standards Board's pronouncements as national standards although with modifications to reflect the local legal environment. The self-assessment reiterates that all of the International Standards on Auditing (ISAs) promulgated by the IAASB have been adopted with the exception of ISA 320, ISA 501, and ISA 600. The self-assessment adds that "all of these are expected to be adopted in the spring of 2007 and they will then replace existing Danish auditing standards on these matters" (p. 35). However, as of November 2008 there is no publically available information confirming their adoption. A 2004 paper by Holm and Warming-Rasmussen explains that the "international standards are translated section by section and only special regulations in the Danish legislation are added" (p. 12). In addition, a few additional Danish standards have been issued that are not based on equivalent ISAs. Those include, according to the 2004 paper by Holm and Warming-Rasmussen, RS 265 related to communication with the client through the use of long form audit reports ("audit protocols"), RS 585 related to the section in the annual report holding "the management report" or "Management's Discussion and Analysis," and RS 635 on "the cooperation between two appointed auditors" on the possibility of having two auditors for a joint opinion on the full annual report.

Moreover, with the enactment of Directive 2006/43/EC of the European Parliament and Council (effective May 2006), all statutory audits of annual and consolidated accounts must be carried out on the basis of 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. According to the information provided on the EC website, Denmark has fully transposed the above-mentioned Directive into its national legislation.

The securities market is regulated by the Danish Financial Supervisory Authority (DFSA), the Securities Council, and the Copenhagen Stock Exchange. These authorities do not participate in the regulation of the audit profession, nor do they set auditing standards. As far as the enforcement of the reporting requirements is concerned, the 2004 FSR self-assessment notes that starting 2005, the Securities Council will become responsible for the review of financial statements of listed companies in order to monitor their compliance with the established standards. Further, under the Financial Business Act, banks, financial institutions, non-financial institutions, and insurance companies, the self-assessment points out, are regulated by the DFSA, which has the authority to set auditing requirements and review financial statements of the regulated entities.

As explained in the Holm and Warming-Rasmussen paper, the audit profession is organized in two main organizations, the FSR and the Institute of Registered Public Accountants (FRR). Membership at both institutes is voluntary and the Danish Companies Act mandates that only the certified public accountants or state authorized public accountants are permitted to perform statutory audits. The 2007 self-assessment by the FSR notes that the FSR has adopted the 2004 International Federation of Accountants (IFAC) code of ethics with certain modifications. The FSR and FRR are listed as members on the IFAC website.

The audit profession is regulated by the Danish Commerce and Companies Agency, which issues executive orders based on the Act on State Authorized and Registered Public Accountants. The Auditor's Public Oversight Body establishes detailed procedures for the statutory quality assurance review of state authorized and registered public accountants. The 2004 self-assessment adds that "the oversight body has authority to perform/monitor quality assurance reviews to ensure compliance with independence requirements, to establish whether sufficient quality control systems are developed and implemented and to decide on any possible sanctions." Moreover, all state authorized and registered public accounting firms are subject to quality assurance review regardless of whether they perform audits of financial institutions or other companies.

The Principles

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

II

According to the 2007 FSR self-assessment, Denmark adopts IAASB pronouncements as national standards although with modifications to reflect the local legal environment. Moreover, with the enactment of Directive 2006/43/EC of the European Parliament and Council, all statutory audits of annual and consolidated accounts must be carried out on the basis of ISAs as adopted by the EC. There is, however, insufficient information publicly available as to Denmark's compliance with this principle.

ISA 210 Terms of Audit Engagements (effective 2006)

II

See ISA 200.

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

II

See ISA 200.

ISA 230R Documentation (effective 2006)

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.

ISA 320 Audit Materiality (effective 2004)

II

The 2007 FSR self-assessment notes that ISA 320 has not been adopted; however, it was expected to be adopted in the spring of 2007. As of November 2008 there is no publically available information confirming their adoption.

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

II

See ISA 200.

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

II

See ISA 200.

ISA 500 Audit Evidence (effective 2004)

II

See ISA 200.

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

II

The 2007 FSR self-assessment notes that ISA 501 has not been adopted; however, it was expected to be adopted in the spring of 2007. As of November 2008 there is no publically available information confirming their adoption.

ISA 505 External Confirmations (effective 2004)

II

See ISA 200.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

II

See ISA 200.

ISA 520 Analytical Procedures (effective 2004)

II

See ISA 200.

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

II

See ISA 200.

ISA 540 Audit of Accounting Estimates (effective 2004)

II

See ISA 200.

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

II

See ISA 200.

ISA 550 Related Parties (effective 2004)

II

See ISA 200.

ISA 560 Subsequent Events (effective 2006)

II

See ISA 200.

ISA 570 Going Concern (effective 2004)

II

See ISA 200.

ISA 580 Management Representations (effective 2004)

II

See ISA 200.

ISA 600 Using the Work of Another Auditor (effective)

II

The 2007 FSR self-assessment notes that ISA 600 has not been adopted; however, it was expected to be adopted in the spring of 2007. As of November 2008 there is no publically available information confirming their adoption.

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

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.

ISA 710 Comparatives (effective 2004)

II

See ISA 200.

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

II

See ISA 200.

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

II

See ISA 200.