No. 2 of 15 January 1999 Act on auditing and auditors (Auditors Act) CONTENTS Chapter 1 Scope et al. Section 1-1 Scope Section 1-2 Auditor's role

Transcription

1 FINANSTILSYNET Norway Translation revised January 2015 This translation is for information purposes only. Legal authenticity remains with the official Norwegian version as published in Norsk Lovtidend. No. 2 of 15 January 1999 Act on auditing and auditors () CONTENTS Chapter 1 Scope et al. Section 1-1 Scope Section 1-2 Auditor's role Chapter 2 Statutory audit obligation, et al. Section 2-1 Statutory audit obligation Section 2-2 Requirements regarding registered or state authorised auditors Section 2-3 Meeting with the auditor Chapter 3 Authorisation of auditors Section 3-1 Authorisation by Finanstilsynet Section 3-2 Education Section 3-3 Practical training Section 3-4 Requirement of good repute, et al. Section 3-5 Authorisation of audit firms Section 3-6 Authorisation of auditors from other countries, et al. Section 3-7 Statutory auditor Chapter 4 Independence, objectivity and ethics Section 4-1 General requirements regarding independence, objectivity and ethics Section 4-2 Audit firms Section 4-3 Use of staff Section 4-4 Participation in other business activities Section 4-5 Non-audit services et al. Section 4-6 Other matters Section 4-7 Cooperation agreements, ownership shares et al. Section 4-8 Exemptions Chapter 5 Auditor s tasks when auditing annual financial statements et al. Section 5-1 Content of the audit Section 5-2 Auditor s duties Section 5-3 Documentation of engagements Section 5-4 Numbered letters Section 5-5 Retention of documents Section 5-6 Audit report Section 5-7 Special requirements on the audit of consolidated financial statements Chapter 5a Special obligations on the audit of public entities Section 5a-1 Scope Section 5a-2 Transparency report Section 5a-3 Contact with the audit committee Section 5a-4 Rotation 1

2 Section 5a-5 Prohibition against taking up a senior position at an entity subject to statutory audit Chapter 5b Quality control et al. Section 5b-1 Internal quality control in audit firms Section 5b-2 Periodical quality control Chapter 6 Auditor s duty of confidentiality and duty of disclosure Section 6-1 Auditor s duty of confidentiality Section 6-2 Auditor s duty of disclosure Chapter 7 Auditor s withdrawal and transfer of audit engagement Section 7-1 Auditor s right and duty to withdraw from an audit engagement Section 7-2 New auditor Section 7-3 Transfer of audit engagement in the event of merger or reorganisation Chapter 8 Compensatory damages Section 8-1 Liability for damages Section 8-2 Reduction of liability Chapter 9 Revocation of authorisation, sanctions et al. Section 9-1 Revocation of authorisation Section 9-2 Suspension of authorisation Section 9-2a Appeal board Section 9-3 Penalties Chapter 10 Register of Auditors Section 10-1 The Register of Auditors Section 10-2 Information about registered and state authorised auditors Section 10-3 Information about audit firms Section 10-4 Obligation to update information Section 10-5 Deletion of information Section 10-6 Regulations Chapter 11 Transitional rules, entry into force and amendments to other acts Section 11-1 Transitional rules Section 11-2 Entry into force Section 11-3 Amendments to other acts 2

3 Chapter 1 Scope et al. Section 1-1 Scope This Act concerns the statutory audit obligation, authorisation of auditors, auditors tasks and requirements on the performance of auditors tasks. The auditing of the annual financial statements of entities that are subject to statutory audit shall be carried out in accordance with the provisions of this Act. The same applies to the auditing of the annual financial statements of entities that are not subject to statutory audit if an auditor indicates in the audit report or in some other manner that the accounts have been audited. Auditors who provide consulting or other non-audit services to entities that are subject to statutory audit shall carry on their business in accordance with section 4-4, section 5-2 second subsection, section 5-3, section 5-5 and section 6-1. In the case of auditors who are confirming information provided to public authorities or carrying out review engagements pursuant to sections 7-7 to 7-9 of the Limited Liability Companies Act, section 3-7, sections 4-1 to 4-7 and section 5-4 also apply. The King makes provision regarding this Act s application in Svalbard and may make special provision taking into account local conditions. Section 1-2 Auditor's role An auditor is the representative of the general public in the performance of activity as mentioned in section 1-1 second subsection. An auditor shall perform his activity with integrity, objectivity and care. Chapter 2 Statutory audit obligation et al. Section 2-1 Statutory audit obligation and the right to dismiss an auditor Entities required to keep accounting records according to the Accounting Act section 1-2 first subsection shall make sure that their annual financial statements are audited by a registered or state authorised auditor in accordance with section 2-2 (statutory audit requirement), unless otherwise specified by or pursuant to law. The statutory audit obligation pursuant to the first subsection does not apply if operating revenues from all business activities are less than NOK 5 million. Should the annual financial statements indicate operating revenues above this threshold, the statutory audit obligation becomes effective for the following year. If operating revenues in the two subsequent years fall below this threshold, the statutory audit obligation shall cease to apply from and including the third accounting year. The exemption in the first to the third sentence does not apply to: 1. private limited liability companies and public limited liability companies, 2. entities as listed in the Accounting Act section 1-2 first subsection no. 4 having a statutory obligation to keep accounting records, where the number of partners exceeds five, 3. limited partnerships where the general partner is a legal person and where no limited partner incurs personal liability for the partnership s obligations either on an undivided basis or in respect of parts which in aggregate constitute the legal person s total obligations, provided that the limited partnership's has total assets above NOK 20 3

4 million or an average total number of employees above ten full time employee equivalents. The provisions of the second subsection second and third sentences apply equally to the threshold value for total assets and full time employee equivalents, 4. general partnerships where all partners are legal persons and where no partner incurs personal liability for the partnership s obligations either on an undivided basis or in respect of parts which in aggregate constitute the legal person s total obligations, provided the general partnership has total assets above NOK 20 million or an average total number of employees above ten full time employee equivalents. The provisions of the second subsection second and third sentences apply equally to the threshold value for total assets and full time employee equivalents, 5. foundations. For private limited liability companies the statutory audit obligation under the first subsection does not apply where a decision in this respect has been taken under a power of attorney as mentioned in the Private Limited Liability Companies Act section 7-6. The exemptions pursuant to the second and third subsections do not apply where a statutory audit obligation is prescribed by other law or by regulations made pursuant to law. The exemptions pursuant to the second and third subsections do not apply to entities that have a statutory obligation to prepare group accounts, or to limited liability companies that are parent companies pursuant to section 1-3 of the Private Limited Liability Companies Act. The exemptions pursuant to the second and third subsections do not apply to private limited liability companies and entities as mentioned in section 1-2 first subsection no. 13 of the Accounting Act that are organised on the basis of a foreign company form which essentially accords with the definition of a private limited liability company in section 1-1 second subsection of the Private Limited Liability Companies Act that are under supervision by Finanstilsynet pursuant to section 1 of the Financial Supervision Act. Finanstilsynet may by regulations impose a statutory audit obligation on other entities that are under Finanstilsynet's supervision pursuant to section 1 of the Financial Supervision Act if this is necessary for the supervision of the respective entity. An entity subject to statutory audit may not dismiss an auditor without just cause. Disagreement regarding accounting treatment or audit procedures shall not be regarded as just cause for dismissal. The entity concerned shall notify the Register of Business Enterprises without undue delay that the auditor's engagement has been terminated. If an audit engagement for a public interest entity, see section 5-1, is terminated before the expiry of the period of service, the entity concerned shall send Finanstilsynet its justification for such termination. The ministry may in regulations make provision to the effect that justification for termination of an audit engagement under the provision of the fourth sentence shall also apply in respect of other entities subject to statutory audit. Section 2-2 Requirement regarding registered or state authorised auditors The annual financial statements of entities subject to statutory audit under section 2-1 shall be audited by at least one statutory auditor; see section 3-7. Audits as mentioned in the first subsection may be carried out by an audit firm that has been 4

5 authorised by Finanstilsynet; see section 3-1 second subsection. The audit firm shall appoint one statutory auditor to take charge of each engagement; see section 3-7 (statutory auditor responsible for engagement). Section 2-3 Meeting with the auditor The board of directors of any entity subject to statutory audit shall each year hold a meeting with the auditor without the CEO or members of management being present. If a majority of the board members are also part of the management team, the entire board of directors, except for the CEO, shall attend the meeting. The object of the meeting shall be for the board of directors and the auditor to discuss accounting matters where the auditor sees significant shortcomings and flaws in the assessments made by the management team, as well as other matters about which the auditor considers the board of directors should be informed. The requirement of the first subsection does not apply to: 1. entities subject to statutory audit that are covered by section 1-16 of the Accounting Act, 2. subsidiaries subject to statutory audit having the same auditor as the parent company if the parent company is covered by the requirement of the first subsection, 3. subsidiaries subject to statutory audit having the same auditor as the parent company if the parent company, without being covered by the requirement of the first subsection, nonetheless holds such a meeting with the auditor as mentioned in that subsection, 4. entities subject to statutory audit under the statutory audit obligation of the Accounting Act section 1-2 first subsection no. 13 (foreign entities' obligation to maintain accounting records for their branches) if the entity concerned operates outside Norway. The ministry of finance may by regulations make further provision to the effect that certain accounting matters shall always be considered at a meeting as mentioned in the first subsection; see the second subsection. Chapter 3 Authorisation of auditors et al. Section 3-1 Authorisation by Finanstilsynet Registered and state authorised auditors must be authorised by Finanstilsynet. Authorisation is granted to persons who meet the requirements of sections 3-2 to 3-3 and section 3-4. Audit firms which audit annual financial statements for entities subject to statutory audit must be authorised by Finanstilsynet and be assigned an auditor register number. Authorisation is granted to firms that meet the requirements of section 3-5. The titles registered auditor and state authorised auditor may only be used by persons who are authorised under the provisions of the present chapter. Applications for authorisation as auditor or audit firm shall include information as mentioned in section 10-2 and section Finanstilsynet may record the personal identification number of auditors, board members, deputy board members, CEO and shareholders or partners in audit firms. Section 3-2 Education Registered auditors must have achieved a bachelor's degree in auditing in accordance with the 5

6 established national curriculum for auditor education. State authorised auditors must have achieved a master's degree in accounting and auditing. Education at universities and university colleges abroad may be approved in line with education in Norway provided that it is equivalent to education as mentioned in the first and second subsections. The ministry of finance may make further provision regarding auditor education, higher auditor education and foreign education, including requirements regarding examinations and grade levels. Section 3-3 Practical training Registered and state authorised auditors shall have at least three years of varied practical training in the auditing of annual financial statements or equivalent financial statements. At least two years of the period of practical training shall be carried out after successful completion of education as mentioned in section 3-2. At least two years of the period of practical training shall be under the supervision of a state authorised or registered auditor, or an authorised audit firm that audits the annual financial statements of entities subject to statutory audit. Finanstilsynet may approve up to one year s practical training in internal auditing, public auditing, inspection activities or other relevant activities as practical training under the first subsection. The ministry of finance may make further provision enabling up to two years of practical training at the Office of the Auditor General, a local authority or county audit and tax audit to be approved as practical training under the first subsection. An auditor must have passed a practical examination following completion of theoretical and practical training demonstrating that he is fit to undertake audit engagements. The practical training shall take place in Norway or in another EEA member state. The practical examination mentioned in the fifth subsection must be taken in Norway. The ministry of finance may make further provision regarding what shall be considered as varied practical training under the first subsection, and regarding what requirements shall be made in respect of the practical examination under the fifth subsection. Section 3-4 Requirement of good repute et al. Anyone seeking authorisation as a registered or state authorised auditor must be: 1. of good repute, 2. capable of fulfilling their obligations as they fall due, and 3. of legal age and capacity Applications for authorisation as a registered or state authorised auditor shall be accompanied by an ordinary police certificate pursuant to the Police Records Act section 40. Section 3-5 Authorisation of audit firms An audit firm must be organised as a general partnership, private limited liability company or 6

7 public limited liability company and meet the following conditions: 1. the firm shall have a board of directors, of which the majority of both members and alternates are auditors who have been duly authorised pursuant to this Act or by the authorities of another EEA member state or a state with which Norway has signed an agreement on mutual recognition of auditors, 2. pursuant to the partnership agreement or articles of association, auditors or audit firms that fulfil the requirements of no. 1 shall hold more than half of the votes in the firm's highest governing body, 3. the firm must have permanent office premises in Norway. The requirement as to permanent office premises in Norway shall not apply if the firm has permanent office premises in another EEA member state where it is duly authorised and is subject to supervision by the local supervisory authorities. 4. the firm must be capable of fulfilling its obligations as they fall due. The ministry of finance may make further provision regarding the conditions for the authorisation of audit firms. Finanstilsynet may in individual administrative decisions make time-limited exemptions from the requirement of the first subsection no. 1 that a majority of the board members shall be auditors and from the requirement of the first subsection no. 2. Finanstilsynet may by individual administrative decision make exemptions from the requirement of the first subsection no. 3 regarding permanent office premises in Norway, provided that the auditor s documents relating to clients in Norway are retained in an orderly and proper manner in a permanent place in Norway. The documents shall be available for, and organised with a view to, inspection by public supervisory authorities and other statutory inspection. Section 3-6 Authorisation of auditors from other countries et al. The ministry of finance may make regulations concerning the authorisation and supervision of auditors and audit firms from other countries. The ministry may by regulations provide that activity as referred to in section 1-1 of the may also be performed by persons who are lawfully established in another EEA member state with a view to engaging in such activity there, and may make further provision regarding temporary performance of such activity. Section 3-7 Statutory auditor For the purposes of this Act "statutory auditor" means a registered or state authorised auditor who in addition: 1. meets continuing education requirements in accordance with rules made by the ministry of finance, 2. meets the requirement for permanent office premises pursuant to section 3-5 first subsection no. 3, 3. is resident in an EEA member state, 4. has sufficient protection against any liability arising pursuant to chapter 8 in accordance with rules made by the ministry of finance, and 5. has been assigned an auditor register number by Finanstilsynet after providing evidence of compliance with the conditions of nos. 1 to 4. Finanstilsynet may grant exemptions from the requirement that the auditor shall be resident in an EEA member state. Finanstilsynet may by individual administrative decision make exemptions from the requirement of the first subsection no. 2 regarding permanent office 7

8 premises in Norway provided that the auditor s documents relating to clients in Norway are retained in an orderly and proper manner in a permanent place in Norway. The documents shall be available for, and organised with a view to, inspection by public supervisory authorities and other statutory inspection. Chapter 4 Independence, objectivity and ethics Section 4-1 General requirements regarding independence, objectivity and ethics Should an auditor or an auditor s related party (see fourth subsection) be related to an entity that is subject to statutory audit or to employees or officers of such entity in a manner that might impair the auditor s independence or objectivity, the person concerned may not audit the annual financial statements of the said entity. The same applies where other special circumstances exist which are liable to impair confidence in the auditor. The annual financial statements of entities which are subject to statutory audit may not be audited by: 1. anyone who is employed by such entity or who is otherwise in a collaborative, subordinate or dependent relationship to such entity or to someone as mentioned in nos. 2 to 5, 2. anyone who holds ownership shares in, is the proprietor of or a partner in such entity, 3. anyone who is owed money by or who owes money to such entity with the exception of outstanding fees for the last two accounting years (the same shall apply with respect to the liability protection provider), 4. anyone who is a member or alternate member of the governing bodies or control committee, or is the CEO, of such entity, 5. anyone who is responsible for, or participates in, maintaining the entity's accounts or preparing its management report, or who provides specific recommendations regarding the assessment of items in the annual financial statements or in returns to public authorities. The annual financial statements of entities subject to statutory audit may not be audited by anyone with related parties as mentioned in the fourth subsection who have a relationship as mentioned in the second subsection nos. 2 to 5 with such entity. This provision shall not prevent an auditor from having related parties as mentioned in the fourth subsection nos. 3 to 5 with ownership shares or outstanding accounts etc., as mentioned in the second subsection nos. 2 to 3, unless these are substantial. The following shall be considered related parties of an auditor: 1. a spouse or a person cohabiting with the auditor in a relationship akin to marriage, 2. the auditor's under-age children, and under-age children of a person as mentioned in no. 1 with whom the auditor cohabits, 3. relatives in direct line of ascent or descent and siblings, 4. relatives in direct line of ascent or descent and siblings of a person as mentioned in no. 1, and 5. spouse of, or person cohabiting in a relationship akin to marriage with, someone as mentioned in no. 3. Persons who are barred by the provisions of this chapter from auditing annual financial statements prepared by a parent company may not audit the annual financial statements of subsidiaries of such parent company. 8

9 The ministry of finance may by regulations establish a code of professional ethics and rules of independence and objectivity if this is deemed necessary for the purpose of compliance with international obligations. Section 4-2 Audit firms No one may act as statutory auditor in charge of the audit, see section 2-2, when other auditors or senior employees of the audit firm or members or alternate members of the audit firm s governing bodies have a relationship as mentioned in section 4-1 first or second subsection with the entity subject to statutory audit. The first subsection also applies where a shareholder or partner who owns more than 10 per cent of the share or contributed capital and the votes of the audit firm has a relationship as mentioned to the entity subject to statutory audit. Ownership shares or outstanding accounts etc., as mentioned in section 4-1 second subsection nos. 2 and 3 are not of consequence for an auditor s independence unless they are substantial. No one may act as statutory auditor in charge of the audit where persons as mentioned in the first and second subsections have related parties as mentioned in section 4-1 fourth subsection nos. 1 to 3 who have a relationship as mentioned in section 4-1 second subsection nos. 2 to 5 with the entity subject to statutory audit. Ownership shares or outstanding accounts etc., as mentioned in section 4-1 second subsection nos. 2 and 3 are not of consequence for an auditor s independence unless they are substantial. An audit firm may not audit the annual financial statements of an entity subject to statutory audit if the audit firm or its parent has a relationship with the entity subject to statutory audit as mentioned in section 4-1 first, second or fifth subsections. The ministry of finance may by regulations prescribe that this provision shall apply equally to other companies in a group. Shareholders, board members and senior employees of an audit firm or affiliates shall not seek to influence the execution of an audit engagement in such a way that it may affect the auditor's or audit assistants' independence and objectivity. Section 4-3 Use of staff Only audit staff who meet the requirements of section 4-1 may be used. However, section 4-1 second subsection no. 3 shall not prevent the use of assistants who have a claim on or debt to the entity subject to statutory audit on market terms which has been offered to an indeterminate group of persons. Section 4-4 Participation in other business activities Auditors or audit firms may not participate in or have functions in other business activities if doing so might lead to a conflict between the interests of the auditor or firm concerned and those of the client entity or might in some other manner impair confidence in the auditor or audit firm. Section 4-5 Non-audit services et al. An auditor who audits the annual financial statements of an entity subject to statutory audit may not provide consulting or other non-audit services to that entity if doing so might influence or raise doubts about the auditor s independence and objectivity. The auditor may not provide services which belong under the management and control 9

10 tasks of the audited entity. The auditor may not act as attorney-in-fact for the said entity. Exemptions to this apply in regard to assistance in tax matters under section 218 of the Courts of Justice Act. In the case of audit firms, this provision applies equally to auditors who are not the statutory auditor in charge of the audit. The ministry of finance may by regulations make supplementary provisions to this section. Section 4-6 Other matters An auditor shall ensure that fees from a client, a group of collaborating clients or from one and the same source do not constitute such a large proportion of the auditor s total fees that they may influence or raise doubts about the auditor s independence and objectivity. An auditor may not agree a contingent fee. Nor may a fee be entirely or partly determined or influenced by the delivery of non-audit services. Section 4-7 Cooperation agreements, ownership shares et al. In the case of collaborating auditors who from the outside appear to be a joint operation, provisions laid down in or pursuant to this chapter shall apply as if they were an audit firm. Where an auditor or audit firm has ownership shares in an entity that provides consulting or other non-audit services, these shall be viewed collectively for the purpose of provisions laid down in or pursuant to this chapter. The annual financial statements of an entity subject to statutory audit may not be audited by anyone who has a cooperation agreement with someone providing consulting or other nonaudit services if this might influence or raise doubts about the auditor s independence and objectivity. The ministry may by regulations provide that rules laid down in or pursuant to this chapter shall apply where such a collaboration agreement exists. Section 4-8 Exemptions Finanstilsynet may by individual administrative decision grant exemptions from section 4-1 second and third subsections, section 4-2 and section 4-3 when called for on special grounds. Chapter 5 Auditor s tasks when auditing annual financial statements et al. Section 5-1 Content of the audit The auditor shall assess whether annual financial statements have been prepared and approved in accordance with laws and regulations, and whether the management of an entity subject to statutory audit has fulfilled its obligation to produce a proper and clearly set out record and documentation of accounting information in accordance with laws and regulations. The auditor shall assess whether information in the management report and where applicable in the account of corporate governance pursuant to the Accounting Act section 3-3(b) concerning the annual financial statements, the going concern assumption and the proposal for application of profit or coverage of loss is in accordance with laws and regulations, and whether the information is consistent with the financial statements. The obligation pursuant to the second sentence applies equally to the information which at minimum shall be disclosed in accounts of corporate social responsibility pursuant to the Accounting Act section 3-3(c) first 10

11 subsection, and to information included in accounts of corporate social responsibility disclosed in a document other than the management report; see the Accounting Act section 3-3c sixth subsection. The auditor shall ensure that an entity subject to statutory audit has arranged for satisfactory management of its assets and that proper controls are in place. The auditor shall by way of the audit contribute to the prevention and identification of irregularities and errors. Section 5-2 Auditor s duties The auditor shall conduct the audit to the best of his judgement, including assessing the risk that the annual financial statements may contain incorrect information as a result of irregularities or errors. The auditor shall ensure that he has an adequate basis for assessing whether any infringement of laws and regulations of material significance for the annual financial statements has taken place. The auditor shall conduct his business in accordance with good auditing practice. The ministry of finance may by regulations impose requirements on the conduct of audits if this is necessary for the enforcement of international obligations. An entity subject to statutory audit shall permit the auditor to undertake such examinations as the auditor finds necessary, and shall make available to the auditor such information as he requires for the execution of his engagement. The auditor shall in writing draw the following matters to the attention of the management of the entity subject to statutory audit (see section 5-4): 1. deficiencies in regard to the obligation to produce a proper and clearly set out record and documentation of accounting information, 2. errors and deficiencies in the organisation and control of its asset management, 3. irregularities and errors that may result in incorrect information in the annual financial statements, 4. circumstances that may lead to liability on the part of members of the board, corporate assembly, supervisory board or CEO, 5. the reason for any absence of the auditor's signature in confirmations given to public authorities pursuant to laws or regulations, and 6. the reason for the auditor's withdrawal from any engagement pursuant to section 7-1. Section 5-3 Documentation of engagements The auditor shall be able to document how the audit was conducted, as well as the result of the audit, in a manner that is sufficient to support, and enable the testing of, the auditor s conclusions. It must be possible to document separately any matters indicating the existence of irregularities or errors, accompanied by a statement of any action taken by the auditor in that connection. If an auditor withdraws from an engagement and in that connection advises another auditor not to take on the engagement pursuant to section 7-2, this shall be documented and the reason shall be given. A new auditor s reason for taking on an engagement contrary to a previous auditor s advice shall also be documented. Documentation as mentioned may be provided in an electronic format provided a satisfactory method is used that authenticates the person responsible for it and secures the document s contents for a lengthy period of time. 11

12 When providing consulting or other non-audit services to entities subject to statutory audit, the auditor shall be able to document the nature of the engagement, its scope and any recommendations. Such services shall be invoiced separately, stating the nature of the engagement. Section 5-4 Numbered letters Letters drawing attention to matters as mentioned in section 5-2 fourth subsection shall be numbered sequentially. In the case of entities subject to statutory audit that have a board of directors, such letter shall be sent to the chairman of the board. If the CEO and the chairman of the board are the same person, a copy of such letter shall be sent to all members of the board. Letters dealing with matters that may give rise to liability for a member of the board, see section 5-2 fourth subsection no. 4, shall in all cases be copied to all board members. Letters may be sent electronically provided a satisfactory method is used that authenticates the sender and secures the document s contents for a lengthy period of time. Section 5-5 Retention of documents The auditor shall retain documentation and numbered letters under this chapter in an organised and satisfactory manner for at least 10 years. The same shall apply to correspondence related to the provision of non-audit services. The ministry of finance may make further provision regarding methods of retention. Section 5-6 Audit report The auditor shall submit an audit report without undue delay after the annual financial statements have been approved and no later than seven months after the end of the financial year. Section 7-4 second sentence of the Private Limited Companies Act and section 7-4 second sentence of the Public Limited Companies Act nonetheless apply in the case of private limited liability companies and public limited liability companies. An audit report shall also be submitted in cases where annual financial statements do not exist or are incomplete. Audit reports for entities subject to statutory audit shall be in Norwegian except as otherwise prescribed by the ministry of finance in regulations or by individual administrative decision. The audit report shall be dated and signed by the statutory auditor responsible for the engagement. The audit report shall contain an introduction which shall at a minimum disclose which annual financial statements have been audited and which rules for financial reporting have been applied in the preparation of the annual financial statements. In the audit report the auditor shall confirm that the audit has been conducted in accordance with law, regulations and good auditing practice. The audit report shall contain a description of the scope of the audit which shall at a minimum disclose which auditing standards have been applied in the conduct of the audit. In the audit report the auditor shall express an opinion regarding the following matters: 1. a clear indication of whether the annual financial statements in the auditor s judgement give a fair presentation in conformity with the rules for financial reporting that have been applied, 2. whether the annual financial statements have been prepared and approved in accordance with law and regulations, 3. whether the management of the entity subject to statutory audit has fulfilled its duty to produce a proper and clearly set out record and documentation of accounting information, and 12

13 4. whether the information in the management report and, where applicable, in the account of corporate governance pursuant to section 3-3b of the Accounting Act concerning the annual financial statements, the going concern assumption and the proposal for application of profit or coverage of loss is in accordance with laws and regulations, and whether the information is consistent with the annual financial statements. The obligation pursuant to the first sentence applies equally to the information which at minimum shall be provided in corporate social responsibility reports pursuant to section 3-3c first subsection of the Accounting Act, and to information included in a document other than the management report; see section 3-3c sixth subsection of the Accounting Act. If the accounts fail to provide the information about the entity's results and financial position that should have been provided, the auditor shall issue a qualified opinion, and in the event provide necessary supplementary information in his report. Reference shall be made to any matters to which the auditor has drawn attention by emphasis of matter without issuing a qualified opinion in the audit report. Should the auditor deem that the accounts should not be approved as they stand, this shall be indicated separately. Should the auditor find during his examinations that circumstances exist which may give rise to liability for a member of the board, corporate assembly, supervisory board or the CEO, this shall be remarked upon in the audit report. Where an entity subject to statutory audit is required to hold a meeting as mentioned in section 2-3, and such meeting has not been held in the course of the past year, this shall also be remarked upon in the audit report. The auditor shall also disclose any other information about circumstances which he believes should be drawn to the attention of the partners or shareholders in the audited entity. The ministry of finance may by regulations make provision concerning the audit report if this is necessary for the enforcement of international obligations. Section 5-7 Special requirements on the audit of consolidated financial statements An auditor who is appointed by an audit firm in accordance with section 2-2 shall when auditing annual financial statements for a parent company issue a joint audit report for the parent company and the group. Section 5-6 first to eighth subsection applies. With a view to the consolidated audit procedures, an auditor as mentioned in the first subsection shall review audit work of significance for the consolidated financial statements done by the auditor of any subsidiary. The review shall be documented in a manner that is sufficient to enable testing of the work done. When auditing a group of companies a subsidiary of which is audited by an auditor or audit firm from a country outside the EEA area which does not have a mutual cooperation agreement on supervision of auditors and audit firms, the group auditor as mentioned in the first subsection shall retain a copy of documentation of audit work done by the subsidiary's auditor. The obligation to retain documentation shall not apply where satisfactory access to documentation is ensured through an agreement the auditor has established with the subsidiary's auditor or by other means. If it is necessary in order to ensure public authorities' access to documentation, Finanstilsynet may order the auditor to take other appropriate measures. An auditor as mentioned in the first subsection shall on request present documentation as mentioned in the second and third subsections, including documentation prepared for the 13

14 consolidated audit procedures, to Finanstilsynet. However, this does not apply to documentation as mentioned in the third subsection if the auditor had taken satisfactory measures as mentioned there, and circumstance beyond the auditor's control render it impossible to present such documentation. Chapter 5a Special obligations on the audit of public interest entities Section 5a-1 Scope The provisions of this chapter apply to auditors who audit annual financial statements for the following entities subject to statutory audit: 1. entities having issued transferable securities that have been admitted to trading on a regulated market in an EEA member state, 2. banks or other credit institutions, 3. insurance companies. Finanstilsynet may grant exemption from the requirement of this chapter if the auditor is subject to requirements under other countries' legislation. Section 5a-2 Transparency report Auditors covered by section 5a-1 shall each year issue a report which at minimum describes: 1. the form of organisation and ownership structure, 2. any cooperation as mentioned in section 4-7 first subsection, including the basis for such cooperation, 3. the governance structure, 4. internal quality control systems and guidelines for independence, together with a declaration from the board of directors on how the quality control systems have functioned and confirming compliance with the guidelines, 5. date of the most recent periodical quality control pursuant to section 5b-2, 6. what entities or groups as mentioned in section 5a-1 have been audited by the auditor in the last financial year, 7. the audit firm's policy regarding continuing education, 8. accounting information showing the scope of the audit, including aggregate turnover distributed on fees for audit and non-audit services, 9. remuneration to the owners. The report shall be signed and made available on the auditor's website not later than three months after end of the financial year. Finanstilsynet may in special cases grant exemption from the provisions of the first subsection. Section 5a-3 Contact with the audit committee Where the entity subject to statutory audit has an audit committee, the auditor shall provide the audit committee with a description of the main elements in the audit for the preceding financial year, including in particular with regard to material weaknesses brought to light by the internal control of the financial reporting process. The auditor shall moreover 1. each year confirm his/her independence in writing, 2. disclose what services other than statutory audit have been delivered to the entity in the course of the financial year, 3. disclose possible threats to independence and provide documentation of measures taken to mitigate such threats. 14

15 Information as mentioned in the first subsection shall be given to the board of directors if the assembled board of directors discharges the audit committee's tasks under separate legal authority. Section 5a-4 Rotation An auditor may not audit annual financial statements for the same entity for more than seven consecutive years. An auditor covered by the first sentence may not take on an audit engagement for the same entity until at least two years have passed. For audit firms this applies to the person designated as statutory auditor. The ministry of finance may by regulations make further provision concerning rotation. In cases where the statutory audit obligation applies to consolidated financial statements, an audit report may not be prepared for the group if one or more significant subsidiaries have an auditor who pursuant to the first subsection of this section could not have taken on an audit engagement for a group entity. Finanstilsynet may in special cases consent to an audit firm not appointing a new statutory auditor even though seven years have elapsed. Section 5a-5 Prohibition against taking up a senior position at an entity subject to statutory audit An auditor may not take up a senior position with the audited entity within a period of at least two years of the date on which the audit engagement ended. For audit firms this applies to the person designated as statutory auditor. Chapter 5b Quality control et al. Section 5b-1 Internal quality control in audit firms Audit firms shall establish adequate systems for internal quality control of the audit. Section 5b-2 Periodical quality control Auditors who audit the annual financial statements of entities subject to statutory audit shall undergo quality control every sixth year. Auditors covered by section 5a-1 shall be quality controlled at least every third year. The quality control shall at least include an assessment of independence, resource use, audit fees and conduct of the audit. For audit firms the quality control shall also include an assessment of the firm's internal quality control systems; see section 5b-1. The results of the quality control shall be described in a written report. Adverse remarks with a basis in the quality control shall be acted on by the auditor without undue delay. The quality control shall be performed by whomever Finanstilsynet appoints for the purpose. The ministry of finance may make regulations concerning the implementation of quality control performed by parties other than Finanstilsynet. The ministry may moreover make regulations concerning quality control of auditors covered by section 5a-1. Chapter 6 Auditor s duty of confidentiality and duty of disclosure Section 6-1 Auditor s duty of confidentiality Auditors and auditors colleagues shall treat as confidential any information which comes to 15

16 their knowledge in the course of their work unless otherwise prescribed by law or unless the person to whom the information relates has given his consent for the duty of confidentiality to be waived. Auditors and auditors colleagues may not make use of such information in their own work or in the service or employment of others. An auditor who reviews another auditor s audit engagement may in connection with this review be provided with information and documentation notwithstanding the other auditor s duty of confidentiality under the first subsection. The duty of confidentiality under the first subsection shall apply to a corresponding extent to the auditor who is conducting the review. The provision of the first subsection shall not prevent an auditor who audits the annual financial statements of a subsidiary, an associated company or a joint venture from providing necessary information to the auditor who audits the annual financial statements of the parent company, a company with significant influence, or partners who control the entity. Notwithstanding the provision of the first subsection or a confidentiality agreement, an auditor may make a statement, and present documentation regarding an audit engagement or other services, to the police where an investigation has been initiated in a criminal case. Furthermore, an auditor may inform the police if, in the course of an audit engagement or other services, circumstances emerge that give reason to suspect that a criminal act has been committed. The duty of confidentiality shall remain in effect after the engagement has been terminated. The ministry of finance may make regulations concerning exemption from the duty of confidentiality towards the auditor oversight body in another state when an entity subject to statutory audit has issued marketable securities that have been admitted to trading on a regulated market in the state concerned or forms part of a group which prepares consolidated financial statements and is subject to statutory audit in that state. The ministry of finance may by individual administrative decision or regulations refuse to allow auditors or audit firms to hand over information about their business or about their clients to foreign auditor oversight authorities if this is necessary for the fulfilment of Norway's international obligations. Section 6-2 Auditor s duty of disclosure An auditor shall, within the framework of an engagement, disclose information about matters relating to an entity subject to statutory audit of which the auditor has become aware in the course of an audit when this is required by a shareholder at a general meeting, by a partner at a partnership meeting, by a member of a corporate assembly, control committee or board of directors, the CEO or an investigator. The duty to disclose information shall not apply if the information required cannot be provided without causing disproportionate harm to the audited entity. Should an auditor be requested in a non-meeting context to disclose information to a member of the corporate assembly, control committee or board of directors, the auditor may request the right to respond at a meeting of the body concerned. When required to do so by an auditor who audits the annual financial statements of a parent company, a company with significant influence or partners in a joint venture, an auditor who audits the annual financial statements of a subsidiary, an associated company or a joint venture shall be obliged to disclose necessary information. 16

17 Where an entity subject to statutory audit fails to fulfil a duty under law or regulations to surrender specific documents to public authorities, the auditor shall at the request of the authorities concerned surrender copies of documents that he has in his possession. The auditor shall send a copy of the reason as mentioned in section 5-2 fourth subsection no. 5, relating to confirmations pursuant to the Tax Assessment Act, to the local tax office. Where an entity subject to statutory audit has initiated debt negotiations, the Bankruptcy Act section 18a concerning an auditor s duty of disclosure and assistance shall apply. If the estate of an entity subject to statutory audit is placed under bankruptcy proceedings, section 101 fourth subsection of the Bankruptcy Act applies. Chapter 7 Auditor s withdrawal and transfer of audit engagement Section 7-1 Auditor s right and duty to withdraw from an audit engagement An auditor is duty bound to withdraw without undue delay from an audit engagement for an entity subject to statutory audit if, during the course of his work, he has identified and drawn attention to significant breaches of law and regulations to which the said entity is subject, and the entity fails to take necessary steps to rectify the situation. Where circumstances as mentioned in the first subsection are not present, the auditor shall only be entitled to unilaterally withdraw from the engagement if he is not given the opportunity to discharge his duties under this Act or if other special grounds exist. The auditor shall give the entity subject to statutory audit reasonable advance notice of his intention to withdraw from the engagement. Prior warning may be sent by electronic means if the recipient has expressly accepted this method. The auditor shall without undue delay notify the Register of Business Enterprises that the engagement has ended. Where an audit engagement for a public interest entity, see section 5a- 1, ends prior to the expiry of the period of service, the auditor shall inform Finanstilsynet of the reason for this. The ministry may by regulations provide that the obligation under the second sentence to give notification of the reason for ending the audit engagement shall also be applied to auditors who audit other entities subject to statutory audit. Section 7-2 New auditor Before a new auditor undertakes to audit the annual financial statements of an entity subject to statutory audit, he or she shall request a statement from the entity s previous auditor about the existence of any circumstances indicating that a new auditor should not undertake the engagement. The previous auditor shall without undue delay disclose in writing the grounds for his withdrawal. The previous auditor of the entity concerned shall, notwithstanding the duty of confidentiality, disclose information and documentation about his audit engagement when the new auditor so requests and it may be of significance for the future audit. Should an auditor undertake the engagement against the advice of the previous auditor, his grounds for doing so shall be documented; see section 5-3 second subsection. Section 7-3 Transfer of audit engagements in the event of merger or reorganisation In the event of a merger of audit firms, the merged firm shall continue the audit engagements performed by the firms prior to the merger. The same shall apply in the event of 17