Action Plan Developed by. KHT-yhdistys Finnish Institute of Authorised Public Accountants BACKGROUND NOTE ON ACTION PLANS

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1 Kht-Yhdistys - Finnish of Authorised Public Accountants BACKGROUND NOTE ON ACTION PLANS Action Plans are developed by IFAC members and associates to address policy matters identified through their responses to the IFAC Compliance Self-Assessment Questionnaires. They form part of a continuous process within the IFAC Member Body Compliance Program to support the ongoing development and improvement of the accountancy profession around the world. Action Plans are prepared by members and associates for their own use based on the national frameworks, priorities, processes and challenges specific to each jurisdiction. As such, they will vary in their objectives, content and level of detail, consistent with their differing national environments and stages of development, and will be subject to periodic review and update. Refer to responses to the Part 1 Assessment of the Regulatory and Standard-Setting Framework Questionnaire and Part 2 SMO Self-Assessment Questionnaire for background information on each member and associate their environment and existing processes. These responses may be viewed at: Use of Information Please refer to the Disclaimer published on the Compliance Program website. ACTION PLAN IFAC Member/Associate: KHT-yhdistys Finnish of Authorised Public Accountants Original Publish : December 2010 Last Updated: August 2012 Next Updated: August 2013 Status as of of Publication Page 1 of 14

2 Kht-Yhdistys - Finnish of Authorised Public Accountants GLOSSARY AB3C s CPD EU HTM IAASB IAESB IES IESBA IFAC IFRS IPSAS ISA ISAE ISQC ISRE ISRS KHT QA SME SMP The Auditing Board of the Central Chamber of Commerce Continuing Professional Development European Union The Registered Association of Certified HTM-Auditors International Auditing and Assurance Standards Board International Accounting Education Standards Board International Education Standards International Ethics Standards Board for Accountants International Federation of Accountants International Financial Reporting Standards International Public Sector Accounting Standards International Standards on Auditing International Standard on Assurance Engagements International Standard on Quality Control International Standard on Review Engagements Integrated Statewide Record System Finnish of Authorised Public Accountants Quality Assurance Small and Medium Enterprises Small and Medium Practices Status as of of Publication Page 2 of 14

3 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 1 and Quality Assurance (QA) Actively Communicate with the Auditing Board of the Central Chamber of Commerce (AB3C s) and Members on Developments of Quality Assurance # Start Actions Completion Background: Over 10 years ago the started the quality assurance reviews, which was voluntarily for its members. In 2008 the AB3C s took over the quality reviews as an independent body. The has assisted the AB3C s with the start-up and training for the inspectors and the AB3C s program meets SMO1 requirements. The and AB3C s share the developments and findings of the quality assurance reviews and if the need arises, they are incorporated in the trainings. AB3C has some Quality Assurance personnel, who perform the inspections of audit firms in PIE sector. The inspections of other audit firms and individual auditors are also done by professional accountants in public practice. Finnish has translated ISQC 1 (Clarity) in Finnish. And though officially it was not adopted in Finland due to the lack of legal requirement, the general regulation in the Auditing act prescribes that auditors must comply with good auditing practise. HTM-auditors association have translated and adapted (due to the need to incorporate some additional information caused by Finnish legislation) quality control model based on the Implementation Guide: Guide to Quality Control for Small and Medium-Sized Practices (SMPs)- Sample Quality Control Manual Two-to-Five Partner Firm published by IFACs Small and Medium Practices Committee, March Facilitate Active Communication with AB3C s on Developments of Quality Assurance 1. June 2011 Follow up the quality assurance reviews performed by AB3C s and discuss the developments and the findings. Quality Assurance Committee of the Quality Assurance Committee of the 2. Jan 2011 Facilitate active communication with AB3C s on developments of quality assurance. Quality Assurance Committee of the Quality Assurance Committee of the and Technical Secretary of the 3. April 2011 Conduct trainings on quality control for SMP s (the trainings included ISQC1 and International Standards on Auditing (ISAs) for Small and Medium Enterprises (SME)/Small and Medium Practices (SMP)). November 2011 Separate training work group Members of Quality Assurance Committee of the and members of the Status as of of Publication Page 3 of 14

4 Kht-Yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion Maintaining Processes 4. Ensure that the members fulfill the requirements and maintain their proficiency and other qualifications required. Quality Assurance Committee of the and technical staff Review of KHT-yhdistys s Compliance Information 5. Perform periodic review of responses to the IFAC compliance self-assessment questionnaires and update sections relevant to quality assurance. Board of the Quality Assurance Committee of the and technical staff Status as of of Publication Page 4 of 14

5 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 2 and International Education Standards (IESs) for Professional Accountants Continue to Use Best Endeavors to Ensure KHT s Compliance with IES and Other International Accounting Education Standards Board (IAESB) Guidance # Start Actions Completion Background: A certain educational background, professional experience and an examination of professional competence is required for authorized auditors. The detailed requirements are prescribed in the regulations given by Ministry of Employment and the Economy. Requirements are based on the 8 th EC Directive (and Finnish legislation). The Auditing Board of the Central Chamber of Commerce maintains the official register of those certified auditors who hold a valid license in Finland and issues extracts from the register at the request. The use of the title certified auditor (HTM and KHT) is restricted by law to only those in the register. Finnish Auditing Act 21 (which is based on auditing directives article 13) requires auditors to maintain professional competence on a sufficient level. There are no set minimum hours per year. Every auditor and every circumstance are to be evaluated separately by the competent authority e.g. the Auditing Board of Central Chamber of Commerce. Auditor has to report to AB3Cs annually how he/she has maintained proficiency and qualifications required for authorization (audit engagements, trainings, etc.). Ensure Compliance with the IES Requirements 6., every year KHT-Media, a Subsidiary of the, arranges training seminars for candidates who prepare for the auditor s examination of professional competence., every year Education Committee of the Members of the 7. The arranges training and seminars for its members on current topics and latest developments in auditing to help them to maintain and develop their professional competence. Different committees and work groups of the Members of the, members of different committees and work groups of the and technical staff of the Maintaining Processes 8. Current Ensure on an ongoing basis that KHT's practical experience and training requirements, including Continuing Professional Development (CPD), are updated in line with IES. Education Committee of the Members of the Status as of of Publication Page 5 of 14

6 Kht-Yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion 9. Help the members to maintain and develop their professional competence. Members of the, members of different committees and work groups of the and technical staff of the Review of KHT-yhdistys s Compliance Information 10. Perform periodic review of responses to the IFAC compliance self-assessment questionnaires and update sections relevant to international education standards. Board of the Status as of of Publication Page 6 of 14

7 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 3 and International Standards, Related Practice Statements and Other Papers Issued by the International Auditing and Assurance Standards Board (IAASB) To Maintain and Improve the Process to Adopt and Implement International Standards # Start Actions Completion Auditing Act (459/2007): Section 13 International auditing standards In addition to the provisions laid down in this Act and any statutes issued by virtue thereof, anyone acting in a duty referred to in section 1(1)(1) shall comply with the auditing standards adopted for application in the European Community (international auditing standards), which are referred to in article 26 of Directive 2006/43/EY of the European Parliament and of the Council on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC. Section 22 Obligation to observe good auditing practice (1) In carrying out the duties referred to in this Act, an auditor shall comply with good auditing practice. (2) An auditor shall observe any particular instructions given by the partners or by the general meeting or equivalent governing body, insofar as these instructions are not in conflict with the law, the articles of association, the rules, the deed of partnership, international auditing standards, good auditing practice, or the principles of professional ethics. Background: The has a long history of giving recommendations on generally accepted auditing practices. Since 2000 the has given recommendations, that follow the International Standards on Auditing of IAASB and they have been amended in accordance with the relevant changes in ISAs. Since 2006 the Board of the has approved auditing standards which have been exact translations on International Standards on Auditing by IAASB. Few additions based on Finnish legislation have been made. In January 2010 the published translation on Clarified ISAs. The Board of has approved them. Also the European Union (EU) has approved the translation. The clarified ISAs are effective for audits of financial statements for periods beginning on or after December 15, Ensure the Adoption and Development of Auditing Standards in Line with the IAASB s Pronouncements 11. April 2011 Conduct trainings for the members on implementation of ISAs (Clarity ISAs and ISAs for SMEs). December 2011 Separate training work group and technical staff of the Members of the and technical staff of the Status as of of Publication Page 7 of 14

8 Kht-Yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion 12. August Prepare and update national illustrations of auditor s November 2011 reports (engagement letter, representation letter, 2011 auditor s opinion, etc.) based on clarified ISAs. The illustrations are published annually in a bound volume Tilintarkastajan raportointi (Auditors reports). 13. April 2011 A joint project with HTM-auditors association to translate into Finnish and publish IFAC s publication Guide to Using International Standards on Auditing in the Audits of Small and Medium-Sized Entities. 14. April 2012 Conduct further training on ISAs for SMEs and organize training together with HTM auditors association. 15. June 2011 Prepare more guidance on implementation and application of ISA 402, when a client entity is using an accounting firm (as service organization). February 2012 August 2012 spring 2012 Auditing Committee of the KHT-Media Translation Coordinator of the Different committees and work groups of the Quality Assurance Committee of the Members of Auditing Committee and technical staff of the Product Manager, publications Translation Coordinator of the and work group formed for this project (members from both and Association) Members of different committees and work groups and technical staff of the Quality Assurance Committee of the Maintaining Processes 16. Continue to use best endeavors to promote ongoing adoption and implementation of the IAASB s pronouncements. This will include reviewing this action plan as appropriate on a periodic basis. Review of KHT-yhdistys s Compliance Information 17. Perform periodic review of responses to the IFAC compliance self-assessment questionnaires and update sections relevant to international standards. The Board of the Status as of of Publication Page 8 of 14

9 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 4 and International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants Continuous Improvement of the Process to Adopt and Implement the IESBA s Code of Ethics # Start Actions Completion Background: The has been performing the faithful translation on the IESBA s Code of Ethics since The annual general meeting of the has approved new Code of Ethics in 2006 and it became effective on July 1, 2007 (the same date as the new Auditing Act). Clarified Code of Ethics has been translated and it became effective on January To Ensure the Adoption of the Clarified Code of Ethics of the IESBA 18. June 2011 Conduct training on Code of Ethics (as part of annual KHT training day). 19. November October Autumn 2012 Conduct training on Code of Ethics (as part of trainings on ISAs). Follow the developments and amendments on Code of Ethics and inform members. Conduct further training on ethics. June 2011 November 2011 Spring 2012 to be confirmed The personnel of the Separate training work group and technical staff of the Technical staff of the Members of the and different committees and work groups of the, KHT-Media Members of the and different committees and work groups of the Technical staff of the, different committees of the Review of KHT-yhdistys s Compliance Information 22. Perform periodic review of KHT s response to the IFAC's Compliance Self-Assessment questionnaires and update sections relevant to SMO 4, as necessary. Once updated, inform the IFAC compliance Staff about the updates in order for the compliance Staff to republish updated data. Notify updates to IFAC's Compliance Self- Assessment and any update to SMO 4 as necessary. Board of the Status as of of Publication Page 9 of 14

10 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 5 and International Public Sector Accounting Standards (IPSASs) Continue to Use Best Endeavors to Support Incorporation of IPSAS Requirements into National Public Sector Accounting Requirements # Start Actions Completion Background: There is a separate association for Chartered public finance auditors in Finland. The (KHT-yhdistys) published a book on public sector regulations and legislation in The latest edition was published in July The is not particularly focused on public sector accounting because there is a separate association for chartered public finance auditors. KHT-Media, the subsidiary of the, has planned to organize training on public sector accounting, but public sector has used accrual accounting for 10 years in Finland, which is similar to the accrual accounting used in private sector and therefore there has not been demand for separate training. Assistance with Implementation of Public Sector Accounting Standards Requirements in Finland Publish the book on public sector regulations (3 rd edition). June 2011 Maintaining Processes KHT-Media, the subsidiary of the Product Manager, publications 24. Indicate what actions may be required in the future to improve processes as well as the need to regularly review and update action plan. Review of KHT-yhdistys s Compliance Information 25. Perform periodic review of responses to the IFAC compliance self-assessment questionnaires and update sections relevant to public sector accounting standards. Board of the Status as of of Publication Page 10 of 14

11 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 6 and Investigation and Discipline Ensure Effective System of Investigation and Discipline is in Place # Start Actions Completion Background: Ethical Board of the supervises that good auditing practice is being implemented. Ethical Board is the preparing body in the questions related to ethical and collegial standards. Ethical Board handles and resolves discipline matters concerning members. The Auditing Board of the Central Chamber of Commerce shall supervise and take appropriate measures to ensure that the auditors and audit firms authorised by it (KHT auditors and KHT audit firms) maintain their proficiency and other qualifications required for the authorisation and that they observe the Auditing Act and any rules given by virtue thereof. The board also lead and develop authorisation and supervision of auditors and is responsible for international cooperative oversight activities. The Auditing Board of the Central Chamber of Commerce is regulated by EU regulation and Finnish legislation the oversight body responsible for supervision and sanctions. Ethical Board of the is secondary and it has no legal status. Disciplinary sanctions The monitored peer review does not have a disciplinary aspect as such. An operational disciplinary link is being discussed with the supervisory bodies. The associations exclude any member, who does not comply with the quality assurance obligations. The decision of dismissal of a member is delivered to the supervisory body the Auditing Board of the Central Chamber of Commerce (KHT) and the Auditing Committees of the regional Chambers of Commerce (HTM), which will take necessary steps. This will include an order to carry out a quality control review visit or using disciplinary sanctions against the auditor in question. Promote Awareness of the SMO 6 Requirements to the Auditing Board of the Central Chamber of Commerce 26. Promote to the AB3C s the need of continual review to ensure compliance with the SMO 6 requirements and best practice. Maintaining Processes 27. KHT will continue to ensure that its Ethical Board identifies areas for improvement in line with the requirements of SMO 6. Board of the Status as of of Publication Page 11 of 14

12 Kht-Yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion Review of KHT-yhdistys s Compliance Information 28. Perform periodic review of responses to the IFAC compliance self-assessment questionnaires and update sections relevant to investigation and discipline. Once updated inform IFAC compliance staff about the updates in order for the compliance staff to republish updated information. Board of the Status as of of Publication Page 12 of 14

13 Kht-Yhdistys - Finnish of Authorised Public Accountants Action Plan Subject: Action Plan Objective: SMO 7 and International Financial Reporting Standards (IFRSs) Follow the implementation of IFRS # Start Actions Completion Background: As Finland is an EU member state it is mandatory to use IFRS in consolidated financial statements for the companies quoted on the stock exchange. The is not responsible for adoption or promulgation of IFRS but the European Commission and relevant national regulator (Ministry of Employment and the Economy). The has translated IFRS into Finnish and informs the members about the latest releases. KHT-Media, the subsidiary of the Institution provides training on IFRS. KHT-Media publishes different books on IFRS, for example translations and example of financial statements in accordance with IFRS. The facilitates informal discussions on current IFRS questions. Participants are from larger audit firms and other interested bodies. IFRS for SME is not adopted in Finland. Provide Continuous Support Assist with the Implementation of the IFRS in Finland 29. Facilitate informal IFRS-Forum (normally twice a year) to discuss application of standards Publish example of financial statements prepared in accordance with the IFRS. 31. Since 2005, Translate IFRS into Finnish. October 2011, Spring 2012 November 2011 December 2011, Technical staff of the KHT-Media, the subsidiary of the KHT-Media, the subsidiary of the Member of the Board of the is a chairman, Technical Secretary of the Translation Coordinator of the and Product Manager, publications (KHT- Media) Translation Coordinator of the and Product Manager, publications (KHT- Media) Maintaining Processes 32. Raise awareness and organize training on new and updated standards. KHT-Media, the subsidiary of the Status as of of Publication Page 13 of 14

14 Kht-Yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion Review of KHT-yhdistys s Compliance Information 33. Perform periodic review of responses to the IFAC compliance self-assessment questionnaires and update sections relevant to IFRS. Board of the Status as of of Publication Page 14 of 14