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: November Next Updated: November 2014 Status as of of Publication Page 1 of 13

2 KHT-yhdistys - Finnish of Authorised Public Accountants GLOSSARY AB3C 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 13

3 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 1 - 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 Over 10 years ago the started the peer reviews, which was voluntarily for its members. In 2008 the AB3C took over the quality reviews as an independent body. The has assisted the AB3C with the start-up and training for the inspectors and the AB3C s program meets SMO1 requirements. The and AB3C share the developments and findings of the quality assurance reviews and if the need arises, they are incorporated in the trainings. The Quality Assurance Team of AB3C performs the inspections of audit firms in PIE sector. The inspections of other audit firms and individual auditors are organized and monitored by AB3C, but the inspections are executed by professional accountants in public practice. Finnish has translated ISQC 1 into Finnish. The ISQC 1 is not officially adopted in Finland, the formal adoption of ISQC 1 and ISAsin are dependent on EC adoption. However, they are applied as good auditing practise. Facilitate Active Communication with AB3C s on Developments of Quality Assurance 1. January 2011 Facilitate active communication with AB3C s on developments of quality assurance. Chief Executive Chief Executive and the Board of the 2. November 2012 Collect feedback on quality assurance review from audit firms and communicate the feedback with oversight body. September Chief Executive Members from Big4 and technical staff of the 3. April Conduct training on quality control for SMP s (the training included ISQC1 and selected International Standards on Auditing (ISAs) for Small and Medium Enterprises (SME)/Small and Medium Practices (SMP)). August Separate training work group Separate training work group and members of the Status as of of Publication Page 3 of 13

4 KHT-yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion 4. October 2012 Plan and conduct training on Quality of audit together with HTM-tilintarkastajat (sister institute) and representatives of oversight body. The starting point for the training was the findings of the quality assurance reviews. January Separate working group and technical staff of the Separate working group, technical staff and members of the 5. October Further develop and conduct training on Quality of audit together with HTM-tilintarkastajat (sister institute) and representatives of oversight body. The starting point for the training will be the findings of the quality assurance reviews. January 2014 Separate working group and technical staff of the Separate working group, technical staff and members of the 6. September Translate Guide to Quality Control for SMPs into Finnish together with HTM-tilintarkastajat (sister institute). December -January 2014 Translation Coordinator of the Translation Coordinator of the and project group (members from both s) Maintaining Processes 7. Ensure that the members fulfill the requirements and maintain their proficiency and other qualifications required. Chief Executive Quality Assurance Committee of the and technical staff 8. 10/ Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 Board of the Quality Assurance Committee of the and technical staff Status as of of Publication Page 4 of 13

5 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 2 - International Education Standards for Professional Accountants and Other Pronouncements issued by the IAESB Continue to Use Best Endeavors to Ensure KHT s Compliance with IES and Other International Accounting Education Standards Board (IAESB) Guidance # Start Actions Completion 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). In order to be authorized by the Central Chamber of Commerce (for a KHT auditor), the candidate must be a person who has not turned out to be unfit as an auditor and who: Possesses the personal attributes and interpersonal skills; Has a full legal capacity and is not in bankruptcy; Does not carry out any secondary activities which are likely to endanger his independence as an auditor or the conduct of an audit; Has attained a higher university degree; Has completed studies necessary for the duties of an auditor in subjects which are laid down in the regulation of the ministry of employment and the economy; Has obtained a minimum of 3 years practical experience under the supervision of a kht auditor or experience of equally demanding auditing and accounting activities as prescribed in the regulation of the ministry of employment and the economy; and Has proven his or her proficiency by passing the auditors examination of professional competence, the detailed contents of which have been prescribed in a regulation of the ministry of employment and the economy, and has thereafter given the auditor s affirmation before the court. AB3C 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 directive article 13) requires auditors to maintain professional competence on a sufficient level. There are no measurable requirements for education at the moment; the adequacy of education is evaluated case by case by AB3C. Auditor shall report to AB3C annually how he/she has maintained proficiency and qualifications required for authorization (audit engagements, trainings, etc.). Ensure Compliance with the IES Requirements 9., every year KHT-Media, a Subsidiary of the, arranges training seminars for candidates who prepare for the Education Committee of the Members of the Status as of of Publication Page 5 of 13

6 KHT-yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion auditor s examination of professional competence. 10. 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 (e.g. training seminar for members in June, discussions on hot topics, training on current issues in December). Different committees and work groups of the Members of the, members of different committees and work groups of the and technical staff of the 11. Q1/2014 Implement the revised IES in co-operation with the oversight body. The project has not started yet but the plan is to set measurable requirements for education. End of 2014 Quality Assurance Committee of the, Technical Secretary of the Quality Assurance Committee of the Maintaining Processes 12. 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 13. Help the members to maintain and develop their professional competence (up-to-date trainings and publications). Chief Executive Members of the, members of different committees and work groups of the and technical staff of the / Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 Board of the Chief Executive Status as of of Publication Page 6 of 13

7 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 3 - International Standards and Other Pronouncements Issued by the 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. 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 15. August Prepare and update national illustrations of auditor s reports (engagement letter, representation letter, auditor s opinion, etc.) based on clarified ISAs. December Auditing Committee of the Members of Auditing Committee and technical staff of the The illustrations are published annually in a bound volume KHT-Media Product Manager, Status as of of Publication Page 7 of 13

8 KHT-yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion Tilintarkastajan raportointi (Auditors reports). publications 16. Follow the developments and amendments on standards and inform members. 17. Translate new and redrafted/revised standards (during this period ISAE 3410, ISA 315, ISRE 2400, ISA 610). Senior Expert Senior Expert and Auditing Committee of the August 18. April Conduct further training on ISAs for SMEs and organize training together with HTM auditors association (a seminar). August Different committees and work groups of the Members of different committees and work groups and technical staff of the 19. The arranges training and seminars for its members on the latest developments in auditing and auditing standards (e.g. training seminar for members in June, discussions on hot topics, training on current issues in December). Different committees and work groups of the Members of the, members of different committees and work groups of the and technical staff of the 20. June Discussion for (relevant) authorities on audit and other actions that are to be carried out by an auditor: framework; which standard for which engagement September Technical Staff of the Members of the and technical staff Maintaining Processes 21. 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. Chief Executive / Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 The Board of the Chief Executive Status as of of Publication Page 8 of 13

9 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 4 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 The has been performing the faithful translation on the IESBA s Code of Ethics since The annual general meeting of the has approved the 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 23. April Conduct training on Code of Ethics (as part of training on ISAs). August Separate training work group and technical staff of the Members of the and different committees and work groups of the 24. March Follow the developments and amendments on Code of Ethics and inform members. Spring Technical staff of the Technical staff of the, Auditing Committee of the 25. Summer Translate the changes to Code of Ethics (during this period 3 changes) and inform members. September Translation Coordinator of the Translation Coordinator of the and translation working group 26. October Conduct training on changes to Code of Ethics November Technical Staff Members of the and Technical Staff / Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 Board of the Chief Executive Status as of of Publication Page 9 of 13

10 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 5 - International Public Sector Accounting Standards and Other Pronouncements Issued by the IPSASB Continue to Use Best Endeavors to Support Incorporation of IPSAS Requirements into National Public Sector Accounting Requirements # Start Actions Completion The is not particularly focused on public sector accounting because there is a separate association for chartered public finance auditors. The (KHT-yhdistys) published a book on public sector regulations and legislation in The latest edition was published in June 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 KHT-Media, the subsidiary of the Product Manager, publications Maintaining Processes 29. Indicate what actions may be required in the future to improve processes as well as the need to regularly review and update action plan. Chief Executive / Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 Board of the Chief Executive Status as of of Publication Page 10 of 13

11 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 6 - Investigation and Discipline Ensure Effective System of Investigation and Discipline is in Place # Start Actions Completion AB3C is the oversight body responsible for supervision and sanctions. Ethical Board of the is a secondary and it has no legal status. If the auditor does not fulfil the qualification requirements, the AB3C shall apply disciplinary sanctions (remark, warning or cancellation of authorization). 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. AB3C supervises and takes 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. Operations of AB3C are regulated by EU regulation and Finnish legislation. Promote Awareness of the SMO 6 Requirements to the Auditing Board of the Central Chamber of Commerce 31. Promote to the AB3C s the need of continual review to ensure compliance with the SMO 6 requirements and best practice. Chief Executive Chief Executive Maintaining Processes 32. KHT-yhdistys will continue to ensure that its Ethical Board identifies areas for improvement in line with the requirements of SMO 6. Board of the Chief Executive / Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 Board of the Chief Executive Status as of of Publication Page 11 of 13

12 KHT-yhdistys - Finnish of Authorised Public Accountants SMO 7 - International Financial Reporting Standards and Other Pronouncements issued by the IASB Follow the Implementation of IFRS # Start Actions Completion 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 34. Facilitate informal IFRS-Forum (previously twice a year) to discuss application of standards. December 2012 Technical staff of the Member of the Board of the is a chairman, Technical Secretary of the Publish example of financial statements prepared in accordance with the IFRS. October 2012 KHT-Media, the subsidiary of the Translation Coordinator of the and Product Manager, publications (KHT- Media) 36. Since 2005, Translate IFRS into Finnish and publish a book. May KHT-Media, the subsidiary of the Translation Coordinator of the and Product Manager, publications (KHT- Media) Maintaining Processes 37. Raise awareness and organize training on new and updated standards. Chief Executive KHT-Media, the subsidiary of the Status as of of Publication Page 12 of 13

13 KHT-yhdistys - Finnish of Authorised Public Accountants # Start Actions Completion / Perform review of revised SMOs and KHT s SMO Action Plan and update relevant sections as necessary. Once updated inform IFAC compliance staff about the update in order for the compliance staff to republish updated Action Plan. 10/2014 Board of the Chief Executive Status as of of Publication Page 13 of 13