Statutory audit – when can an AS opt out of an auditor?
An audit can be opted out of where all three conditions are met: operating income under NOK 7 million, a balance sheet total under NOK 27 million and at most 10 full-time equivalents on average. The general meeting decides with at least two thirds of the votes, and it only takes effect once registered in the Register of Business Enterprises. A parent company has to assess the group as one unit.
The thresholds
All three conditions have to be met at the same time: Operating income: under NOK 7 million Balance sheet total: under NOK 27 million Average number of employees: at most 10 full-time equivalents Note that these are different thresholds from the categories in the Accounting Act. A company can perfectly well be a «small entity» for accounting purposes and still be subject to audit.
Which figures are used?
For an established company the most recently adopted annual accounts are normally used. Where the company is growing, a separate rule applies: where unaudited annual accounts show a threshold has been reached or exceeded, the following year's accounts have to be audited. That means the audit obligation arrives the year after the figures passed the threshold – not the same year. But it arrives automatically, without anyone sending a notice.
Newly formed companies
A new AS can be formed without an elected auditor where the conditions are met. Before the first annual accounts exist, the number of employees and the share contributions at formation are among the factors assessed.
A parent company has to look at the group
A parent company cannot simply look at its own isolated figures. The thresholds have to be met for the group taken as one unit. A small parent with a larger subsidiary can therefore be subject to audit even though its own figures are small. If you are establishing a holding structure, this is worth calculating first – see A holding company – when does it pay off?
Regulated entities are subject to audit regardless
Entities supervised by Finanstilsynet are as a general rule subject to audit regardless of the 7/27/10 thresholds. That includes approved accounting firms – businesses like Greenleaf itself. The threshold rules are not a general route open to every small company.
How the auditor is opted out
1. The previous year's accounts are adopted. 2. The thresholds are checked. 3. The general meeting resolves to opt out. 4. The resolution is notified to the Register of Business Enterprises. 5. The opt-out takes effect when it is registered – not when it is resolved. An opt-out normally requires at least two thirds of the votes cast and of the share capital represented.
The deadline, and what cannot be done afterwards
The notification has to be sent immediately and received no later than one month after the general meeting's resolution. An opt-out cannot be resolved retrospectively for a completed financial year. If you discover in May that last year's accounts should have been unaudited, it is too late for that year.
What if the company has no auditor?
A company subject to audit that does not elect and register an auditor can ultimately be compulsorily dissolved. That is the same chain of sanctions as for missing annual accounts – see Compulsory dissolution from the Brønnøysund Register Centre Where the auditor has resigned or refused to sign, that is a different situation with its own deadlines – see The auditor will not sign We can check the audit thresholds and the documentation around the obligation. For a newly formed company there are separate considerations – see How to start a limited company Different rules apply to associations, foundations and housing companies – see Clubs and associations and Accounting for housing companies
Read more
This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
More on year-end close and reporting
- What has to be done in the year-end close for a company and a sole trader?
- The tax return for businesses – how does it differ from a personal one?
- The shareholder register statement – deadline, content and errors
- Depreciation – which groups and rates apply?
- Inventory at the year-end close – how is it counted and valued?
- Why is the result not the same as the money in the account?
- How long do accounting records have to be kept?
- The annual cycle for a Norwegian AS – which deadlines apply through the year?
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