Drivers of Voluntary Audit in Finland: To Be or Not To Be Audited?

Group 7: Jeremy Heyno, Nguyen Thi My Uyen, Tran Trong Nghia, Linh Dang, Mehfoohz A Khan

Article summary:

Drivers of voluntary audit in Finland: to be or not to be audited?

a.        What is the objective of the study? And why the study was made?

The study was made because the authors wanted to search for explanation why small companies have had different reactions from one another for the question “to be or not to be audited” when operating under regulatory setting that audit is not mandatory for small companies. Therefore, the study focused on seeking answers for two main points. The first point was that the authors wanted to discover whether a recent study’s finding about small UK companies’ drivers of voluntary audits could be applied in different regulatory settings, such as in Finnish regulatory setting. The second point was that the authors wanted to find evidences for many hypotheses about a circumstance that some small company- specific characteristics could drive the determination to have financial statements audited.

b.        Main findings?

Based on a study conducted on a sample of 412 small companies in Finland, the authors found the similarity of their findings to the recent study in UK in the perspective that some elements like company size, outside financing, the essential to check on internal control and to improve the quality of financial statement are key incentives for voluntary audits for small companies in different regulatory settings. Therefore, the article concluded that the boundaries of the findings in the recent study in UK could be expanded to Continental European countries, such as Finland.

Moreover, after conducting the study in Finland, the authors also found informative evidence to support their hypotheses. They reported results consistent with the view that small companies considering tax advisory services from an external accountant benefit are not willing to hire an auditor if audit is not obligatory. In contrast, outsourcing of key accounting functions develops the willingness to have an independent audit. There are also some evidences supporting that prior conflicts attributing to qualified audit reports reduce the willingness to hire an independent auditor, while financial distress increase it because professional advice from auditors can be useful for financially distressed companies.