Requirements for Continuing Education for Auditors

Circular Requirements for Continuing Education for Auditors

CIRCULAR: 10/2012 DATE: 16.05.2012 THE CIRCULAR APPLIES TO: Audit Firms Auditors

FINANS TILSYNET (The Norwegian Financial Supervisory Authority) Postboks 1187 Sentrum 0107 Oslo

Requirements for Continuing Education for Auditors 2 | Finanstilsynet

Contents 1 Introduction 3 2 Who must meet the requirement for continuing education? 3 3 Requirements for hours distributed across subject areas 3 3.1 Legal requirement 3 3.2 Auditing 4 3.3 Ethics 4 3.4 Accounting 4 3.5 Tax Law 5 3.6 Other subject areas 5 3.7 Courses that are not accepted 5 3.8 Requirements for the academic level of continuing education and the auditor's assessment 6 4 How to carry out the continuing education? 6 4.1 Participate in continuing education courses 6 4.2 Participate in teaching at the ordinary auditor education in Norway 7 4.3 Lecture at continuing education courses and at the ordinary auditor education in Norway 8 4.4 Other types of activity approved by Finanstilsynet 8 5 Auditor's documentation of continuing education 9 5.1 Documentation of participation in continuing education courses 9 5.2 Documentation of participation in teaching at auditor education 9 5.3 Documentation of lecturing at continuing education courses and at auditor education 10 5.4 Documentation of other types of activity approved by Finanstilsynet 10 6 Dispensation from the requirement for continuing education 10 7 Requirements for continuing education for an auditor who is also an authorized accountant 11 8 Finanstilsynet's control of continuing education 11 9 Consequences of breach of the provisions on requirements for continuing education 12

Requirements for Continuing Education for Auditors Finanstilsynet | 3

1 Introduction Continuing education is one of the conditions for being a responsible auditor, cf. Act of 15 January 1999 No. 2 on auditing and auditors (the Auditor Act) § 3-7 first paragraph no. 1, with supplementary rules in the Auditor Regulations Chapter 2. It is assumed that all approved auditors are familiar with the content of the rules on continuing education. This circular provides a more detailed description of the requirement for continuing education. The purpose of the continuing education requirement is to help ensure that responsible auditors are professionally up-to-date in their professional practice. Finanstilsynet will hereafter base its practice on the implementation set out in the circular. The circular replaces Finanstilsynet's previous circular 16/2004.

2 Who must meet the requirement for continuing education? Only responsible auditors can be elected as auditor by entities subject to audit and/or appointed as the responsible auditor where an audit firm has been elected as auditor. This also applies to the audit of entities that are not subject to audit, if it is expressed that the accounts have been audited. Furthermore, only responsible auditors can confirm information to public authorities. It is only auditors who have been assigned an auditor registry number by Finanstilsynet who are responsible auditors. The requirement for continuing education applies to all who have an auditor registry number. The requirement applies regardless of whether one actually has assignments or not. The requirement applies regardless of how many assignments the auditor has, and the scope of these. The continuing education requirement applies even if the auditor is sick or if there are other circumstances that make it difficult to meet the requirement.

3 Requirements for hours distributed across subject areas 3.1 Legal requirement Responsible auditors must at all times have completed 105 hours of continuing education over the three preceding calendar years. The requirement of 105 hours is a minimum requirement. The auditor must be able to document that the requirement is met at each year-end. There may be auditors who need special competence due to the nature and scope of the audit activity and the audit client's business, and who therefore must take additional continuing education to have sufficient knowledge in their business. Of the total requirement of at least 105 hours, the continuing education must include a minimum of 35 hours in auditing (of which 14 hours in ethics), 21 hours in accounting, and 21 hours in tax law. This amounts to a total of 77 hours. The remaining 28 hours must be within the subject areas mentioned above, or other subjects from the subject circle of the auditor education in Norway.

3.2 Auditing By auditing is understood regulations and theory in connection with auditor legislation, including good auditing practice and audit methodology. Public auditing cannot be counted within this subject area. Courses in (electronic) audit tools are approved to the extent that the course contains specific, professional issues related to the audit of annual accounts.

3.3 Ethics Courses in ethics should make the auditor aware of, and be suitable for building up, the auditor's role as a person of trust for the general public. The courses should cover the ethical principles that govern the auditor's professional tasks and duties. Courses that concern the execution of the audit can also be used to meet the requirement to the extent that they cover ethical issues. Courses in ethics can have as a starting point the auditor's role in the relationship between the individual auditor and others whom the auditor must relate to, such as clients, public authorities, the company's owners, investors, banks and other financial institutions, suppliers, customers, employees, and society in general. Courses in ethics can also have a broader perspective, for example, the courses can be based on traditional ethical theories, methods, and models, or deal with business ethics. Examples of courses that cannot be approved as ethics: • Courses within the anti-money laundering regulations. Parts of such courses that cover ethical dilemmas that the auditor faces in fulfilling the anti-money laundering regulations will, however, be accepted. • Courses on ethical issues related to the environment, humanitarianism, etc. • Courses on ethical issues related to communication • Courses on ethical issues related to religion • Self-development courses • Courses in conflict management

3.4 Accounting By accounting is understood regulations and theory in connection with accounting and bookkeeping legislation, including good accounting practice and good bookkeeping practice, as well as accounting analysis and key figure analysis of profitability, liquidity, financing, and solvency. Courses in (electronic) accounting programs can only be counted to the extent that the course contains specific, professional issues related to the annual accounts. Courses within public accounting, accountant regulations, and good accounting practice (GRFS) do not cover the subject area of accounting.

3.5 Tax Law By tax law is understood regulations and theory in connection with tax and duty legislation, and the practice of this. Courses within payroll accounting can also be relevant. Courses in (electronic) payroll and accounting programs can only be counted to the extent that the course contains specific, professional issues related to tax and duty.

3.6 Other subject areas These 28 hours are intended to give the auditor flexibility in planning course participation. The hours should in principle be distributed within auditing, ethics, accounting, and tax law. However, other business economic and administrative subjects can supplement these hours. The limitation lies in what is the subject circle of the auditor education in Norway, cf. the Ministry of Education and Research's framework plan for three-year auditor education and the master's education in accounting and auditing, and which is simultaneously relevant for the execution of audit activity. Examples of professional content that can be approved as other subject areas: • Company law • Anti-money laundering regulations • Bankruptcy law • Security law • Inheritance law • Labor law • Socio-economic subjects • Business economic subjects • Audit and accounting tools • Accountant regulations and good accountant practice (GRFS) • Public accounting and public auditing

3.7 Courses that are not accepted Mandatory continuing education applies to the audit-related subject areas. This means that, for example, general data courses (Word, Excel, and PowerPoint, etc.) cannot be counted as statutory continuing education. Courses in Health, Environment, and Safety (HMS) can be approved to the extent that the content falls within the subject circle of the auditor education in Norway, and is relevant for the practice of the auditing profession.

3.8 Requirements for the academic level of continuing education and the auditor's assessment The continuing education should constitute a professional supplement, and therefore imply an increase in competence or updating of existing knowledge. This means that the continuing education must be at a sufficiently high academic level for the continuing education to be used to fulfill the legal requirement. Courses specifically directed at the audit industry will in principle be at a sufficiently high academic level, and therefore also be relevant. Courses directed at a larger group can also be relevant, to the extent that they are at a level that implies an increase in competence or updating of existing knowledge. For example, a course organized by the Norwegian Tax Administration directed at auditors and accountants will normally be considered relevant. However, an introductory course in tax law will not meet the requirement for academic level. Finanstilsynet does not pre-approve courses. It is assumed that the auditor themselves has sufficient insight to assess the professional content of the courses in relation to the subject areas established in the regulations. The auditor must exercise reasonable judgment here. Finanstilsynet will normally not override the auditor's assessment of the course's professional content. If the auditor has assessed the course's professional content differently than what appears in the course certificate or similar, the auditor must document the basis for their assessment.

4 How to carry out the continuing education? The continuing education can be carried out by:

1. participating in continuing education courses
2. participating in teaching at the ordinary auditor education in Norway
3. lecturing at continuing education courses and at the ordinary auditor education in Norway
4. participating in other types of activity approved by Finanstilsynet

4.1 Participate in continuing education courses The continuing education requirement can be met by participating in courses arranged by professional course organizers, and others who are at a qualitatively similar level. Finanstilsynet does not approve course organizers. For the course to be used to fulfill the continuing education requirement, the auditor must ensure that the course organizer meets the criteria. Professional course organizers Professional course organizers means companies whose purpose is to develop and conduct courses. The industry organizations The Norwegian Institute of Public Accountants (DnR), NARF, and the Economic Association are considered professional course organizers. For an organizer to be considered a professional course organizer, documentation for the course must be prepared. The documentation must consist of at least a participant list and a course plan. The course plan must be prepared in advance of the course and describe the course's purpose and objectives, for example, who the course is suitable for, academic level, learning objectives, distribution of time consumption on the different subject areas, and similar. A professional course organizer must use competent lecturers, and the course plan must describe the background/competence of the speakers to be used. The documentation must also contain a copy of course material, presentation, etc. Finanstilsynet assumes that the course organizer keeps the course documentation for as long as the auditor is required to keep the documentation for their continuing education, for at least six calendar years after the course was conducted. A professional course organizer will also ensure that the auditor is able to document course participation through a course certificate. Other course organizers Courses organized by others, who are at a qualitatively similar level to a professional course organizer, can be equated with courses from a professional course organizer. Examples of this are courses arranged by accountant or audit firms and courses organized by the Norwegian Tax Administration. The course organizer must prepare and keep documentation in the same way as professional course organizers. The requirement for a competent lecturer implies that the person must have specialized competence in the subject being lectured on. It is not sufficient for an employee to be used to disseminate from a course they themselves have participated in. The auditor must ensure that the course organizer meets these prerequisites. Online courses Courses conducted via the Internet are approved provided that the requirements for professional content, professionalism, and documentation are met. To ensure real participation, there is a requirement for a certain degree of interactivity. Online courses must therefore consist of individualized tests or answers from each participant during the course. The course organizer, who must issue the course certificate, must have systems that ensure that it is the registered auditor who actually completes the course. The course organizer must also document how many working hours the course normatively constitutes. When the online course is not organized by a professional course organizer, the auditor must ensure that the course organizer meets these requirements.

4.2 Participate in teaching at the ordinary auditor education in Norway Finanstilsynet assumes that the continuing education requirement is fulfilled in its entirety in the year one completed a bachelor's in auditing or a master's in accounting and auditing. This applies if one has followed the ordinary (normative) study program. If the audit study was carried out part-time, relevant examinations that lie within the last three years can be counted in the continuing education. Participation in teaching after completing audit education is credited hour for hour.

4.3 Lecture at continuing education courses and at the ordinary auditor education in Norway Lecturing is approved hour for hour, with the limitation that one cannot be credited for content-wise identical courses more than once. The above-mentioned requirements for professional content and professionalism apply correspondingly.

4.4 Other types of activity approved by Finanstilsynet Finanstilsynet can approve other types of activity as relevant continuing education, and assesses this discretionarily. Previously, the auditor had to apply to Finanstilsynet to have "other activity" approved. Finanstilsynet has now decided that the following activities can be based on without prior application (exhaustive list): • participation in the tax appeal board • examiner activity at the audit study is approved with up to 5 hours within the exam question's subject area • production of professional literature The auditor must distribute the hours used for other activity within the relevant subject areas for the continuing education requirement. Participation in professional committees organized by industry associations, including the Norwegian Accounting Foundation, can be approved as statutory continuing education upon application. The same applies to other activity beyond what is described above, as long as the activity is relevant for professional practice. "Other activity" cannot constitute the entire continuing education within the areas of auditing (including ethics), accounting, and tax law. Within these areas, no more than 50 percent of the total requirement can be fulfilled by other activity than course participation and teaching. This means that 10.5 hours of accounting, 10.5 hours of tax law, 10.5 hours of auditing, and 7 hours of ethics can be included in the continuing education as "other activity." The auditor must simultaneously participate in a minimum of 10.5 hours of courses in accounting, 10.5 hours of courses in tax law, 10.5 hours of courses in auditing, and 7 hours of courses in ethics during the continuing education period, or lecture within these subject areas. 28 hours of "other subject areas" can be fully covered by "other activity." Example: If an auditor has participated in the tax appeal board in the first year where 50 hours were spent working on cases, 10.5 hours will be credited as continuing education within tax law and 28 hours within other subject areas. The same number of hours is credited even if 90 hours were spent. If the auditor has written professional literature on tax law in the second year, the hours from this work cannot be approved in the continuing education period where the hours from the tax appeal board in the first year are included.

Finanstilsynet has previously approved work as an expert lay judge and expert witness as "other activity." Finanstilsynet has, after a new assessment, come to the conclusion that such work cannot be included in the continuing education requirement. The reason for this is that the continuing education should be a professional supplement for the auditor. If the auditor is a lay judge or expert witness, they are appointed based on knowledge he/she already possesses as an auditor. Finanstilsynet is of the opinion that the work does not necessarily add professional supplement to the auditor.

5 Auditor's documentation of continuing education The continuing education must be documented with a course certificate or similar (see further in point 5.1–5.5), and in a combined chronological overview of the continuing education that has been conducted over the three preceding calendar years. The chronological overview must indicate the course organizer, the course name, course date, number of hours, and subject area. This overview is not sufficient on its own to document the continuing education. The auditor is obliged to ensure that the continuing education can be documented and assess whether the course documentation is sufficient in relation to the documentation requirement described below. The documentation must be sufficient for Finanstilsynet to control that the continuing education requirement is fulfilled. The auditor must keep documentation showing that the requirement for statutory continuing education is fulfilled for each of the six preceding calendar years.

5.1 Documentation of participation in continuing education courses Participation in continuing education courses must be documented with a course certificate. The course certificate must confirm that the auditor has completed the course, and must be issued by the course organizer. The course certificate must contain at least: • name of participant (auditor) • name of course organizer • short description of the course's professional content • course date and duration/number of hours Participant certificates for courses organized by DnR and NARF can be replaced by a printout from the industry associations' website that confirms all completed courses in a combined overview. Courses organized by other organizers must be documented with a course certificate, even if they appear in a combined overview.

5.2 Documentation of participation in teaching at auditor education If the continuing education has been carried out by participating in teaching programs at a college/university, the auditor must document this with a written confirmation from the educational institution. The confirmation must contain at least: • name of participant (auditor) • name of educational institution and lecturer • course name and course code • short description of the professional content of the teaching • date and number of hours of participation

5.3 Documentation of lecturing at continuing education courses and at auditor education If the continuing education has been carried out by teaching at courses or at the auditor education in Norway, the auditor must document this with a confirmation from the course organizer or educational institution. The confirmation must contain at least: • name of lecturer (auditor) • name of the course organizer or educational institution • short description of the course/lecture's professional content • course name and possibly course code • date and number of lecture hours

5.4 Documentation of other types of activity approved by Finanstilsynet If the continuing education has been carried out by other types of activity, this must be documented with a confirmation from the employer which must contain at least: • name of auditor • name of employer • short description of the activity's professional content • time of implementation and estimate of number of hours per year The auditor must also keep a copy of Finanstilsynet's approval, if such approval has been given.

6 Dispensation from the requirement for continuing education There is no legal basis for making exceptions from the continuing education requirement. Finanstilsynet has no access to grant dispensation either from the content of the continuing education or the scope of the continuing education. This means that the auditor in the planning of the continuing education must take into account that unforeseen circumstances may arise during the continuing education period. Illness, parental leave, or other circumstances that make it difficult to meet the requirement do not provide grounds for postponement or reduction of the continuing education requirement. If the auditor does not meet the continuing education requirement, the auditor will not meet the requirements to be a responsible auditor.

7 Requirements for continuing education for an auditor who is also an authorized accountant The requirement for continuing education under the Auditor Act applies only to those who are responsible auditors, and have been assigned an auditor registry number. The requirement for continuing education for accountants applies to all who have authorization, regardless of whether one operates a business as an accountant or not. This means that an approved auditor who is also an authorized accountant, regardless, must fulfill the continuing education requirement that applies under the Accountant Act. The requirements for the composition of subject areas in continuing education are different for auditors and accountants. An auditor who fulfills the requirement for continuing education in accordance with the Auditor Regulations will not automatically fulfill the requirement for continuing education in accordance with the Accountant Regulations. The requirements for continuing education for accountants are described in circular 11/2012.

8 Finanstilsynet's control of continuing education Control of the continuing education for the individual auditor takes place continuously through document-based supervision, on-site supervision, and otherwise when Finanstilsynet monitors the auditor's business and fulfillment of concession requirements. Continuing education is also controlled in the industry association's quality control of its members. The auditor should not send in documentation of completed continuing education to Finanstilsynet, unless such submission is requested. The auditor should, however, always prepare and keep documentation that the continuing education requirement is fulfilled, as described under point 5. The individual responsible auditor is responsible for following up the requirement for continuing education. When an audit firm is elected as auditor, a responsible auditor must be appointed. As part of this process, the audit firm must ensure that the appointed person at all times fulfills the requirements to be a responsible auditor. The audit firm must therefore have routines for following up the continuing education of responsible auditors. Finanstilsynet will, as part of the ongoing supervision of audit firms, control the company's routines for the implementation of any course activity. If the company cannot document professional quality, including that sufficient documentation has been prepared, the relevant courses cannot be used as part of the statutory continuing education.

9 Consequences of breach of the provisions on requirements for continuing education Fulfillment of the continuing education requirement is a condition for maintaining the auditor registry number. Failure to fulfill the continuing education requirement means that the auditor does not meet the requirements to be a responsible auditor. In case of deficiencies in continuing education, the auditor must report to Finanstilsynet and relinquish the auditor registry number. The auditor must further resign as elected auditor. If the auditor is appointed as responsible auditor, the audit firm must appoint a new responsible auditor as responsible auditor. The auditor can no longer...