Order on the Financial Supervisory Authority's Certification of State-Authorized Auditors

Order on the Financial Supervisory Authority's Certification of State-Authorized Auditors 1)

Pursuant to Section 199, subsection 13, and Section 373, subsection 4, of the Act on Financial Business, cf. Act Consolidation No. 1013 of 21 August 2024, and Section 193, subsection 14 and Section 316, subsection 1, of Act No. 718 of 13 June 2023 on Insurance Business, it is hereby stipulated:

Scope of Application

Section 1. This Order applies to state-audited auditors, including foreign auditors established in Denmark, who are approved by the Danish Business Authority, cf. Section 3 and Section 10, subsection 1, of the Act on Approved Auditors and Audit Firms (the Auditor Act), and who are appointed as signing auditors for:

1. Credit institutions, cf. Section 5, subsection 1, item 1, letter a, of the Act on Financial Business.
2. Mortgage credit institutions, cf. Section 5, subsection 1, item 1, letter b, of the Act on Financial Business.
3. Insurance companies, cf. Section 9, subsection 1, item 1, of the Act on Insurance Business.

Subsection 2. The companies referred to in subsection 1 are hereinafter referred to as "the company".

Subsection 3. The state-audited auditor(s) appointed as auditor to sign the annual report for the company must be certified by the Financial Supervisory Authority in accordance with this Order.

Subsection 4. If an audit firm is appointed as auditor for the company, the audit firm must, in connection with the appointment, designate one or more certified auditors to sign the annual report.

Subsection 5. This Order does not apply to foreign auditors who have been granted permission by the Danish Business Authority to perform specific assignments, cf. Section 10, subsection 5 and Section 11, subsection 1, of the Auditor Act.

Definitions

Section 2. In this Order, audit services include the following services provided by a state-audited auditor, who has been appointed at the company's general meeting or representative assembly, to the relevant type of company for which the auditor seeks certification, cf. Section 3, subsection 1:

1. Audit of the annual accounts, including preparation of reporting to the board and management and participation in meetings with the company's management regarding accounting and audit matters.
2. Other statutory opinions pursuant to the Act on Financial Business and the Act on Insurance Business, or regulations issued pursuant thereto.
3. Audit-related opinions for branches of foreign financial businesses and insurance companies, prepared for use by other auditors.

Subsection 2. In addition to the audit services mentioned in subsection 1, items 1-3, audit and review of interim accounts for the type of company for which the auditor seeks certification may be included in the calculation of audit services, cf. Section 4, subsection 1, item 1, and subsection 2.

Subsection 3. In this Order, billable hours refer to the auditor's performed working hours that can be attributed to financial businesses, cf. Section 5, subsection 1, item 1, of the Act on Financial Business, financial holding companies, cf. Section 5, subsection 1, item 9, of the Act on Financial Business, credit institution holding companies, cf. Section 5, subsection 1, item 10, of the Act on Financial Business, mortgage credit holding companies, cf. Section 5, subsection 1, item 11, of the Act on Financial Business, insurance companies, cf. Section 9, subsection 1, item 1, of the Act on Insurance Business, insurance holding companies, cf. Section 9, subsection 1, item 10, of the Act on Insurance Business, company pension funds, cf. Section 2 of the Act on Supervision of Company Pension Funds, managers of alternative investment funds, cf. Section 3, subsection 1, item 3, of the Act on Managers of Alternative Investment Funds etc., the Labour Market Supplementary Pension, Danmarks Skibskredit A/S, Finansiel Stabilitet A/S, and the Lønmodtagernes Dyrtidsfond.

Subsection 4. In this Order, head of audit team refers to the state-audited auditors who perform leadership functions for an audit team in cooperation with the signing auditor.

Types of Certifications

Section 3. There are two separate certifications covering the following types of financial businesses:

1. Credit and mortgage credit institutions, cf. Section 5, subsection 1, items 1, letters a and b, of the Act on Financial Business.

2. Insurance companies, cf. Section 9, subsection 1, item 1, of the Act on Insurance Business.

3. The Order contains provisions implementing parts of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, Official Journal of the European Union, No. L 376, page 36.

Act Gazette A 2024 Published on 10 December 2024 5 December 2024. No. 1427. Ministry of Industry, Business and Financial Affairs, Financial Supervisory Authority, file no. 24-019417 CQ003064

Subsection 2. If a state-audited auditor signs annual reports within both certification-required types of business, the auditor must be certified for both types of business.

Conditions for Obtaining Certification

Section 4. The Financial Supervisory Authority may certify a state-audited auditor to sign annual reports for the covered companies, cf. however subsections 2-4, if the following conditions are met:

1. The auditor documents that they have performed at least 1,000 billable hours within the last five years, cf. Section 2, subsection 3. Of these, 750 billable hours must cover audit services, cf. Section 2, subsections 1 and 2, for the relevant type of company, cf. Section 3, subsection 1, for which the auditor seeks certification. Hours with audit services must have been obtained from at least three companies of the type, cf. Section 3, subsection 1, for which the auditor seeks certification, and must cover audit within several audit areas of the relevant type of financial business or insurance company. At least 50 percent of the hours with audit services must have been performed as a signing auditor or as head of an audit team, cf. Section 2, subsection 4. All hours, cf. 1. and 2. sentences, must have been performed after passing the examination as a state-audited auditor.
2. The auditor documents compliance with the current requirements for continuing education for auditors who have specialized in the audit of the relevant type of financial business, cf. Order on Mandatory Continuing Education of Approved Auditors. As part of their mandatory continuing education, the auditor must have participated in at least 20 hours of continuing education within the last three years covering topics targeted at financial businesses or insurance companies, cf. Section 5, subsection 1, item 1, of the Act on Financial Business and Section 9, subsection 1, item 1, of the Act on Insurance Business.
3. The auditor has not, within the last five years, had a case before the Audit Board, which the Financial Supervisory Authority assesses as significant for the auditor's trustworthy exercise of the role as auditor for the type of financial business or insurance company for which the auditor applies for certification.
4. The auditor has not been imposed criminal liability for violation of Chapter 28 of the Criminal Code, the financial legislation, or other relevant legislation, including criminal liability abroad under relevant foreign legislation, where the Financial Supervisory Authority assesses that the violation entails a risk that the auditor cannot perform their duties or position in a trustworthy manner.
5. The auditor has not exhibited behavior where the Financial Supervisory Authority finds that the auditor has not functioned satisfactorily, wholly or partially, and where there is reason to assume that the auditor will not perform the duties or position in a proper manner. In assessing whether the auditor has not functioned satisfactorily, regard must be had to the interest in maintaining confidence in the financial sector.

Subsection 2. If a state-audited auditor applies for certification within both types of business, cf. Section 3, subsection 2, the auditor must be able to document having performed 750 billable hours within the last five years with audit services for companies within each type of business, cf. Section 3, subsection 1, for which the auditor seeks certification. Hours with audit services must have been obtained from at least three companies of each type, cf. Section 3, subsection 1, for which the auditor seeks certification, and must cover audit within several areas of the relevant type of financial business or insurance company. At least 50 percent of the hours with audit services must have been performed as a signing auditor or as head of an audit team. All hours must have been performed after passing the examination as a state-audited auditor. The other conditions in subsection 1, items 2-5, must also be met.

Subsection 3. Notwithstanding that the hour requirements in subsection 1, item 1, or subsection 2, are not fully met, the Financial Supervisory Authority may, following a concrete assessment, consider the conditions to be met on the basis of other relevant experience.

Subsection 4. The Financial Supervisory Authority may also consider the hour requirements in subsection 1, item 1, or subsection 2, to be met if the auditor documents that they have performed at least 700 billable hours within the last five years, cf. Section 2, subsection 3. Of these, 525 billable hours must cover audit services, cf. Section 2, subsections 1 and 2. Furthermore, the auditor must document that they have, in five selected years within the last seven years, jointly performed at least 1,000 billable hours, cf. Section 2, subsection 3. Of these, 750 hours must cover audit services, cf. Section 2, subsections 1 and 2.

Application and Documentation

Section 5. An application for certification pursuant to Section 1, subsection 3, must contain the information necessary for the Financial Supervisory Authority to assess whether the conditions in Section 4 are met, including documentation of the performance and content of the stated billable hours and performed audit services, cf. Section 4, subsection 1, item 1, or subsection 2, as well as compliance with the requirements for continuing education, cf. Section 4, subsection 1, item 2.

Subsection 2. The Financial Supervisory Authority confirms in writing and no later than five working days after receipt of the application, cf. subsection 1. Simultaneously with the confirmation of receipt of the application, the Financial Supervisory Authority notifies the applying auditor of the date when the assessment period expires, cf. subsection 3, and of the possibilities for appeal in case of refusal, cf. Section 9, subsection 3.

Subsection 3. The Financial Supervisory Authority has an assessment period of 60 working days from the time of receipt of all documents required to be attached to the application to assess whether the conditions in Section 4 are met. The Financial Supervisory Authority may extend the deadline once by up to 60 working days if the complexity of the case justifies this. The Financial Supervisory Authority duly justifies the extension and its duration and notifies the applicant before the original deadline expires.

Subsection 4. The Financial Supervisory Authority may, during the assessment period, request additional information necessary for the assessment. The request must be made in writing. When such a request is made, the assessment period is interrupted for the period between the time of the request and receipt of the answer thereto.

Subsection 5. If the Financial Supervisory Authority refuses an application for certification, this must be justified in writing and communicated to the applying auditor as soon as possible after the decision. The notification must be made within the assessment period.

Subsection 6. If the Financial Supervisory Authority does not issue a written refusal of the application for certification during the assessment period, the certification is deemed to have been obtained.

Conditions for Maintaining Certification

Section 6. To maintain their certification, an auditor must at any time be able to document continued compliance with the requirements in Section 4.

Subsection 2. If an auditor, upon certification, was credited with other relevant experience pursuant to Section 4, subsection 3, this experience may be included in the calculation of whether the auditor continues to meet the requirements for certification. Experience not included in the Financial Supervisory Authority's assessment pursuant to Section 4, subsection 3, in connection with the certification, may only be included in the calculation of whether the auditor continues to meet the requirements for certification following a concrete assessment by the Financial Supervisory Authority.

Subsection 3. A granted certification is valid until the relevant auditor notifies the Financial Supervisory Authority that they do not wish to be certified, or until the certification is revoked by the Financial Supervisory Authority pursuant to Section 9.

Section 7. A certified auditor has an obligation to notify the Financial Supervisory Authority without unjustified delay if the relevant auditor:

1. Is brought before or receives a ruling from the Audit Board,
2. Is imposed criminal liability for violations of Chapter 28 of the Criminal Code, the financial legislation, or other relevant legislation,
3. No longer meets the requirements in Section 4, or
4. Deposits their approval as a state-audited auditor.

Control

Section 8. The Financial Supervisory Authority continuously monitors whether the conditions for maintaining a state-audited auditor's certification are met.

Subsection 2. A certified auditor has an obligation, upon request from the Financial Supervisory Authority, to submit documentation that the auditor meets the conditions for maintaining the certification, cf. Section 6, within a deadline of 4 weeks after the dating of the request.

Revocation of Certification

Section 9. A certified auditor must, pursuant to Section 16 of the Auditor Act, perform their duties as a representative of public trust in a trustworthy manner, and perform tasks in accordance with good auditing practice.

Subsection 2. The Financial Supervisory Authority may, in the interest of maintaining confidence in the financial sector, revoke a state-audited auditor's certification if:

1. The auditor cannot, within a deadline set by the Financial Supervisory Authority, document compliance with the conditions for certification, cf. Section 4, subsection 1, items 1 and 2, and subsection 2, cf. however subsections 3 and 4.
2. The auditor is brought before the Audit Board or, by a ruling from the Audit Board, has been imposed a penalty for violation of their duties according to the auditor legislation or the financial legislation, including criminal liability abroad under relevant foreign legislation, and the Financial Supervisory Authority assesses that there is reason to assume that the auditor will not perform their duties in a trustworthy manner.
3. The auditor is imposed criminal liability for violation of Chapter 28 of the Criminal Code, the financial legislation, or other relevant legislation, if the violation entails a risk that the person cannot perform their duties in a trustworthy manner.
4. The auditor has exhibited behavior where the Financial Supervisory Authority finds that the auditor has not functioned satisfactorily, wholly or partially, and where there is reason to assume that the auditor will not perform the duties or position in a proper manner. The auditor's failure to fulfill their obligations, including deficient audit and previous orders to the auditor from the Financial Supervisory Authority, and the nature thereof, may be included in considerations regarding revocation of the certification.

Subsection 3. The Financial Supervisory Authority's decision pursuant to subsection 2 to revoke a state-audited auditor's certification or the Financial Supervisory Authority's refusal of an application for certification may be reviewed by the courts, cf. Section 199, subsection 5, of the Act on Financial Business, and Section 193, subsection 6, of the Act on Insurance Business. A request for submission of a decision must be submitted to the Financial Supervisory Authority no later than 4 weeks after the decision is made. The Financial Supervisory Authority is responsible for submitting the case to the courts, which must be done no later than 4 weeks after receipt of the request from the relevant auditor.

Subsection 4. Submission to the courts does not have suspensive effect. In the event of revocation of a certification, cf. subsection 2, the court may, however, decide that the relevant state-audited auditor may maintain their duties as auditor for the type of financial business or insurance company for which the auditor was certified, while the case is pending before the court.

Penal Provisions

Section 10. Violation of this Order's Section 1, subsections 3 and 4, Section 7, and Section 8, subsection 2, as well as submission of incorrect information to the Financial Supervisory Authority, is punishable by a fine.

Entry into Force

Section 11. This Order enters into force on 1 January 2025.

Subsection 2. Order No. 284 of 18 April 2018 on the Financial Supervisory Authority's Certification of State-Audited Auditors is repealed.

Ministry of Industry, Business and Financial Affairs, 5 December 2024 Louise Mogensen / Line Bergmann