The Norwegian Financial Supervisory Authority (Finanstilsynet) has published an inspection report on an audit firm, concluding that its audit of the 2022 financial statements for a specific engagement breached the Norwegian Auditor Act, with several breaches characterised as gross. The shortcomings relate in particular to audit work on related-party loans, the going concern assessment, the audit report issued, and the auditor’s follow-up of identified deficiencies and decision to continue the engagement. Finanstilsynet found that the auditor did not obtain sufficient and appropriate audit evidence for a loan presented as to group companies, even though it represented about 70% of the audited entity’s balance sheet, and that the documentation indicated the loan was in substance an illegal loan to the shareholder/CEO. Despite this, the auditor issued an audit report for 2022 without the reservations Finanstilsynet considered necessary. The report also criticises the going concern work as lacking sufficient audit evidence and not reflecting the implications of the loan and a recognised deferred tax asset, which affected the company’s equity position. In addition, Finanstilsynet concluded that the continuation assessment for the 2023 audit did not include sufficient follow-up or concrete requirements for remediation, including setting a deadline and warning of resignation if issues were not corrected. The audit firm accepted Finanstilsynet’s assessments and conclusions, completed a root cause analysis and prepared an action plan that Finanstilsynet took note of as suitable to reduce the risk of similar deficiencies in future audits.
Norwegian Finanstilsynet 2026-02-05
Norwegian Financial Supervisory Authority finds gross Auditor Act breaches in audit firm’s 2022 audit of a bankrupt client
The Norwegian Financial Supervisory Authority (Finanstilsynet) reported significant breaches by an audit firm in its 2022 financial statement audit, particularly concerning related-party loans and going concern assessments. The firm failed to obtain sufficient evidence for a major loan, issued an unqualified audit report, and inadequately addressed deficiencies. The firm accepted the findings and has developed an action plan to mitigate future risks.