Do I need an auditor?
Any organisation that is obliged to submit audited its annual accounts must have an auditor. Whether or not you are subject to the audit obligation will partly depend on your organisational form and the size of your enterprise.
Some sectors are subject to the audit obligation through specific rules. Lawyers, accountants and estate agents are examples of this.
An audit is a review of your accounts to check that they are in order. If you are subject to the audit obligation, you choose an approved audit firm or a registered or state-authorised auditor to carry out this audit. After completing the audit, the auditor must prepare an audit report which must be submitted together with the annual accounts. Any remarks, which the auditor wishes to make, must be stated in this report.
The auditor must not have any links with the enterprise other than being its auditor. The Auditor Act imposes strict requirements on independence. For example, if you have a brother who is an auditor, he will not be able to act as auditor for your enterprise.
Private limited companies (AS)
Small limited companies are normally not required to have an auditor. These companies can choose not to have their annual accounts audited. This is called "opting out of audit".
The company can opt out of audit if their:
- Operating revenues amount to less than NOK 6 million, and
- Balance sheets assets amount to less than NOK 23 million, and
- Average number of employees is less than 10 full-time equivalents.
Opting out of audits for private limited companies
If no auditor is appointed in the memorandum of association, the annual accounts are not to be audited. In these cases, the new company is considered to have opted out of audits.
If a private limited company is considering opting out of audits, the previous annual accounts will be used as a basis for the assessment. If the annual accounts show that the enterprise is below the thresholds, the enterprise can cease using an auditor from the following year. Opting out of audits is reported via Altinn using the "Coordinated register notification" form.
Triggering the accounting obligation in a limited company
When the operating revenues, balance sheet total or the number of full-time equivalents exceeds the limit, the audit obligation will be triggered from the following year onwards.
Eksempelbedriften AS was established in 2012. The company has revenues of less than NOK 5 million (from 2018 - 6 million) during its early years, and otherwise satisfies the requirements for opting out of audits. The company has decided to exercise this option and has opted out of having audits of its annual accounts.
In 2015, it wins an unusually large contract and its revenues amount to NOK 7 million during this year. This means that it will be subject to the audit obligation for the following year, i.e. 2016.
In 2016, the company's turnover is NOK 4 million, but it must still have its accounts audited as it passed the threshold amount in the previous year.
In 2017, it again opts out of having audits because its revenues in 2016 were below the threshold.
Parent companies in groups
Private limited companies which are a parent company in a group can opt not to have their annual accounts audited when the conditions are met for the group viewed as a single entity.
Small sole proprietorships are not normally subject to the audit obligation. The audit obligation will be triggered when turnover exceeds NOK 5 million and one of the following conditions is also met:
- The balance sheet contains assets worth over NOK 20 million, or
- Average number of employees is less than 20 full-time equivalents
General partnerships (ANS/DA)
Small general partnerships are not normally subject to the audit obligation.
General partnerships are subject to the audit obligation under the following conditions:
- Operating revenues amount to NOK 5 million or more, or
- The number of partners exceeds 5, or
- If all partners are legal persons and have assets on the balance sheet worth over NOK 20 million or the average number of employees exceeds 10 full-time equivalents.
Co-operatives become subject to the audit obligation when their operating revenues amount to NOK 5 million or more.
Norwegian branches of foreign companies (NUF)
NUFs which are liable to pay taxes to Norway are subject to the audit obligation when their operating revenues amount to NOK 5 million or more.
When is the audit obligation triggered and when does it lapse?
When the thresholds are passed and the enterprise becomes subject to the audit obligation, the audit obligation will be triggered in the following year. When you are subject to the audit obligation, your operating revenues must be below the limit for two consecutive years before you can stop using an auditor. The audit obligation will lapse from the third year onwards. This is the general rule and applies to all the organisations forms referred to above, with the exception of private limited companies. Special rules apply to these companies.
Note that even if your enterprise is not obliged to have its annual accounts audited, certain events can trigger a requirement to obtain special certification from an auditor.
For example, the Companies Act requires the liquidation accounts of private limited companies to be audited. This means that private limited companies which are not subject to the audit obligation must still have their liquidation accounts audited by an auditor in accordance with a special rule.