FAQ

On this page, you’ll find clear explanations of the purpose of audits, relevant legal requirements and key regulations. These insights will help you understand the key concepts of auditing and accounting.

What is an audit?

An audit is an independent and non-biased review that makes sure that a company’s finances are managed correctly and that its operations follows the law and regulations. The purpose of an audit is to confirm that the financial statements and accounting provide a true and fair view of its financial position.

During the audit, the auditor reviews the company’s financial statements, accounting, and management practices. After the review, the auditor issues a report assessing whether the financial statements have been prepared in accordance with the law and whether they provide a true and fair view of the company’s results and financial position. An audit is not just a legal requirement, it is also a valuable tool that helps the company identify potential mistakes and risks, improve financial management, and operate more transparently and sustainably.

An auditor must have high professional competence, integrity, and complete independence in order to review a company’s operations fairly and objectively. A well-conducted audit strengthens trust in the company, supports management in decision-making, and helps prevent errors or misuse of funds.

An auditor’s work is based on three key areas:

  • Legislation, such as:
    • Auditing Act (1141/2015)
    • Accounting Act (1336/1997)
    • Corporate laws (e.g. the Limited Liability Companies Act, the Foundations Act, the Associations Act, the Housing Companies Act, and the Act on General and Limited Partnerships)
    • Other laws related to business operations
  • International Standards on Auditing (ISA), which are applied in Finland as approved auditing practices
  • Good auditing practice, which also includes ethical guidelines (such as independence, objectivity, and confidentiality)

Auditing is not just a legal formality, it is an important part of a company’s financial management and a key way to ensure its reliability. In practice, an audit supports a company in many ways, such as:

  • Building trust with investors, lenders, and other stakeholders who need assurance about the company’s financial situation.
  • Meeting regulatory requirements, such as reports and inspections required by the trade register, tax authorities, and financial institutions.
  • Supporting decision-making by providing management and the board with verified, reliable, and up-to-date financial information.
  • Managing risks and improving internal controls, helping to prevent financial errors and misuse of assets.

Auditing can also include special audits, such as:

  • Valuation of non-cash capital contributions, meaning when a company receives assets instead of cash (e.g., machinery or equipment). These must be accurately valued to ensure they correspond to the company’s capital.
  • Reports and reviews related to capital loss
  • Verification of the use of public grants and project funds, ensuring that the company uses the received funds precisely for their intended use and fulfils all reporting obligations. This is especially relevant for projects financed by organizations such as Business Finland.

An audit is not mandatory for all companies. The obligation to have an audit applies to accounting-obligated companies and organizations, such as limited liability companies, general partnerships, limited partnerships, cooperatives, associations, and foundations – if the company meets two of the following conditions during both the most recent financial year and the year before:

  • Turnover is over €200,000
  • Balance sheet total is over €100,000
  • Average number of employees over three

Foundations are always required to have an audit, regardless of their size or scale of their operations. Holding companies that mainly own securities and have a significant influence over another accounting-obligated company are also required to have an audit, even if they don’t meet the limits above.

The purpose of an audit is not only to verify that the financial figures are accurate, but also to ensure that the company operates responsibly and in accordance with the law. An audit enhances the company’s credibility, is often essential for securing external financing, and helps maintain strong relationships with authorities and other business partners.

Accountant
An accountant is a person who manages a company’s financial records. They record all income, expenses, and other financial transactions to keep the company’s finances organized and accurate. An accountant makes sure the financial records are up to date and correct and often helps with tax filings and other financial administration tasks.

Accounting Firm
An accounting firm is a company that provides bookkeeping and accounting services to other businesses. Accounting firms employ accountants who manage a company’s financial records, including recording income and expenses, preparing financial statements, and handling tax filings. They help businesses keep their finances organized and that all legal requirements are met.

Auditor
An auditor is a professional who has passed GR, CGR, or OFGR qualifications. The auditor reviews a company’s accounting and financial statements, essentially checking the work done by the accountant. The auditor ensures that the financial statements give a true and fair view and that the company follows laws and regulations.

Auditors act as an independent third party, verifying the company’s financial information and helping both the company and its stakeholders—such as owners, banks, and authorities—trust that the financial data is accurate and reliable. In addition to audits, auditors can also provide advisory services, consulting, and other assurance assignments.

Audit Firm
An audit firm employs GR, CGR, and/or OFGR auditors along with colleagues who assist in audits. Staff at an audit firm do not maintain bookkeeping; their role under audit law is to review the accounting prepared by the bookkeeper. Auditors can also provide the additional services mentioned above.

Good accounting practices mean managing a company’s finances carefully, accurately, and on time. It ensures that the accounting is reliable and provides a true picture of the company’s financial situation.

Some examples of good practices include:

  • Regular and accurate accounting entries
    All business transactions should be entered in the accounts promptly and according to the accrual principle. Accounting should be based on dated and systematically numbered documents/vouchers that support the transaction (Accounting Act, Section 2:5).

  • Keeping receipts and accounting records
    Every transaction should have supporting documentation, such as a receipt, invoice, or other record. Source documents, accounting records, and other accounting materials must be carefully retained for at least six years (for source documents) or ten years (for financial statements and accounting records) from the end of the financial year (Accounting Act, Section 2:10 §).

    Accounting records must be stored so that their contents can be easily reviewed and printed in a clear and understandable format if needed (Accounting Act, Section 2:7 §).
  • Clear procedures
    Companies should have clear guidelines for managing its accounting, including responsibilities and documentation practices. The accounting system should be organized so that the connection between transactions, receipts, and entries can be easily verified (Accounting Act, Section 2:6 §).

    The board of directors is responsible for ensuring that the company’s accounting and financial management are properly organized. The CEO is responsible for ensuring that the company’s accounting complies with the law and that financial management is reliable. If there is no CEO, this responsibility also falls on the board.

  • Compliance with laws and regulations
     Accounting must always be carried out in accordance with current laws and regulations, and the company must follow good accounting practice (Accounting Act, Section 1:3 §).

  • Regular preparation of financial
    At the end of each financial year, a financial statement is prepared to give a complete picture of the company’s financial situation.

Well-maintained accounting helps a company avoid mistakes and saves time. It also provides reliable information to support decision-making and helps the company meet requirements from authorities or financiers.

A limited liability company can raise funding in several ways, each playing an important role in the company’s finances. The most common methods are:

Share Issue

  • A share issue is a procedure under the Limited Liability Companies Act (Chapter 9) where the company issues new shares. These shares can be offered to existing shareholders or new investors.
  • The subscription price paid by investors is recorded in the company’s equity (either in the equity capital or unrestricted equity, depending on the decision). This is a key way to raise new capital to finance the company’s operations or investments.
  • As a result of a share issue, investors receive ownership in the company, and their rights are determined by the Limited Liability Companies Act and company’s articles of association.

Capital Contributions Without Consideration

  • Capital contributions without consideration are funds or assets given to the company without the company receiving shares in return. The contribution is recorded in either restricted or unrestricted equity, depending on the decision.
  • These contributions are more common within corporate groups and for financing subsidiaries, and they are intended to strengthen the company’s equity and financial stability.

Capital loan

  • A capital loan is a special type of loan under the Limited Liability Companies Act (Chapter 12) that helps strengthen the company’s financial stability. Capital loans are counted as part of equity when checking if the company has enough funds.
  • A capital loan is different from a regular loan: paying back the loan or interest comes after other debts, and can only be done if the company has enough free and distributable funds.
  • Capital loans are often used to fund investments or business growth, giving the company more flexibility.
  • Capital loans are usually shown as liabilities, but in some cases, they can be treated as equity.

Convertible Bond

  • A convertible bond is a financial instrument that combines both debt and equity features. It is a loan that a company can issue to raise financing, and the bondholder has the right to convert the bond, or part of it, into the company’s shares under pre-agreed terms (options or other special rights to shares).
  • This type of financing is regulated under the Limited Liability Companies Act (Chapter 10) and its use requires a decision by the company’s annual general meeting.

Other Forms of Financing

  • Other forms of financing, such as bank loans, leasing agreements, installment debts, and crowdfunding, provide the company with alternative ways to fund its operations.

The financing methods provided under the Limited Liability Companies Act offer a variety of opportunities to support the company’s funding needs. It is important that all financing arrangements are carried out in accordance with the law and good governance practices to support the company’s long-term goals.