Accounting and audit

Accounting and audit are tasks for which companies often require the help of an outside expert. According to law, all companies are subject to an accounting obligation. With the exception of small companies, all enterprises are obliged to elect an external auditor. It is useful even for small companies to engage the services of an external auditor, even though they are not obliged to do so. The sections below provide more detailed information on accounting and audit.

Accounting

In simple terms, bookkeeping means recording the sums of money involved in business transactions resulting from business operations. Accounting collects complete financial documentation and registers information on business transactions, following a specific method. The result is financial statements on the company’s finances. As a whole, accounting comprises the company’s revenue, expenses, property, assets and debts. Financial statements prepared on the basis of accounting reveal the operating result. Company management is responsible for arranging accounting.

The Association of Finnish Accounting Firms has compiled an accounting guide (Kirjanpidon ABC) on its website. This Accounting ABC explains what accounting is. Knowledge of various terms and practices helps you in transactions with your accounting firm.

Accounting obligation

According to the Accounting Act, all enterprises and private persons engaged in business or professional activity are subject to an accounting obligation. The obligation commences from setting up a business. Accounting arrangements are therefore among the primary duties of a start-up company.

Outsourcing financial management

A company can manage accounting itself or acquire financial management services from an expert accounting firm. Prior to sending out a call for tenders, matters to consider at the company include

  • Which sectors of financial management (invoicing, accounts payable and receivable, payment transactions, payroll calculations, business accounting, inventory management, budget, cash flow and funds statements) you wish to outsource and which the company will manage on its own
  • Monthly business volumes
  • What kind of cost centre and budget monitoring is required (product groups, departments) and what kind of requirements are set on reporting (accuracy of monthly reporting, for instance as regards financial statements)
  • Potential electronic solutions (including sales invoices, purchase invoices, payment transactions, debt collection).

In many cases, small enterprises manage invoicing and payment transactions themselves. However, in addition to accounting, they outsource accounts payable and receivable, payroll calculations and debt collection.

Selecting an accounting firm

If you decide to partly or completely outsource financial management, you should select a professional, preferably authorised accounting firm for your company. In every case, accounting firms operate on the basis of professional responsibility: they are responsible for ensuring that the work is done in the manner agreed with the client, on the basis of the material submitted by the client.

The following quality issues should be taken into account when selecting an expert accounting firm:

  1. Has the accountant passed the KLT accounting examination?
    The KLT accounting examination is the expert qualification of professionals in the accounting sector. Candidates are required to have a university level commercial degree and several years’ practical experience of diverse financial management duties.

  2. Is the accounting firm a member of the Association of Finnish Accounting Firms?
    The Association of Finnish Accounting Firms has almost 800 members. An accounting firm can be accepted as a member of the Association, only if it the management has passed the KLT accounting examination. Authorised accounting firms comply with the professional standards prepared for the industry by the Association of Finnish Accounting Firms, with the purpose of minimising risks to clients and ensuring a high-quality service relationship.

The website of the Association of Finnish Accounting Firms offers a search service for finding your local authorised accounting firms. The site also contains a form for requesting a quotation and a form template for a formal written agreement on assignments. You should always conclude a written agreement and comply with it and the agreed deadlines, because delays in submitting receipts are costly, either in the form of overtime compensation or penal interest paid to the Tax Administration.

See also

Financial Statements

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