Extended Review of Annual Accounts in Denmark
- 4 minute read
- Finance & Accounting
In short, an extended review is a thorough review of an annual report. It can be chosen by companies that are exempt from full audit requirements, but must or want to present an auditor’s statement. Extended review provides moderately limited security: The security is greater than with a review, but less than with a full audit report. It is therefore the option that provides the second highest security for you annual accounts.
The difference between audit and extended review
Audit
The completed audit typically follows international standards (ISA) and requires extensive effort from the auditor. It provides an in-depth understanding of the company, its workflows and control systems. Furthermore, there are high requirements for evidence and documentation before the auditor can give his conclusion with certainty.
Extended review
Extended review follows the Danish Business Authority’s declaration standard for small businesses and involves fewer control actions than a full audit. This also means that after an extended review, the auditor can only express limited security in the conclusion.
This type of auditor’s report is based to a greater extent on inquiries and analyzes of the accounts.
The 4 supplementary actions
In addition to a review, extended review must include the following 4 actions:
Confirmation letter from financial institutions/banks Lawyer’s letter about any related cases Different registers etc. regarding collateral Documentation for tax returns, AM contribution, payroll tax, VAT, etc.
(Possibly other external confirmations or samples.)
On the other hand, the following audit requirements can be waived in an extended review:
Auditor control of physical stock count or stock status Auditor control of accounting figures and accounting information when testing for underlying documentation Auditor preparation of a written report for the company’s management.
Extended review will often be chosen by smaller companies that are not subject to full audit requirements. It gives a thorough insight and can e.g. be an advantage to have if you are basically subject to audit requirements, but go below the threshold for a full audit, or you need to find financing or investors, but do not need the control and security that a completed audit provides.
When is an audit required?
By default, all Danish companies are subject to audit requirements, unless they meet certain requirements. We have described them in depth here. In short, you are exempt if you do not exceed 2 of the following 3 for 2 years in a row on the balance sheet date:
- Balance of DKK 4 million
- Net turnover of DKK 8 million
- 12 full-time employees on average in the financial year
For holding companies, this applies when the holding company and the companies it may be associated with together exceed the limits.
A balance sheet of DKK 50 million. DKK and above automatically require an audit.
In addition, there are 11 special risk industries which are subject to auditor duty when turnover reaches over DKK 5 million.
Commercial foundations and employee investment companies are always subject to audit.
Who can choose extended review instead of audit in 2025?
Extended review is typically less costly and less resource-intensive than audit.
However, it should be considered who will ultimately use the annual report for something. Because if these stakeholders would later make additional demands on the security of the accounts (e.g. banks, suppliers, customers, etc.), auditing would probably have been the cheaper alternative overall.
Note! New size limits for accounting classes
You can choose an extended review instead of a completed audit if your company does not exceed 2 out of 3 of the limits for accounting class B two years in a row on the balance sheet date. But be aware that these will change with effect from your 2024 reporting:
- Balance of DKK 55 million (before: DKK 44 million)
- Net turnover of DKK 11 million (before: DKK 89 million)
- 50 full-time employees on average in the financial year
If 2 out of 3 of the limits are exceeded in 2 consecutive financial years, the company will move to accounting class C and extended review will no longer be an alternative to audit.
Extended review may be a good alternative for smaller businesses that:
Has simpler company structures Is not currently needing financing Does not have stakeholders who demand auditing according to international standards Not facing alternation of generations or sale
How to choose extended review?
The decision to switch from audit to extended review must be made at an ordinary general meeting. It must also be ensured that the company’s articles of association do not state that auditing must take place according to international standards (ISA).
