Audit-report errors can fail inspections despite otherwise sound work

An incorrect audit opinion can lead to a failed quality inspection even when the rest of the engagement follows good auditing practiceTilintarkastajat, Suomen Tilintarkastajat warns in a four-part review of PRH audit oversight’s 2025 findings. The association describes recurring weaknesses rather than new inspection themes, covering audit reports, revenue, balance-sheet items and related parties.

Before signing, auditors should check that the report names the financial statements actually included and that required statements and disclosures are present. The association highlights unmodified opinions despite missing required information, incorrect reporting on other information, signatures inconsistent with the auditor’s appointment, and reports that conflict with the audit file’s conclusions. Client-specific template fields and the consistency of dates on the report and financial-statement audit notation also need checking.

For related parties, the file should explain how management identifies them, who they are, which transactions were identified and what evidence was obtained. Inspection findings include overly narrow identification and missing documentation of audit procedures. Auditors should document conclusions on the accuracy and sufficiency of disclosures in the financial statements and management report. Deficiencies should be communicated to management; if uncorrected, their effect on the auditor’s reporting should be assessed. The association recommends comparing working-paper templates with TIVA’s questionnaires Lähipiiri and Liiketoimet intressitahojen kanssa.

Revenue testing should cover every material revenue stream and relevant assertion, with procedures responding to the risks identified. The review flags cutoff work restricted to one side of the reporting date without justification, unidentified sales transactions in the documentation, and missing conclusions. It also calls for documenting the revenue-recognition fraud-risk assessment and adequately justifying any rebuttal. Simply matching the general ledger to sales invoices does not establish completeness, occurrence or cutoffTilintarkastajat. Missing disclosures for revenue recognised by stage of completion also require assessment of their effect on statutory compliance and audit reporting.

For inventory, the review identifies gaps in existence, completeness and valuation testing, attendance at counts, documented test counts and item-level valuation. For material physical inventory, the review asks whether the auditor attended the count or, where attendance was impracticable, performed alternative procedures to establish existence and condition. The linked recommendation requires a modified opinion under ISA 705 when attendance or alternative procedures cannot yield sufficient appropriate evidence about inventory. When the count takes place on another date, additional audit procedures must establish whether inventory movements between that date and the financial-statement date were properly recorded.

Receivables testing needs sufficient evidence of existence and valuation. The association points to external confirmations or matching outstanding invoices to subsequent receipts on bank statements. Fixed-asset work should address existence, reconciliation with accounting records, acquisition cost, capitalisation criteria, depreciation and possible impairment where material. Across balance-sheet items, procedures should address the same assertions as the risk assessment, and documentation should show the evidence and conclusions.

The reporting review also calls for consistent treatment of matters requiring additional reporting, including a first audited period or material going-concern uncertainty. Its practical message is to allow enough time to read each report carefully before signing, when procedural and template errors can still be caught.

Tilintarkastuslaki (1141/2015), chapter 4, section 3 requires good auditing practiceFinlex and section 5 requires quality assuranceFinlex, while the articles refer to ISA 240 and ISA 501.