BDO breached audit rules on going concern and deferred tax asset

Finanstilsynet has found that BDO AS breached the Auditors Act (revisorloven)Finanstilsynet in the audit of one engagementFinanstilsynet, in its review of the going-concern assumption and of a capitalised deferred tax assetFinanstilsynet. The supervision, based on a report filed with Finanstilsynet, was limited to the firm's acceptance assessment and its audit of the going-concern assumption, the deferred tax asset and inventory for the reported engagement.Finanstilsynet The acceptance assessment drew no material remarks after the firm's comments; only the areas with material findings are covered in the report.

On going concern, Finanstilsynet finds that the auditor did not obtain sufficient and appropriate audit evidence to determine whether a material uncertainty existed about the client's ability to continue as a going concernFinanstilsynet — a breach of section 9-4 third paragraph (e)Finanstilsynet — and did not exercise sufficient professional scepticismFinanstilsynet as section 9-4 fourth paragraph requiresLovdata. The breach is assessed as gross.Finanstilsynet The client showed a clear negative trend in turnover, margin, equity ratio and working capital after years of large deficits: the January–May 2024 interim report showed a large deficit, the 31 May 2024 balance sheet showed materially negative working capital with an overdraft approaching its limit, and no documentation shows any assessment of cash flow for June–August 2024Finanstilsynet.

The 2023 accounts were prepared on a going-concern basisFinanstilsynet with an unmodified opinion. The auditor's documentation consists of a Going Concern Questionnaire concluding, on the basis of cost measures plus shareholder loans, that there was no material uncertainty; a liquidity budget (the «Action Plan», September 2024–June 2025) whose assumptions and data the auditor never evaluatedFinanstilsynet; and a June 2024 closing meeting. Finanstilsynet holds that at the September 2024 signing date there was no sufficient basisFinanstilsynet: negative working capital, no cash-flow documentation for June–August 2024, accumulated negative net cash flow budgeted for September–December 2024, and no binding agreements on new shareholder loans or guaranteesFinanstilsynet. The budget rested on selling a large number of units, yet only a few had signed contracts, and the auditor never evaluated the data behind the estimated salesFinanstilsynet. Where cash-flow forecasts are central, ISA 570 paragraph 16(c)(i)–(ii) requires the auditor to evaluate the underlying data and challenge management's assumptions — which the documentation does not showFinanstilsynet.

On the deferred tax asset, Finanstilsynet finds that the auditor did not obtain sufficient and appropriate evidence supporting its recognitionFinanstilsynet — also a breach of section 9-4 third paragraph (e)Finanstilsynet, assessed as grossFinanstilsynet. The asset was materialFinanstilsynet and had grown 71 per cent since 2022Finanstilsynet. The auditor's evidence for 2023 amounts to the client's written turnaround narrative, endorsed with the note «we have assessed management's assessment as reasonable». The client must make future taxable profit probable through future earnings or realistic tax planning to utilise the asset (NRS (F) Resultatskatt point 2.4); as an accounting estimate it triggers ISA 540, and Finanstilsynet cannot see that any of the procedures in ISA 540 paragraph 18 were performedFinanstilsynet.

The report also notes the supervision covered inventory, on which no material findings are reported. The report is signed 8 October 2026 following Finanstilsynet's preliminary report of 7 September 2026 and the firm's comments of 25 September 2026. It contains no vedtak section imposing a fine or other sanction — unlike the ES Revisjon report published the same month, which is titled «Tilsynsrapport og vedtak».

Legal basis: revisorloven § 9-4 tredje ledd bokstav e and fjerde leddFinanstilsynetFinanstilsynet.