The Accounting Law sets out the general requirements for companies’ accounting.

The Danish Business Authority monitors companies’ annual reports, where the auditor provides information about violations of the Accounting Law.

If, in connection with the audit of the company’s annual accounts, the auditor becomes aware that the company does not comply with the Accounting Law, the auditor must disclose this either by:

• modifying his conclusion, or
• disclosing the violation as a highlighted matter in the report.

Violations of the Accounting Act must be brought to an end as soon as possible.

If the auditor has provided information about violations of the Accounting Act in his report, the Authority will generally start an inspection case.

See the Danish Business Authority’s guidance on inspection

Kontrol med bogføring | erhvervsstyrelsen.dk

8. Control, reactions, and penalties

The Bookkeeping Law has been expanded with provisions on control of companies’ compliance with their bookkeeping obligations. Today, the law contains both a provision that obliges companies to hand over their accounting materials to authorities in connection with control, e.g. tax control or control of the company’s annual accounts, and provisions on general bookkeeping control, registration of and requirements for digital bookkeeping systems, and special provisions on control of compliance with the new provisions on requirements for digital bookkeeping.

 8.1. New provisions on control and reactions and penalties for violations

In addition to provisions on general bookkeeping control and requirements for digital bookkeeping, new forms of reactions have also been introduced in the event of a violation, including the possibility of forced dissolution of a company. Finally, a new penalty provision has been introduced with a significantly increased level of fines. With these changes, the legislator wanted to emphasize the societal importance of complying with essential requirements for companies’ accounting, and that in particular more extensive violations of the Accounting Act should be able to result in a serious fine.

However, it is also important to emphasize that the new provisions on control, reactions and penalties are based on the principles of materiality, proportionality and risk-based control. The provisions are particularly aimed at significant and more extensive violations, and the reactions must be applied proportionally in relation to the violations that have occurred.

The normal picture will therefore be that any violation will result in an order that the company must cease the violations. If such an order is complied with, nothing further will typically happen. In some cases, however, the violations may be so extensive that such a reaction is not considered sufficient, but that, for example, a fine is required. And especially if a company does not comply with an order to correct violations, it can result in serious reactions and penalties.

 8.2. Monitoring that companies comply with the obligation to keep digital records

The Danish Business Authority monitors that companies comply with the requirements for digital bookkeeping.

For companies subject to accounting obligations, a special disclosure obligation has been introduced when reporting the annual report, where the company must state which digital bookkeeping system they use. The disclosure obligation applies to annual reports where the bookkeeping that forms the basis for the annual report is covered by the requirement for digital bookkeeping.

 8.3. Fines

The Bookkeeping Act contains rules stating that companies subject to bookkeeping obligations may be fined for violating the law’s requirements for digital bookkeeping. In addition, providers of digital registered bookkeeping systems and companies that use unregistered digital bookkeeping systems may be fined for violating the requirements for digital bookkeeping systems. Furthermore, there is a possibility of fines for companies that perform bookkeeping for other companies, e.g. accountants and auditors.

A company may be punished for violating the following obligations regarding accounting:

• The obligation to register all of the company’s transactions accurately as soon as possible

• The obligation to ensure both transaction and audit trails

• The obligation to store the accounting material in a secure manner for five years after the end of the financial year

• The obligation to protect against the destruction, disposal or corruption of the accounting material

• The management’s obligation to ensure the storage of the accounting material upon the cessation of the accounting obligation or changes in management

• Register all of the company’s transactions in a digital accounting system

• Store registrations and related documents in a digital accounting system.

 8.4. Fine for violation of obligations regarding digital accounting

The fine may amount to up to DKK 1.5 million. When determining fines, the company’s turnover, the severity and duration of the violation, and whether there are repeated violations, must be considered.

In the event of particularly extensive violations of a number of provisions on obligations regarding digital bookkeeping and the use and functionality of bookkeeping systems, a more severe fine will be imposed. The penalty is imposed by the courts after an assessment of the circumstances of the individual case based on the following indicative fine table:

Schematic overview of fine levels for violations of the Accounting Act

 Degree of violation

Net turnover 10-100 million DKK.

Less extensive 25,000-100,000 DKK.

More extensive 100,000-250,000 DKK.

Especially extensive (increased fine) DKK 250,000-1 million DKK

 Net turnover more then 100 million DKK.

Less extensive 100,000-250,000 DKK.

More extensive 250,000-1 million DKK. DKK

Especially extensive (increased fine) 1 million DKK-1.5 million DKK

 Below is a description of what is meant by minor, major and particularly extensive violations, with some typical examples. It should be emphasized that this is not an exhaustive list and that it is up to the courts to assess the nature of the violation in the specific case.

 Minor violations

“Minor violations” are understood to mean that a company has partially fulfilled the basic accounting obligation, but where deficiencies are found to a significant extent that may lead to uncertainty about certain entries in the company’s accounts and VAT or tax returns. A minor violation may, for example, consist of the company not consistently registering the transactions in the company.

 More extensive violations

“More extensive violations” means that the company’s bookkeeping and the accounting records stored are so inadequate that it is not possible to prepare accounts that can be audited, without the auditor having to refer in his report to the fact that the audit could not be carried out due to the lack of bookkeeping, or that it is not possible for the authorities to determine whether the company has, for example, stated its VAT or tax liability correctly.

This may, for example, be the case that the company has not registered the company’s transactions for longer periods or for certain types of transactions. There may also be cases where the company has registered transactions in a digital accounting system, but has failed to store registrations and vouchers in the accounting system.

 Particularly extensive violations

“Particularly extensive violations” means the fact that all or most of the company’s transactions have not been registered, or that transactions of particular economic importance to the company have not been registered and documented. It may also be the case that the company has neither registered transactions nor stored records and vouchers in a digital accounting system, and that there are significant deficiencies in any manual accounting.

If the company fails to comply with an order to bring a violation of the Accounting Act to an end, this will also be considered a particularly extensive violation.

Single or occasional violations are also punishable, depending on their significance. This applies in particular if such a violation has significant or decisive economic significance, e.g. failure to register or store accounting material regarding a contract that constitutes a significant part of the company’s turnover.