The demand for voluntary audit in micro-companies: Evidence from Finland

The purpose of this study is to uncover additional factors that determine the demand for voluntary audit in micro-companies by investigating the internal management factors that have not yet been explored in prior literature. The hypotheses are developed from the literature and interviews of owner-managers of such companies, bank lenders and the tax authority. The study is based on archival data relating to some 50,000 Finnish micro-companies over the three-year period following introduction of audit exemption in 2008. Our results show that the drivers of voluntary audit are (1) management needs to ensure security of supply from trade creditors, (2) the company is not in financial distress, (3) the company is growing, (4) management has a need for tax reporting credibility and (5) ownership is dispersed. The results of this research will be of interest to the owners and managers of micro-companies, as well as the accounting and auditing profession.