The state itself caused the shortage of auditors?!

On 12 November 2025, the newspaper Äripäev published an opinion article by sworn advocate Kaupo Kask entitled “Lawyer: the State Itself Caused the Shortage of Auditors.”Available at: https://www.aripaev.ee/arvamused/2025/11/12/advokaat-riik-ise-pohjustas-audiitorite-puuduse

The content of the article was as follows.

There would be enough auditors in Estonia if they were allowed to do their work, writes sworn advocate Kaupo Kask.

In May of this year, an article was published in Postimees outlining possible reasons why entrepreneurs are unable to find auditors willing to take on new clients. The article also highlighted auditors’ concerns that oversight of their work has become excessively strict.

Having repeatedly advised auditors in disputes with the Chamber of Auditors and, among other things, represented auditors in several court proceedings, I cannot remain silent.

In my assessment, the problems are significantly more serious than those described in the aforementioned article. This may be a fundamental issue that is likely to worsen rather than resolve itself.

“Auditors carefully consider whether to accept assignments from many moderately complex or highly complex clients. The source of stress is uncertainty as to whether, as a result of accepting such work, they will be sanctioned in quality control proceedings or, even worse, lose their professional qualification,” writes sworn advocate Kaupo Kask.

Pursuant to the law, the Chamber of Auditors regularly conducts quality control reviews of its members’ work. These reviews assess whether audits and reviews have been carried out in accordance with international auditing standards, professional ethics requirements, and statutory obligations.

Quality control is carried out by four salaried employees of the Chamber of Auditors’ body, the Auditing Activities Oversight Board (AJN). Although they hold the qualification of sworn auditor, they are not practising auditors.

Auditors with whom I have spoken have explained that it is difficult, if not impossible, to refute the AJN inspectors’ subjective interpretations of applicable standards during quality control proceedings. It should be noted that most international standards are formulated in general terms and leave the auditor with discretion, for example, in determining the facts underlying compliance with a specific standard.

The issue is not so much whether an auditor has failed to fully comply with a particular standard requirement, but rather that in most cases the AJN concludes that insufficient evidence was gathered to reach a specific conclusion.

This is where the auditor’s professional judgment—or discretion—comes into play when performing an engagement. Since the ISA (International Standards on Auditing) and ISRE (International Standards on Review Engagements) do not precisely prescribe, for example, which and how many documents must be analysed during an engagement, how conclusions should be drawn on the basis thereof, or the exact extent to which supporting data must be archived, work performed and/or conclusions reached based on the auditor’s discretion cannot be deemed incorrect merely because the inspector would hypothetically have collected different underlying material, asked different questions of a company’s management board members, or reached a different conclusion based on their own internal conviction.

In light of the above, I believe that the criticisms set out in quality control decisions are often unjustified, where the AJN finds that it would have conducted the engagement differently or reached different conclusions, or that, in its opinion, certain issues were not analysed sufficiently. This amounts to an extremely subjective, retrospective, and superficial assessment, without the inspector having carried out a thorough engagement themselves.

Experience from court practice shows that challenging the AJN’s unilateral conclusions in judicial proceedings has proven impossible. Regardless of the explanations presented to the court, the courts have consistently taken the position that they cannot review the substantive correctness of the assessments given during quality control, nor can they engage in a detailed analysis of whether, in a specific case, the activities complied with the legal acts and standards governing audit services.

In practice, it is also difficult to seek a third opinion from other auditors (i.e. in addition to the opinions of the audited auditor/audit firm and the AJN inspector). Providing explanations in support of a colleague would, with high probability, result in being selected for “random sampling” in quality control, with an outcome that would be predictably negative.

In such circumstances, the question arises: who verifies the correctness of the inspector’s position? Why is the opinion or conclusion of an auditor with, for example, 20 years of experience deemed incorrect, while that of the inspector is deemed correct?

Under the law, the Ministry of Finance should exercise supervision over the activities of the Chamber of Auditors and, consequently, over the AJN. In practice, however, such oversight does not exist. No one reviews whether the substantive work of the AJN inspectors is correct—not even the courts.

As a result, auditors are left at the mercy of four AJN inspectors. Their word is final and their conclusions supreme.

If an AJN-appointed inspector finds that a particular standard has not been complied with or has only been partially complied with, the auditor’s objections are, in practice, dismissed in 99% of cases (and in many cases 100%), and the AJN decision remains unchanged. This is where the substantive review of the auditor’s work effectively ends.

The lack of an effective opportunity to challenge substantive findings significantly damages auditors’ reputations and creates complete uncertainty as to how auditors should perform their work. Consequently, auditors carefully consider whether to accept assignments from many moderately complex or highly complex clients. The source of stress is uncertainty as to whether, as a result of accepting such work, they will be sanctioned in quality control proceedings or, even worse, lose their professional qualification.

Under the Auditing Activities Act, the purpose of quality control is “to verify the compliance of audit services provided by a person subject to quality control during the control period with legal acts and the standards or guidelines and recommendations approved thereunder.”

If an auditor receives a “red” or “orange” rating as a result of quality control, a new control is effectively initiated against them almost immediately, and the described vicious circle begins again. Auditors with whom I have spoken have explained that once an auditor has fallen into the “clutches” of the AJN, it is very difficult to get out. Several auditors have felt that if you did not agree with the AJN’s assertions in the previous quality control and challenged them, the next control will be aimed at effectively ending your professional activity.

I use the expression “ending professional activity” because, as a result of several consecutive controls, several of my clients had their professional qualification revoked. In one case, however, the Estonian Supreme Court succeeded in annulling the relevant decision. There are also other auditors who have managed to regain their qualification as a result of Estonian Supreme Court proceedings.

If it were possible to substantiate auditors’ substantive objections in court, auditors’ rights would, in my view, be better protected, and arbitrary action by the AJN would be prevented.

It is important to note that when a new control immediately follows the previous one, the auditor has no opportunity to remedy the “deficiencies” identified in the quality control in the work reviewed during the new period, because the work being reviewed was completed before the final conclusions of the previous control were issued. This allows the AJN, if it so wishes, to revoke the qualification of any auditor whose work revealed significant deficiencies in the previous quality control.

Each year, deficiencies or some violations of auditing standards are identified in the majority of quality controls conducted in respect of auditors and audit firms.

• In the 2018/2019 quality control period, of 31 audited auditors/audit firms, 6 (19%) received a “red” rating, 11 (36%) “orange”, 8 (26%) “yellow”, and 6 (19%) “green”.

• In the 2019/2020 period, of 31 audited auditors/audit firms, 2 (6%) received “red”, 6 (19%) “orange”, 12 (39%) “yellow”, and 11 (36%) “green”.

• In the 2020/2021 period, of 31 audited auditors/audit firms, 4 (13%) received “red”, 4 (13%) “orange”, 14 (45%) “yellow”, and 9 (29%) “green”.

• In the 2021/2022 period, of 33 audited auditors/audit firms, 4 (12%) received “red”, 11 (33%) “orange”, 8 (24%) “yellow”, and 10 (30%) “green”.

• In the 2022/2023 period, of 23 audited auditors/audit firms, 6 (26%) received “red”, 8 (35%) “orange”, 4 (17%) “yellow”, and 5 (22%) “green”.

• In the 2023/2024 period, of 25 audited auditors/audit firms, 2 (8%) received “red”, 12 (48%) “orange”, 8 (32%) “yellow”, and 3 (12%) “green”.

On average, 14% of audited auditors/audit firms per year receive a public “red” rating, meaning that significant and/or recurring deficiencies are present in their work. The work quality of 31% of audited auditors/audit firms is publicly assessed as weak (“orange”). Only 25% of those audited pass quality control each year without deficiencies, receiving a “green” rating.

Many auditors simply give up their profession—last year, seven auditors voluntarily relinquished their qualification. Of those who remain, many choose very carefully which engagements they accept. Many moderately complex or highly complex companies are likely left without service for the reasons described above, and as a result, entrepreneurs are unable to find an auditor.

Audit and review are an administrative burden imposed by the state on companies, yet the state is unable to ensure the availability of this service. Administrative capacity is lacking because, as a result of quality control, auditors themselves leave the profession, and with a declining number of auditors it is no longer possible to carry out all mandatory audits. From nearly 500 actively practising auditors at the peak in the early 2000s, only about 350 remain.

In my view, the shortage of auditors has been caused by the AJN’s control procedure, which is currently, in substance, entirely unchecked. The Ministry of Finance should take a serious look at its operations. I believe this could resolve several of the problems that have emerged.

There are auditors in Estonia. Let them do their work.

Kaupo Kask

Attorney-by-law