International Auditing Harmonisation: Environmental factors affecting audit exemption thresholds in European Union.

Abstract

The first research question of this thesis is to examine international auditing harmonisa-tion and identify environmental factors that have an effect on international accounting and auditing harmonisation process in European Union. The second research question is that are the differences in audit exemption thresholds between European Union member states affected by these environmental factors.

In EU countries audit exemption thresholds varies largely. For example Netherlands, Germany, and UK have adopted relatively high thresholds but Finland, Denmark, and Estonia have adopted relatively low thresholds. However, audit exemption thresholds have increased in certain member states of the EU in recent years and further increases are expected in the future. The sample of this thesis consists of 27 European countries which define the audit exemption thresholds for year 2006. Partial Least Squares (PLS) is used to test relationships between environmental factors and audit exemption thresh-olds.

The empirical findings in this study indicate that societal environment, actor environ-ment and accounting environment have significant impact on audit exemption thresh-olds. For the professional and organizational environment a weak influence on audit exemption thresholds can be stated.