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The demand for voluntary audit in micro-companies: Evidence from Finland
Hannu Ojala, Jill Collis, Juha Kinnunen, Lasse Niemi and Pontus Troberg
Abstract
The purpose of this study is to uncover additional determinants of 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 with 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 the 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.
Key words
Audit theory, external audit, regulation
Biographies of the authors
Hannu Ojala is Acting Professor of Accounting at University of Tampere and Professor of Practice at
Aalto University School of Business, Helsinki.
Jill Collis is the Founding Director of the Accounting and Auditing Research Group at Brunel University
London.
Lasse Niemi is Associate Professor of Auditing at Aalto University School of Business, Helsinki.
Juha Kinnunen is Professor of Accounting, Aalto University School of Business, Helsinki.
Pontus Troberg is Professor of Accounting, Hanken School of Economics, Helsinki.
Acknowledgements
The authors would like to thank the anonymous reviewers for their helpful comments. We are also
grateful for feedback received on earlier versions of the paper from participants at workshops and
conferences organized by University of Tampere School of Management (2015), Aalto University
School of Business, Helsinki (2011 and 2012); Università Commercial Luigi Bocconi, Santa Margherita
Ligure (2012); British Accounting and Finance Association, Brighton (2012); Brunel University London
(2012 and 2013); European Accounting Association, Ljubljana (2012) and Paris (2013); and the
Workshop on European Financial Reporting, Prague (2012) and Bamberg (2013). Finally, we gratefully
acknowledge financial support received from the Jenny and Antti Wihuri Foundation, Foundation of
Helsinki School of Economics, and Foundation for Economic Education (Finland).
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1. Introduction
The purpose of this study is to uncover additional determinants of the demand for voluntary audit in
micro-companies by investigating the internal management factors that have not yet been explored in
the literature. Micro-companies are not only of economic importance to the many small and medium-
sized accounting practices that service their needs, but they are also important at macro-level. In the EU,
for example, they represent 92 percent of the business population and provide 29 percent of jobs (EC,
2013, p. 10). Together with small and medium-sized companies, they are considered ‘key to ensuring
economic growth, innovation, job creation, and social integration’ (EC 2015, n.p.). Our study is also set
in the wider context of the debate over reducing administrative burdens for micro-entities under the new
Accounting Directive (Directive 2013/34/EU), which affects some 5.3 million micro-companies (75
percent of reporting entities) in the EU. To a large extent, the debate focuses on the dearth of empirical
research evidence on the benefits of regulation, which are much harder to measure than the costs
(ICAEW, 2015).
Given the option to forgo the audit, the question arises as to why some micro-companies see sufficient
benefits in having an external audit once it becomes voluntary. A number of previous studies have
examined the demand for voluntary audit in small companies (e.g. Seow, 2001; Rennie et al. 2003;
Collis et al., 2004; Hay & Davis 2004; Allee & Yohn, 2009; Collis, 2010; Kim et al., 2011; Lennox &
Pittman, 2011; Minnis, 2011; Dedman & Kausar, 2012; Niemi et al., 2012; Dedman et al., 2014). In
addition, Collis (2012) investigated the demand for voluntary audit among micro-companies in the UK
that fell below the maximum EU size thresholds for micro-entities. However, we are not aware of any
large sample based study that has examined the drivers of voluntary audit in very small micro-
companies
1
. In view of the importance of micro-entities in the European economy, we add to the
1
To illustrate, the size of the firms (in terms of average total assets) examined in some prior studies has been the
following: Collis et al. (2004): 0.706 million GBP (approximately 880 thousand EUR) in a sample of 385 small
UK firms; Allee and Yohn (2009): 0.3536 million USD (approximately 273 thousand EUR) in the sample of 4004
US privately-held small businesses; Minnis (2011): 6.51 million USD (approximately 5,028 thousand EUR) in the
sample of 25,784 firm-years of private US firms. In contrast, the total assets of the micro-companies analysed in
this study averaged only 49.90 thousand EUR in our sample of 149,013 firm-years (see Table 4).
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literature by identifying additional drivers of voluntary audit not examined by Collis (2012). The main
reason for the lack of large-sample studies is the difficulty in obtaining data, since few countries collect
and publish detailed financial data for these very small companies. It can also be argued that the move
towards regulatory relaxation for smaller entities in many jurisdictions exacerbates this problem
(ICAEW, 2015).
Since 1994, EU Member States have been able to offer audit exemption to qualifying small companies.
In general, a non-publicly accountable company must satisfy two of the three size tests for a small
company for two consecutive years. The current thresholds for a small company are shown in Table 1.
By the end of 2010, all 27 Member States had done so, using the EU maxima or a lower national level,
thus allowing companies a choice: to forgo an independent audit of their financial statements or opt for
a voluntary audit. This study is set in Finland, where audit exemption was not introduced until 2008 and,
even then, it was only available for very small micro-companies. Table 1 also shows the very low
thresholds applicable in Finland and includes the thresholds for the new EU category of micro-entity
(EC 2013) by way of comparison.
(Insert Table 1 here)
Finland makes a suitable institutional setting for the study due to the availability of detailed data. With
the exception of the cash flow statement, which is only required for companies exceeding certain size
tests
2
, all companies file a full set of financial statements with the tax authority. This information is
subsequently transferred to the public record, thus fulfilling financial reporting requirements. The public
record provides access to financial statements and taxable income of limited liability companies and,
arguably, increases the reliability of financial information from micro-companies.
2
According to the current Finnish Accounting Act (1336/1997), private companies are not required to prepare
cash flow statements if no more than one of the following size thresholds is exceeded: turnover €7.30m, total assets
€3.65m and average number of employees 50 during the past two fiscal years.
4
We analyse both quantitative and qualitative data in this study
3
. The qualitative data was collected via
20 semi-structured interviews conducted in 2012:
4
16 interviews with the owner-managers of micro-companies in a range of business sectors that
included architecture, digital media, healthcare education, interior design and restaurants
3 interviews with experienced managers in a major commercial bank who were responsible for
making lending decisions to small companies operating in the Nordic and Baltic region
1 interview with a representative of the Finnish Tax Authority.
A common characteristic of the micro-companies interviewed was that they were all funded by owner’s
equity and none of them used bank finance. Although they all had opted for voluntary audit in 2008,
some were no longer doing so at the time of the interviews in 2012. These interviews provided rich
insights from three important stakeholder groups and aided the development of hypotheses for the
quantitative part of the study, which was based on an extensive sample comprising some 50,000 Finnish
micro-companies over the three years 2008 to 2010. During this period, reducing administrative burdens
(exemption from mandatory audit, in particular) and improving access to finance were key issues in
discussions concerning micro-companies. Our results show that 32 percent of micro-companies opted
for voluntary audit, but this decreased monotonically over the three-year period. This supports studies
of small companies in the UK, which document a trend away from audit over time (Dedman et al.,
2014). While controlling for variables already documented in the literature, our results show that the
drivers of voluntary audit are that the company is not in financial distress, management has a need for
tax reporting credibility, there is dispersed ownership, the company is growing, and management needs
to ensure security of supply of goods or services from creditors. By unpacking the management’s reasons
for continuing to have the accounts audited following deregulation, this study extends the theory
developed by Collis (2012) based on (larger) micro-companies in the UK.
3
The rationale for using methodological triangulation is to reduce bias in data sources and methods and thus
enhance the rigor of the study (Jick, 1979; Modell, 2009).
4
The interview schedules are shown in the Appendix.
5
The remainder of this paper is organized as follows. First, we develop our hypotheses by drawing on
evidence from the literature and our interviews with key stakeholders. We then describe our methods
and report our results. In the final section we present our conclusions.
2. Development of hypotheses
It can be argued that very small companies differ systematically from their larger counterparts in a
number of ways that affect their willingness to voluntarily hire an auditor. First, as micro-companies are
typically owner-managed, there is little scope for the traditional agency problems of information
asymmetry between management and investors. Agency problems may, however, arise regarding
equality between owners (Niskanen et al., 2011).
Second, if bank finance is used, the lender is often the only outside stakeholder with a claim on the
company’s assets and an interest in seeing audited financial statements (Blackwell et al., 1998; Berger
& Udell, 2006). However, many micro-companies differ from their larger counterparts and are more
likely to be financed by owner’s equity with little or no bank finance (Berger & Udell, 1998). Therefore,
micro-companies allow us to observe the extent to which entities with limited agency relationships are
willing to voluntarily hire an auditor.
Third, micro-companies are very small by definition and are unlikely to have the resources to prepare
the annual accounts required by law in our European setting. Therefore, they usually outsource this work
to an external accountant (Collis & Jarvis, 2000; Collis, 2008). Apart from providing assurance to any
lenders, this may create the need for voluntary audit to provide comfort about the credibility of the
accounts to management, enhance control/security and the opportunity for non-audit services (Rennie
et al., 2003). Hiring an auditor may offer the opportunity to seek specific advice on financial matters
(Rennie et al., 2003), taxation and accounting matters (Seow 2001), and internal control (Abdel-Khalik,
1993), or simply general advice on managing the business. These needs are often accentuated in very
small companies where owner-managers have little expertise or interest in areas outside the core
business. This suggests that demand for voluntary audit may be explained by management’s need for
assurance regarding the quality of financial statements.
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Consistent with related prior literature, we argue that the needs for voluntary audit in micro-companies
may stem from two distinct, but not mutually exclusive, sources. While the majority of prior studies
examine the role of information asymmetry between firms and their outside stakeholders (for example,
Jensen & Meckling, 1976; Chow, 1982; Fama & Jensen, 1983; Watts & Zimmerman, 1986), other
studies consider the needs of the firms and the entrepreneurs themselves (Abdel-Khalik, 1993; Seow,
2001; Rennie et al., 2003; Niskanen and Niskanen, 2006; Syrjä, 2010; Niskanen et al., 2011; Collis,
2012). We will elaborate on the key issues and findings from the latter stream of literature.
According to agency theory, the demand for auditing arises from information asymmetries and conflicts
of interest between principals and agents (Jensen & Meckling, 1976; Watts & Zimmerman, 1986). The
agency rationale is classically applied to large companies where the audited accounts mitigate
information asymmetry between the investor (the principal) and the manager (the agent) arising from
separation of ownership and control (Fama & Jensen, 1983). Perhaps not surprisingly, the vast majority
of prior studies of the demand for audit focus on firms with hired managers and dispersed ownership, as
in the case of publicly-held corporations.
These studies link the demand for auditing or audit quality to agency costs arising from the relationship
between the management and providers of capital and/or the relationships between providers of equity
capital and debt capital (e.g. Chow, 1982; Francis & Wilson, 1988; DeFond, 1992; Anderson et al.,
1993; Willenborg, 1999; Pittman & Fortin, 2004). A good example of these studies is Chow (1982),
who examined the demand for external audit in listed US companies in the early 1900s when auditing
was yet not mandatory. Consistent with agency theory, he found that firm size, capital structure and the
number of debt covenants written in terms of accounting numbers were positively associated to the
propensity of having an audit. He argued that firm size proxies for two effects: the decrease in
managerial ownership (that is, increased separation of ownership and control) as firm size increases and
the decrease in audit cost as firm size increases due to the fixed (start-up) costs of providing audits.
Much less research is devoted to the demand for audit in privately-held companies. This is particularly
true for very small firms, which may face agency problems arising from the relationships between the
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owners and providers of outside capital. Indeed, Power (1997) contends that in small companies, a
principal is anyone who is distant from the actions of management and is unable to verify them, such as
an external shareholder, lender or trade creditor.
Overall, the interview data revealed a number of management needs for voluntary audits beyond those
examined in the literature (e.g. Seow, 2001; Rennie et al., 2003; Collis 2012). For instance, the
interviewees referred to factors such as supply security, firm size and growth, family relations, financial
distress, need for advice and internal control, need to focus on core business, safety and company image,
as well as the importance to the tax authority. While some of these factors are measurable from financial
statements and other data available, others are not. In what follows, we concentrate on the factors for
which we can find an operational measure from our archival data and present our hypotheses.
Security of supply
Security of supply refers to management’s need to ensure that the goods and services required for the
company's operations are available. Unlike banks which have the economic power to require the
financial statements to be audited in order to grant the loan, a single supplier providing trade credit
cannot normally insist that the customer’s financial statements are audited (Niskanen & Niskanen,
2006). However, a supplier has a control advantage due to the ability to stop deliveries of goods and
services if the customer does not settle debts (Petersen & Rajan, 1997). Therefore, micro-entities may
opt for voluntary audit to signal the credibility of the financial position and secure continuity of supply.
The desire to provide assurance about the credibility of financial statements to users was one of the
reasons for continuing audit in Rennie’s et al. study (2003). This assertion is also supported by one of
our interviewees.
‘In the eyes of co-operation partners, the credibility of the firm increases when its financial
statements have been audited. Many suppliers and other stakeholders go and check the [financial]
information from Suomen Asiakastieto [a major credit rating agency in Finland], and therefore
this information is like the firm’s business card. If this information cannot be found, it says a lot
about the firm and, if the information is delayed, then the question is, why?’ (Bank manager A)
Considering the importance of security of supply, our first hypothesis is:
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H1: Voluntary audit is more likely if the micro-company is dependent on its suppliers of goods and
services.
Financial expertise and advice
There are contrasting views on how the financial health of the company affects the use of auditing. Seow
(2001) hypothesized that making accounting losses has a negative effect on management’s decision to
opt for an audit but did not find research results supporting this assertion. However, the bank managers
we interviewed had clear views on the importance of the audit in reducing the risk of bankruptcy and
financial distress. Their opinions are not surprising given their expertise in estimating financial risk and
distinguishing firms that are a going concern from those where this is in doubt. This is apparent in the
following quotations.
‘Regarding bankruptcy risk, auditing may have importance because the likelihood of errors is
lower when an outsider has checked the numbers. In a good accountant-auditor relationship,
these outsiders may raise a warning flag and draw the entrepreneur’s attention to the right things
before it is too late.’ (Bank manager A)
‘[Auditing] can reduce bankruptcy risk in the sense that if the equity of the company becomes
negative, then the auditor gives the entrepreneur a notice of it so that he or she must put some
fresh money into the company… If the firm is financially distressed, it will not be saved by being
audited, but the auditor can tell the entrepreneur to do this and that to avoid bankruptcy.’ (Bank
manager B)
These views were reinforced by comments from the owner-managers we interviewed, who emphasised
their need for (financial) advice.
‘The question is also about keeping everything under control, and this person gives some
assurance to our business. I see it is a good thing. If something starts to go completely wrong,
then at least he is likely to raise a warning flag.’ (Owner-manager, architectural services business)
‘I myself concentrate on the core activities. It is good to receive comments on financial matters.
For example, the auditor draws my attention to receivables that have been left hanging.’ (Owner-
manager, home textile import business)
‘I have had [name of auditor removed] since 1995, right from the beginning of my business.
Someone recommended him to me, and the reason why I still have him is that I get terribly good
advice from him in different matters concerning my business.’ (Owner-manager, market research
business)
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However, financial and other advice from an auditor is not without cost. In contrast to the above
arguments suggesting that the need for advice increases the likelihood to voluntarily hire an auditor, we
can also expect that owner-managers of micro-companies in need of advice, especially when under
financial distress, may forgo an audit simply because they cannot afford it or consider it not to be worth
its price. Cost savings represented the single most important reason for reducing the level of assurance
services purchased in Rennie’s et al. study (2003). This is also in agreement with Seow’s findings
(2001). An interviewee expressed this as follows:
‘I did not retain the auditor when the audit requirement was removed. His annual fee [X euros] was
pretty high for his work which was quite straightforward… Had it not been so expensive, I would
have continued using his services this year also.’ (Entrepreneur, interior design and architecture
business)
Given the need for and cost of hiring an auditor when a micro-company is financially distressed, we
formulate our second hypothesis as follows:
H2: Voluntary audit is more likely if the micro-company is in financial distress.
Anticipated growth and size
Some owner-managers we interviewed explicitly mentioned the possibility of firm growth as a reason
for having a voluntary audit. This was connected to two factors: they anticipated that the company would
soon exceed the size thresholds for audit exemption and they recognised that they would need advice as
the company became larger and more complex to manage. Here are examples of how the owner-
managers expressed their views.
‘Well, the reason that I have an auditor is that if it ever happened that I received a really big order,
then I would have to hire a couple of other guys and then there would be no problems [if the company
exceeded the thresholds for audit exemption].’ (Owner-manager, conservation and preservation
business)
‘We keep our eye on the possibility that our export business may grow some day when Europe
recovers [from the economic downturn] and there will then be certain elements that may lead to the
need for advice.’ (Owner-manager, software business)
In light of these comments, we posit our third hypothesis:
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H3: Voluntary audit is more likely if the micro-company is anticipating growth.
Tax reporting credibility
Prior literature on tax audits suggests that audit adjustments by tax authorities are related to the firm’s
tax aggressiveness (Mills, 1998; Cho et al., 2006) In addition, Ojala et al. (2015) provide evidence
supporting the view that the likelihood of adjustments of taxable income by tax authority is lower when
the financial statements of the company have been (voluntarily) audited by a certified public auditor.
Seow (2001) found that the most frequently supplied non-audit services among small UK companies
were advisory services on taxation and accounting matters. In the similar vein, a recent survey conducted
by Syrjä (2010) shows that owner-managers of small firms in Finland tend to resort to their auditors
and/or to their external accountants when they are in need of tax planning expertise.
The importance of external audit to the tax authority emerged in some of our interviews with the owner-
managers and with one of the bank managers as shown below.
‘Yes, I do believe that it is important to have some expertise when you are in contact with tax
authority. In fact, I don’t care to call them myself, but it is my auditor who makes the call… It is
important to ask them the right questions with correct wording, thereby avoiding all unnecessary
hassle.’ (Owner-manager, market research business)
‘Definitely! We have had at least ten years without any queries from the tax administration. It is
of significant importance.’ (Owner-manager, home textile import business)
‘I guess the tax authorities rationally think that if the company has some outside control [by an
auditor], then its financial figures are more reliable.’ (Bank manager C)
‘I have heard that some companies choose to be audited just because they believe that tax
inspection is less likely when they have been audited… In my view, the thresholds for audit
exemption [in Finland] are quite low, but nevertheless I remember some people here at the Tax
Administration were very sceptical towards audit exemption saying that we can’t trust anything
anymore now that companies are not audited.’ (Representative, Finnish Tax Authority)
Given these views, we have sufficient grounds for our fourth hypothesis:
H4: Voluntary audit is more likely if the micro-company wants to enhance the credibility of the financial
statements for tax purposes.
Family-related reasons and owners’ equality
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In most micro-companies the owner-manager is often the sole investor in the company. In cases where
ownership is dispersed, other shareholders are usually family members (Abdel-Khalik, 1993). This may
give rise to concerns about the family-owners’ rights and equality. In response to those concerns,
management may see it as advisable to hire an auditor with the aim to have an external ‘referee’ checking
that nobody’s rights are being breached (Niskanen et al., 2011). The following comments given by some
of the owner-managers we interviewed shed light on their concerns.
‘My own children are on the board and therefore it’s better that nothing can take place – even by
mistake – that could violate the equality between the owners.’ (Owner-manager, securities trading
business)
‘The most important thing is to have a competent accountant, but the auditor increases safety and
credibility by checking that bookkeeping is OK. My grandfather gave me one lesson – he did not
teach us many things, but nevertheless I managed to grow up in that family one way or the other. He
said, “Listen to me, son, always remember to keep your papers in order. That is the starting point.’
(Owner-manager of several businesses)
We formulate our fifth hypothesis addressing this factor in the following way:
H5: Voluntary audit is more likely if ownership of the micro-company is dispersed among the family
members.
These hypotheses are tested using quantitative archival data from a large sample of micro-companies in
Finland. We will describe our sample and statistical model next.
3. Methods
There were 145,707, 149,298 and 153,058 limited liability companies in Finland 2008, 2009 and 2010
respectively (Statistics Finland, 2012). Our sampling frame was the Voitto+ and Orbis databases, from
which we selected all micro-companies that provided the data for the variables in our analysis and did
not exceed any two of the following three size criteria for two consecutive years (the size test for audit
exemption in Finland):
turnover EUR 0.20 million
balance sheet total EUR 0.10 million
average number of employees 3.
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This allowed us to use the vast majority of the population of micro-companies in Finland. Information
on auditors was purchased from Asiakastieto Oy, which is the leading rating agency and it also maintains
the financial statement information in Voitto+ database. The final sample comprised 149,013 firm-years,
representing approximately 50,000 Finnish micro-companies as shown in Table 2.
(Insert Table 2 here)
The empirical tests of our hypotheses require the estimation of the conditional probabilities of voluntary
audit, whilst controlling for the effect of other relevant factors. Therefore, we construct the following
logit regression model (1):
(1)
Table 3 shows the variables in the analysis. In the logit model (1), VOLAUDIT is the dependent variable
and is coded as 1 if company i opted for voluntary audit in year t, and 0 otherwise. We adjust the standard
errors for clustering on each company (Petersen, 2009). The independent variables of main interest are
the binary indicator variables SUPPLYSECURITY and FINDISTRESS, as well as the continuous
variables GROWTH, TAXCREDIBILITY and DISPOWNERSHIP.
The importance of suppliers of goods and services for firm operations is measured with the level of trade
credit used, based on the idea that micro-companies with higher levels of trade credit are more dependent
on their suppliers and thereby in need for ensuring supply security also in the future. To measure this,
we use SUPPLYSECURITY which is coded 1 if the company has trade credit (scaled by total assets)
above the industry-specific mean, and 0 otherwise. We know from Niskanen and Niskanen (2006) that
trade credit levels differ across industries, which creates the need to use an industry-adjusted measure.
Following Fama and French (1997), we use 48 industries as the basis for industry sector. With this
Z
ti e
VOLAUDITrobP
11
)( ,
tititi
tititi
tititi
YYSIZEAUDQUALITY
GBANKFUNDINHIPDISPOWNERSLITYTAXCREDIBI
GROWTHSFINDISTRESRITYSUPPLYSECUZwhere
,10,981,7
1,61,51,4
1,31,21,10
20102009
13
industry classification, we control for cross-industry differences in the level of trade credit that may
relate to the market, size, distress risk and other industry-specific factors. In light of H1, we expect the
coefficient of SUPPLYSECURITY to be positive.
We might expect micro-companies in financial distress to forgo audit simply because they cannot afford
it. This would lead to a negative relationship between financial distress and opting for voluntary audit.
However, financial distress may give rise to the need to hire an auditor in order to seek advice on how
to get out of a difficult situation (Niemi et al., 2012). This would lead to a positive relationship between
financial distress and choosing voluntary audit. Finnish legislation requires financially distressed
companies with negative equity to publicly register the lack of owner’s funds. To measure the
relationship between voluntary audit and financial distress, we include the variable FINDISTRESS,
which is coded 1 if the company has negative equity in its balance sheet, and 0 otherwise. H2 does not
predict any particular sign for its coefficient.
Regarding anticipated growth, H3 suggests that it is likely to be positively associated with voluntary
audit. For example, fast growing micro-companies that expect to exceed the audit exemption thresholds
might prepare for this by having a voluntary audit. We use the company’s past growth measured by the
percentage change in turnover from year t-1 to t as a proxy to anticipated growth, denoted by GROWTH.
To measure the threat of the micro-company coming under the scrutiny of the tax authority and a subject
to a tax audit, adjustments of tax returns or similar (costly) tax-related consequences, we employ the
variable TAXCREDIBILITY. It is defined as the complement of the company’s tax aggressiveness,
computed by one minus the effective tax rate of the company. The rationale for this is that the more tax
aggressive the company is, the lower its effective tax rate; consequently, the greater the need to preserve
the tax reporting credibility of the financial statements. Following prior tax research
5
, we compute the
effective tax rate by the ratio of tax expense to pre-tax book income; to attain a positive relationship
5
See Hanlon & Heitzman (2010) for a review of this literature.
14
with voluntary audit, we subtract the effective tax rate from one.
6
Thus, H4 predicts that the coefficient
of TAXCREDIBILITY will be positive.
Based on our interview evidence, we hypothesise in H5 that when ownership of a micro-company is
dispersed, it is very likely that the other investors are family members. To maintain their equality and to
avoid any related problems, management may wish to hire an auditor. To measure this effect, we
augment the model with DISPOWNERSHIP, which is coded 1 if none of the shareholders owns more
than 24.99 percent of the company, and 0 otherwise. We expect the coefficient of this variable to be
positive.
Finally, we augment our model with a number of control variables. BANKFUNDING is coded 1 if the
company uses bank finance, and 0 otherwise. While most micro-companies are likely to be financed
solely by owner’s equity, those in financial distress may have needed to resort to a bank loan. Unlike
trade credit, for which systematic variation is likely across industries
7
, we do not expect the level of
bank debt to vary across industries in any systematic pattern. We posit that any level of bank debt will
create a demand for voluntary audit (Blackwell et al., 1998; Karjalainen, 2011), irrespective of the
business sector. Therefore, we do not make an industry adjustment for BANKFUNDING.
8
We control for the effect of the quality of the external auditor the micro-company had prior to 2008
when audit exemption became available. The structure of the market for auditing services in Finland
continues to be based on a two-tier system of certification, as it is in other Nordic countries and in
Germany. Interestingly, when Hay & Davis (2004) examine incorporated entities in New Zealand that
have a voluntary audit, they find that most choose auditors of higher than the minimum quality, even
though higher-quality auditors are more expensive. Following Knechel et al. (2008), we use top-tier
6
For loss companies with negative pre-tax book income, we impose the restriction that effective tax rate is zero.
Thus, in these companies TAXCREDIBILITY takes the value of 1.0.
7
For example, wholesale or retail companies tend to exhibit larger levels of trade credit than those providing
services.
8
A very significant number of micro-companies in the sample are financed primarily by owner’s equity with no
bank debt at all. For example, in 68 percent of the 149,013 firm-year observations available for empirical tests the
amount of bank debt is nil. To avoid potential estimation bias due these observations representing such a large
portion in the sample, we use binary indicator variables rather than original continuous variables to measure the
effects bank debt and trade credit on the propensity to have the accounts audited.
15
auditors as our measure of auditor quality. Companies paying for the highest level of the auditor quality
are more likely to value the assurance of the external audit (Dedman et al., 2013). AUDQUALITY is a
binary variable that is coded 1 if the auditor the firm had when audit was mandatory possessed the
highest auditor qualification and 0 otherwise.
All micro-companies in our sample are very small by definition and the cross-sectional variation in their
size is also small. Nevertheless, we augment our model with SIZE, which is the size of company
measured by the natural logarithm of total assets. This serves as a control for the effects of any agency
relationships in our sample companies (see, for example, Collis, 2012).
Finally, to control for potential macro-economic changes we use Y2009, which is coded as 1 if the
observation is from year 2009, and 0 otherwise. Similarly, we control for year 2010 with variable Y2010.
(Insert Table 3 here)
Table 4 presents descriptive statistics for the independent variables used to test our hypotheses. The
table reports the p-values of the differences between audited (n = 40,682) and unaudited (n = 108,331)
companies for all variables used in the regression analyses using the t-test for the continuous variables
and Fisher’s exact test for the dummy variables. From the table we can see that micro-companies that
have a voluntary audit are on average larger (SIZE 4.31) than those that do not have an audit (SIZE 3.76).
In contrast, micro-companies that are not audited show slightly stronger growth (13 percent) than
companies that have a voluntary audit (12 percent).
The use of bank debt (BANKFUNDING) is more common (37 percent) among the companies choosing
voluntary audit than in companies opting for exemption (30 percent). Similarly, voluntarily audited
companies are characterized by higher quality of auditing (AUDQUALITY 20 percent compared to 5
percent the preceding year), and by higher likelihood of information asymmetry (DISPERSED
OWNERSHIP 0.3 percent compared to 0.1 percent).
In contrast, the level of trade credit exceeds the industry average more often in unaudited companies
than in companies having a voluntary audit (SUPPLYSECURITY 25 percent and 23 percent respectively)
16
when the effects of other factors are not controlled. In addition, there is a higher frequency of negative
equity in companies which are unaudited than in those having a voluntary audit (FINDISTRESS 16
percent compared to 12 percent).
(Insert Table 4 here)
4. Results
Table 5 shows a correlation matrix for the variables used in the regression analyses. It provides both
Pearson and Spearman correlations. Voluntary audit correlates positively with high dispersion of
ownership (DISPOWNERSHIP). In addition, the use of bank finance (BANKFUNDING), high auditor
quality (AUDQUALITY) and total assets (SIZE) correlate positively with voluntary audit. All the above
correlations are significant at the 1 percent level.
Contrary to our expectations, an above average level of trade credit (SUPPLYSECURITY), the presence
of negative equity (FINDISTRESS), firm growth (GROWTH) and the complement of tax aggressiveness
(TAXCREDIBILITY) correlate negatively with voluntary audit. However, it is well known that company
size is an important driver of voluntary audit and that the correlation coefficient is a measure of the
strength and direction of a linear relationship between two variables without controlling for relevant
background factors. Therefore, we also take the partial effects of company size into consideration (not
tabulated). We find that when company size (SIZE) is used as a covariate, the correlations of
SUPPLYSECURITY, GROWTH and TAXCREDIBILITY with the voluntary audit decision turn positive,
as expected. This provides weak univariate support for H1, H3 and H4. However, the company’s
financial distress status (FINDISTRESS) correlates negatively with voluntary audit even when firm size
is used as a covariate (not tabulated).
(Insert Table 5 here)
The results of the binary logit model are shown in Table 6 in two parts. First, when the model includes
only our control variables, the model is highly significant (p < 0.001) and has a pseudo R2 of 11.9
percent. The dependent variable, VOLAUDIT, is coded 1 if the company has a voluntary audit, and 0
17
otherwise. Therefore, the sign of the coefficients of the explanatory (predictor) variables indicate the
direction of the impact on the likelihood of the company choosing voluntary audit. The table shows that
the coefficients of the control variables for which we have sign expectations (BANKFUNDING,
AUDQUALITY and SIZE) fall in line with our expectations.
The columns on the right of Table 6 show the results after augmenting the model with our test variables
measuring entrepreneurs’ internal needs for voluntary audit. It can be seen that the test variables
contribute marginally to the overall explanatory power (pseudo R2) which is now 12.1 percent.
Nevertheless, after controlling for background factors potentially affecting the audit decision, the
regression coefficient for SUPPLYSECURITY is positive and significant. This suggests that, after
controlling for other relevant factors, the likelihood of voluntary audit is higher in companies that have
need for supply security, as measured by an above average level of trade credit for their industry. This
is consistent with H1.
The sign of the coefficient of the variable measuring financial distress (FINDISTRESS) is negative
suggesting that micro-companies that are in financial distress are less likely to choose voluntary audit
than those that are not in financial distress. When we examine the liquidity level measured by quick
ratio in year t-1 of financially distressed companies with negative equity (FINDISTRESS = 1), our (non-
tabulated) test results reveal that those financially distressed firms choosing a voluntary audit have
significantly more liquidity than those which opt out from voluntary audit. (The z-value of the Wilcoxon
rank sum test for the difference between these two groups is 5.5 with p < 0.001.) This finding supports
the interpretation that voluntary audit decision may relate to the availability of sufficient funds for
carrying out an audit. In other words, owner-managers whose companies are financially distressed tend
to forgo audit because they cannot afford it (H2), which explains the negative coefficient of
FINDISTRESS.
18
With regard to our remaining explanatory variables, GROWTH, TAXCREDIBILITY and
DISPOWNERSHIP, the table shows that all three have significant positive coefficients (with p < 0.001).
Thus, the findings are consistent with H3, H4 and H5.
9
Finally, we also report the VIF values for diagnosing collinearity. The low VIFs (which all fall clearly
below 10.0) indicate that that we have no grounds to suspect that the results are affected by serious
multicollinearity.
(Insert Table 6 here)
When we perform a stepwise logit regression (not tabulated), the order of the explanatory variables
according to their statistical contribution to the variation in the outcome variable (VOLAUDIT) are as
follows: (1) the company is not in financial distress; (2) management has a need for tax reporting
credibility; (3) there is dispersed ownership; (4) the company is growing; and (5) management needs to
ensure security of supply of goods from creditors.
Because it is possible that the drivers of voluntary audit change from one year to another during the
period 2008 to 2010, we examine and report annual results in Table 7. While the coefficient estimated
for FINDISTRESS is consistently significant and negative throughout the three-year period examined,
the statistical significances of the other test variables show some instability. For example, the
coefficients estimated for of SUPPLYSECURITY and DISPOWNERSHIP are significant in 2010, but
they are not so in 2008 when audits for the first time became voluntary for micro-companies. In contrast,
the coefficients of GROWTH and TAXCRIDIBILITY are significant in 2008 (GROWTH also in 2009)
but remain insignificant in 2010. Looking at the control variables (BANKFUNDING, AUDQUALITY,
SIZE), we can see that their coefficients are significant consistently across the years examined.
9
In addition to past growth (measured by GROWTH), we examine and find that also the closeness to the thresholds
of mandatory audit relate positively to the decisions to engage in audits. We define a firm to be close to threshold
if one of the three mandatory audit criteria is met. In addition, we also look at investments in property plant and
equipment (PPE) as an alternative proxy for growth (instead of growth in sales). However, we find that it has a
much weaker fit in the logit model. This is consistent with the view that in micro-companies, many of which
represent service industries, investment in PPE is not an important measure of size or growth.
19
One important conclusion that can be drawn from Table 7 is that the overall fit of the logit model
becomes stronger over time. This is indicated by the monotonically increasing pseudo R2 from 0.071 to
0.122 and further to 0.161. We find a significant increase in the predictive power of the annual models
using the receiver operating characteristic (ROC) curve for each model, similar to Minuti-Meza (2013).
A plausible explanation is that the data contains less noise as time goes by and the temporal distance
from the audit law reform in 2007 increases. In other words, the 2008 data (immediately after audit
exemption was introduced in Finland) may include more noise due to the tradition of the previous
statutory requirement, and this seems to diminish over time. This interpretation is also supported by the
negative trend of the indicator variables for the observation years in Table 6 (YEAR2009 coefficient = -
0.191; YEAR2010, coefficient = -0.414, both statistically highly significant), which are consistent with
the negative trend in voluntary audit.
(Insert Table 7 here)
Additional tests
The impact of loss firms: To measure financial distress in our logit model, we used an indicator variable
coded 1 for micro-companies with negative equity, and 0 otherwise. The reason for this definition was
the requirement by Finnish law to publicly register the lack of owner’s funds. As a robustness check,
and to control for the effect of negative earnings on our measure of tax credibility (see footnote 4), we
include an indicator variable for loss firms in our logit model. The (non-tabulated) results indicate that
this indicator has a significant negative sign, which is consistent with our primary measure of financial
distress. In addition, the findings for the test (and control) variables, including tax credibility, are
qualitatively unchanged.
Immediate versus late quitters of voluntary audit: Table 2 shows a decreasing trend of voluntary audit
across 2008-2010, which is also suggested by the negative coefficients of the indicator variables for
years 2009 and 2010 in Table 6. This being the case, we compare the immediate and late quitting entities
to see whether there are any systematic patterns that differentiate these two groups of companies. To do
this, we compare the distributions of our independent variables for the subsample of micro-companies
20
(n = 21,992) that opted for audit exemption immediately after the law reform in 2008 with the
subsamples that dropped the audit one or two years later (n = 4,049 and n = 1,954, respectively).
The results from t-tests for means (not tabulated) shows that micro-companies opting for audit
exemption immediately had, on average, more often negative equity (FINDISTRESS), lower need to
assure tax authorities (TAXCREDIBILITY), less likelihood of bank debt (BANKFUNDING), lower
auditor quality in the year prior to abandoning audit (AUDQUALITY) and were smaller (SIZE) than
those micro-companies which opted out later. These findings are consistent with our results from the
logit regressions and provide further evidence that these factors are driving voluntary audit in micro-
companies. The remainder of our hypothesis variables (SUPPLYSECURITY, GROWTH and
DISPOWNERSHIP) did not show, on average, statistically significant differences between the two
subsamples in this additional test.
5. Conclusions
This study contributes to the literature by extending theory on the demand for voluntary audit in micro-
companies and identifying new management drivers. It is set in Finland and covers the three-year period
following the introduction of audit exemption in 2008. The institutional background relates to the debate
over regulatory relaxation for micro-entities in the EU under the new Accounting Directive (Directive
2013/34/EU). Micro-companies are increasingly seen as the engines for growth in most countries, but
they are also of significant economic importance to the small and medium-sized practices of accountants
who service their needs. Therefore, the results of this research will not only be of interest to the owners
and managers of the vast population of micro-companies, but also to those providing them with
professional accounting and auditing services.
Our interviews with owner-managers of micro-companies reveal new insights into the internal needs
that explain the demand for voluntary audit. These were incorporated in our hypotheses and tested with
empirical data from some 50,000 micro-companies. Our results show that 32 percent of micro-
companies initially opted for voluntary audit, but the proportion decreased monotonically over time to
23 percent. This supports studies of small companies in the UK, which document a trend away from
21
audit over time (Dedman et al., 2014). Using our large sample archival data, our results show that the
drivers of voluntary audit are, in order of explanatory power: (1) the company is not in financial distress,
(2) management has a need for tax reporting credibility, (3) there is dispersed ownership, (4) the
company is growing, and (5) management needs to ensure security of supply of goods from creditors.
By identifying these specific internal reasons for continuing to have the accounts audited after the
introduction of exemption, the research increases our understanding of the needs of very small micro-
companies.
This study makes a number of specific contributions. It is the first to look at the drivers of voluntary
audit in very small micro-companies, which are largely ignored in the auditing literature. In addition, it
focuses on the crucial three-year period following the introduction of audit exemption. Previous studies
have examined the effect of debt and the role played by audit in the agency relationship with external
lenders in small and medium-sized companies, but our study provides insights into management’s need
for audited accounts in micro-companies.
The benefits provided by voluntary audit to owner-managers and external stakeholders of micro-
companies are likely to be relatively similar across countries, particularly within the EU where the
harmonization policies are bring about convergence of national accounting and auditing policies.
Although we do not have grounds to suspect that the underlying drivers for voluntary audit would be
substantially different outside Finland, the wider generalizability of our results to companies of the same
size or larger could be confirmed by testing our model in other countries with the same or higher audit
exemption thresholds.
22
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27
Table 1. Audit exemption thresholds in Finland and EU size thresholds
Audit exemption
in Finland
EU maxima for
micro-entity
EU maxima for
small company
Turnover
EUR 0.20m
EUR 0.70m
EUR 8.80m
Balance sheet total
EUR 0.10m
EUR 0.35m
EUR 4.40m
Average employees
3
10
50
28
Table 2. Sample companies
Audit-exempt micro-companies
Year
All
Not audited
Audited
2008
45,323
30,691 (67.7%)
14,632 (32.3%)
2009
50,501
36,735 (72.7%)
13,766 (27.3%)
2010
53,189
40,901 (76.9%)
12,288 (23.1%)
Total (firm-years)
149,013
108,331 (72.7%)
40,682 (27.3%)
29
Table 3. Demand for voluntary Audit: Variables in logistic regression (1)
Variable
Description
VOLAUDIT
Binary variable coded 1 if the company has a voluntary audit in year t, and 0
otherwise
SUPPLYSECURITY
Binary variable coded 1 if the company’s trade payables scaled by total assets
exceed the industry-specific mean at the end of year t-1, and 0 otherwise
FINDISTRESS
Binary variable coded 1 if the company has negative equity at the end of year t-
1, and 0 otherwise
GROWTH
Percentage change in revenue from year t-1 to t
TAXCREDIBILITY
Max [(1- effective tax rate); 0], where effective tax rate = tax expense/pre-tax
book income in year t-1
DISPOWNERSHIP
Binary variable coded 1 if none of the owners has more than 24.99% of the shares
at the end of year t-1, and 0 otherwise
BANKFUNDING
Binary variable coded 1 if the company has external debt (bank) finance at the
end of year t-1, and 0 otherwise
AUDQUALITY
Binary variable coded 1 if the auditor in year t-1 has the highest audit
accreditation, and 0 otherwise
SIZE
Natural logarithm of total assets (in thousands of euros) at the end of year t-1
Y2009
Binary variable coded 1 if the observation is from year 2009, and 0 otherwise
Y2010
Binary variable coded 1 if the observation is from year 2010, and 0 otherwise
30
Table 4. Descriptive statistics for independent variables
Variables
All
Audited
Difference
No
Yes
p-value
N
149,013
108,331
40,682
SUPPLYSECURITY
Mean
0.25
0.25
0.23
<.001
***
Std
Dev
0.30
0.43
0.42
FINDISTRESS
Mean
0.15
0.16
0.12
<.001
***
Std
Dev
0.36
0.37
0.33
GROWTH
Mean
0.13
0.13
0.12
0.014
**
Std
Dev
0.62
0.64
0.57
TAXCREDIBILITY
Mean
0.90
0.89
0.90
<.001
***
Std
Dev
0.14
0.14
0.14
DISPOWNERSHIP
Mean
0.002
0.001
0.003
<.001
***
Std
Dev
0.04
0.03
0.05
BANKFUNDING
Mean
0.32
0.30
0.37
<.001
***
Std
Dev
0.47
0.46
0.48
AUDQUALITY
Mean
0.09
0.05
0.20
<.001
***
Std
Dev
0.28
0.21
0.40
SIZE
Mean
3.91
3.76
4.31
<.001
***
Std
Dev
1.20
1.16
1.22
YEAR2009
Mean
0.34
0.34
0.34
0.787
Std
Dev
0.47
0.47
0.47
YEAR2010
Mean
0.36
0.38
0.30
<.001
***
Std
Dev
0.48
0.48
0.46
Notes:
For variable definitions, see Table 3
Statistical (two-tailed) significance (p-values) better than 0.001, 0.01, and 0.05 indicated by ***, **, and *
31
Table 5. Correlation matrix
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
1.VOLAUDIT
1.000
-0.025
-0.048
0.016
-0.029
0.019
0.059
0.235
0.192
-0.001
-0.070
<.001
<.001
<.001
<.001
<.001
<.001
<.001
<.001
0.788
<.001
2. SUPPLYSECURITY
-0.025
1.000
0.124
-0.004
0.045
-0.002
0.017
0.000
-0.148
0.010
-0.006
<.001
<.001
0.165
<.001
0.441
<.001
0.935
<.001
<.001
0.014
3. FINDISTRESS
-0.048
0.124
1.000
0.031
0.269
0.004
0.161
-0.011
-0.131
-0.001
0.022
<.001
<.001
<.001
<.001
0.097
<.001
<.001
<.001
0.580
<.001
4. GROWTH
-0.007
-0.006
0.058
1.000
0.094
0.002
0.004
0.007
-0.059
-0.064
0.015
0.008
0.021
<.001
<.001
0.339
0.102
0.011
<.001
<.001
<.001
5. TAXCREDIBILITY
-0.029
0.038
0.255
0.105
1.000
0.004
0.125
0.018
0.103
0.440
-0.830
<.001
<.001
<.001
<.001
0.089
<.001
<.001
<.001
<.001
<.001
6. DISPOWNERSHIP
0.019
-0.002
0.004
0.001
0.004
1.000
0.005
0.013
0.026
0.000
-0.002
<.001
0.441
0.097
0.659
0.089
0.040
<.001
<.001
0.965
0.533
7. BANKFUNDING
0.059
0.017
0.161
-0.016
0.125
0.005
1.000
0.011
0.278
0.007
-0.011
<.001
<.001
<.001
<.001
<.001
0.040
<.001
<.001
0.005
<.001
8. AUDQUALITY
0.235
0.000
-0.011
-0.001
0.018
0.013
0.011
1.000
0.113
-0.027
-0.027
<.001
0.935
<.001
0.684
<.001
<.001
<.001
<.001
<.001
<.001
9. SIZE
0.201
-0.148
-0.132
-0.096
0.104
0.029
0.277
0.121
1.000
0.012
-0.034
<.001
<.001
<.001
<.001
<.001
<.001
<.001
<.001
<.001
<.001
10. Y2009
-0.001
0.010
-0.001
-0.048
0.440
0.000
0.007
-0.027
0.009
1.000
-0.533
0.788
<.001
0.580
<.001
<.001
0.965
0.005
<.0001
0.001
<.001
11. Y2010
-0.070
-0.006
0.022
0.018
-0.830
-0.002
-0.011
-0.027
-0.031
-0.533
1.000
<.001
0.014
<.001
<.001
<.001
0.533
<.001
<.001
<.001
<.001
Notes
n = 149,013. See Table 3 for definitions of the variables. Pearson (Spearman) correlations below (above) the diagonal.
32
Table 6. Binary logit regression results for choice of voluntary audit estimated from pooled data with year fixed effects
Variables
Predicted
Coefficient
p-value
Coefficient
p-value
VIF
INTERCEPT
?
-2.338
<.001
-2.481
<.001
***
SUPPLYSECURITY
+
0.031
0.038
**
1.04
FINDISTRESS
?
-0.217
<.001
***
1.13
GROWTH
+
0.037
<.001
***
1.02
TAXCREDIBILITY
+
0.184
<.001
***
1.10
DISPOWNERSHIP
+
0.543
<.001
***
1.00
BANKFUNDING
+
0.047
<.001
0.072
<.001
***
1.14
AUDQUALITY
+
1.468
<.001
1.471
<.001
***
1.02
SIZE
+
0.346
<.001
0.342
<.001
***
1.20
Y2009
?
-0.195
<.001
-0.191
<.001
***
1.40
Y2010
?
-0.416
<.001
-0.414
<.001
***
1.41
Model summary
N
149,013
149,013
Wald chi-square
11,449
11,558
p-value
<.001***
<.001***
-2 Loglikelihood
161,921
161,759
Pseudo R2
0.119
0.121
Notes
See Table 3 for definitions of the variables
Statistical (two-tailed) significance (p-values) better than 0.001, 0.01, and 0.05 indicated by ***, **, and *
33
Table 7. Binary logit regression results for choice of voluntary audit estimated from annual cross-sectional data
Pred. sign
Year
2008
Year
2009
Year
2010
Variables
Coefficient
p-value
Coefficient
p-value
Coefficient
p-value
INTERCEPT
?
-2.616
<.001
***
-2.433
<.001
***
-2.909
<.001
***
SUPPLYSECURITY
+
-0.036
0.154
0.035
0.160
0.101
<.001
***
FINDISTRESS
?
-0.254
<.001
***
-0.221
<.001
***
-0.172
<.001
***
GROWTH
+
0.073
<.001
***
0.044
0.014
**
-0.002
0.893
TAXCREDIBILITY
+
0.550
<.001
***
-0.027
0.725
-0.046
0.580
DISPOWNERSHIP
+
0.293
0.212
0.663
0.005
***
0.714
<.001
***
BANKFUNDING
+
0.052
0.023
**
0.076
0.001
***
0.094
<.001
***
AUDQUALITY
+
0.816
<.001
***
1.754
<.001
***
2.035
<.001
***
SIZE
+
0.322
<.001
***
0.323
<.001
***
0.375
<.001
***
Model summary
n
45,323
50,501
53,189
Wald chi-square
2,233
3,868
5,046
p-value
<.001
***
<.001
***
<.001
***
-2 Log likelihood
54,646
54,721
51,522
Pseudo R2
0.071
0.122
0.161
Notes
See Table 3 for definitions of the variables.
Statistical (two-tailed) significance (p-values) better than 0.001, 0.01, and 0.05 indicated by ***, **, and *.
34
Appendix
Interview schedules
Interviews with owner-managers of micro-companies (16)
Background information about the interviewee and the company:
General education in general and whether education and/or training in business and accounting/auditing
in particular
Experiences as an entrepreneur (a short biography as entrepreneur)
Industry and business model of the company
Size of the company in terms of net sales, total assets and number of personnel
Age of the company
Legal form of the business and does it belong to a group of companies
Open-ended questions regarding motivation for being voluntary audited:
1. I’d like to start by asking you about the main motivation of why you use auditor on voluntarily basis?
2. Are there any other reasons why you use auditor on voluntarily basis?
3. Can you come up with anything else that has to do with the fact that you use auditor on voluntarily basis?
After the interviewee has nothing to add to the reasons for voluntary audit, then:
What is the ownership structure of the company?
How well are you aware of the roles of an auditor and external accountant?
What are your experiences about tax filings and do you see that your auditor has affected the tax reporting?
Describe your personal contacts with your auditor. Does the auditor provide you with advice?
Have you outsourced accounting and/or preparation of financial statements to an external accountant?
If so, please describe how the auditor and the external accountant interact.
Are you aware of your annual audit fee? Is it at the correct level in your opinion? Why?
Does your company have bank debt?
How much trade credit does your company have?
Does voluntary audit affect your access to funding?
Is there anything else that you would like to add?
Interviews with bank managers (3)
General theme: How does voluntary audit affect credit decisions?
Interview with representative of the Finnish Tax Authority (1)
General theme: Does voluntary audit affect the taxation process? If yes, how?
