The abolishment of the statutory audit requirement -Does it change vredit assessment processes?

Abstract

Background: In November 2010, the statutory audit requirement in Sweden was abolished for Swedish SMEs. The abolishment was the result of the objective of a 25% reduction of administrative costs, for companies within the European Union. Further on, Sweden is considered to have a bank-oriented system, which means that banks play an important role when it comes to financing SMEs. When assessing the creditworthiness of an SME, financial accounting information is an important source of information for the banks. This means that banks are concerned by the abolishment of the statutory audit requirement since one of their most important source of information no longer has to be reviewed by a third party. Aim: The aim of this thesis is to investigate how the new legislation regarding the abolishment of the statutory audit requirement affects the credit assessment process of a Swedish bank located in a metropolitan area and a Swedish bank with a distinct local profile. Method: Due to the complexity of the subject of this thesis, interviews have been performed in order to receive more deeply understanding for the subject and to find out the arguments behind the banks’ opinions regarding the abolishment of the statutory audit requirement. Three personal interviews have been performed with a total number of four respondents. The empirical data was then analyzed based on the frame of reference to be able to answer the research questions. Conclusion: The conclusion of this thesis is that the credit assessment process of the investigated banks is not greatly affected by the abolishment of the statutory audit requirement and that no major differences exist between the different bank types. Contrary to previous research, this thesis also concludes that no major differences can be found in the credit process of the two types of banks compared. Further research: It would be interesting to further investigate how the abolishment of the statutory audit requirement has affected the credit assessments after a period of time. Will there be a different result after a couple of years when the banks have had the opportunity to fully adapt to the new legislation? Key words: Abolishment, audit, bank, credit assessment process, credit granting, creditworthiness financial accounting information, the statutory audit requirement.