Lay reviewer or authorised auditor

An association has to have either an authorised auditor (tilintarkastaja) or a lay reviewer (toiminnantarkastaja). Having neither is not an option, and the appointment is made by the association’s meeting, not by the board.

For most small associations the answer is a lay reviewer. The line above which an authorised auditor becomes compulsory is written into law as figures, so the question is settled by arithmetic rather than by judgement.

When an authorised auditor is compulsory

An authorised auditor has to be appointed if, in both the financial year just ended and the one before it, at least two of these three were exceeded:

• balance sheet total of 100,000 euros
• turnover or equivalent income of 200,000 euros
• an average of three employees

Two details matter. The thresholds are read across two consecutive financial years, so one unusually busy year does not by itself create the obligation. And two of the three have to be exceeded, not one: a single employee on the payroll is not enough if the balance sheet and the income stay below their limits.

Beyond the thresholds, an audit can become compulsory by two other routes. The association’s own rules may require one, and plenty of older rulebooks do. A funder may require one as a condition of a grant, which is common where an association receives public money or a foundation grant.

What a lay reviewer does

A lay reviewer goes through the association’s finances and administration to the extent the activity requires, and issues a report on it. In practice that means looking at receipts and bank statements, comparing them against the books, checking that the decisions in the minutes and the money that left the account match each other, and saying so when something does not.

This is not an audit. An authorised auditor follows auditing standards, holds a qualification and answers for the work professionally. A lay reviewer is a layperson, and that is the point: the role exists so the membership has its own way of confirming that the money went where the meeting decided it should.

The difference shows in what you can conclude from the report. An audit report is an opinion on whether the financial statements give a true and fair view. A lay review report is an account of what the reviewer looked at and what they found.

Who can act as a lay reviewer

A lay reviewer needs no degree and no certification. What is required is enough knowledge of financial and legal matters for the association’s activity, and independence.

Independence is the condition that fails most often in practice. The reviewer cannot be a board member or a close relative of one, and cannot review work they did themselves. In a small association where the same ten people do everything, that narrows the field quickly.

Two lay reviewers are appointed, or one together with a deputy. The deputy is not a formality: if the only reviewer is unavailable just before the annual meeting, the financial statements are left without a report.

What this means in practice

Work out the thresholds before the annual meeting rather than after it. The reviewer is appointed at that meeting, and if the limits were passed and nobody noticed, the appointment was made wrongly and has to be made again.

Read the rules at the same time. A requirement in the rules overrides the statutory minimum, and old rules call for an authorised auditor more often than the people who drafted them intended.

And keep the books in a state the reviewer can work with. A review that starts by sorting a pile of receipts costs more and takes longer whichever kind of reviewer is doing it.

If you are not sure which side of the line your association falls on, ask us: the figures are in the last set of financial statements and the answer takes a few minutes. See also association bookkeeping and when an association’s financial statements are due.