This master thesis presents an insight in the revised Danish standards of public auditing (SOR) and
the effects derived from the auditors reporting in both the auditors’ records and the independent
auditors report published in connection with the annual report. Based on the auditing of a private
primary school, the aim of this thesis is to assess how the updated SOR might affect the materiality
concept of both the critical legal audit and the performance audit conducted regarding the
financial audit of the annual report. It does so by reviewing the SOR and existing public auditing
guidelines - but also by including assessments by three leading Danish experts specializing in public
auditing of private primary schools.
Based on an extensive review of the SOR and guidelines combined with and analysis and
discussion of interviewed experts’ opinions, the thesis concludes that:

- The materiality of both the critical legal audit and the performance audit should
prospectively be of a more quantitative level. Especially during the planning of the audit,
the financial materiality level should be used for selecting only essential areas of audit.

- The Ministry of Children and Education provides a set of guidelines to the auditors’ records
which the auditors must follow. It states in its definition that findings should be reported in
two ways: either as a significant remark or a critical remark.

- When it comes to the reporting of the critical legal audit and the performance audit in the
independent auditors’ report, both the literature and the interviewed experts are more
ambiguous. However, there is a consensus among the interviewed experts that financial
material findings of rule violation or management shortfall should be reported. Moreover,
one of them states that any critical remark in the auditors’ records should be reported in
the auditors’ report as well. Another well-agreed convention for mandatory reporting in
the auditors’ report is the accountables’ reliability. If a substantial rule violation or a
substantial management shortfall is committed in deliberately the finding should also be
reported in the independent auditors’ report.

Thus, the auditor still needs to conduct a significant qualitative assessment of the nature and
context of the rule violation or management shortfall to assess, whether to report the findings
recovered by the public auditing.