Bankruptcy proceedings are regulated by the Bankruptcy Act as a public coercive process in which the state directly intervenes in assets, prioritizes claims, and terminates legal relationships with legally binding effect. For this reason, the legislator has established an explicit control point in bankruptcy law: before the administration of the estate may be discontinued, the estate accounts must be audited in accordance with good auditing practice.
When this requirement is not enforced, the independent control presupposed by law falls away. The consequence is that courts conclude coercive proceedings without ensuring traceability as to how the estate’s assets have been identified, assessed, and administered.
The field of law and justice is challenging in Norwegian democracy. Oagal points to a recurring and partly systemic feature of Norwegian public life: while the wording of the law and its preparatory works are clear, actual legal application develops in a different direction. In this way, Norwegian public authorities take far-reaching liberties that Norwegian citizens themselves are prevented from taking.
This development often occurs without clear corrective intervention from the courts. When courts do not properly understand or assume their constitutional role, they increasingly function as a secretariat for the legislative and executive institutions of power – in addition to being dependent on the views of the small circle of individuals who constitute the judicial branch.
This has been evident in cases concerning public participation under the Planning and Building Act, where statutory requirements have been reduced to formal exercises. Oagal’s precursor project, the Participation Ombudsman (self-appointed), was established because ombudsmen, audit committees, and state administrators to a limited extent intervened when municipal and state planning was carried out in violation of the law’s preparatory works and intent. Norwegian municipalities systematically breach the participation provisions of the Planning and Building Act and in practice receive support for doing so, as neither ombudsmen nor courts intervene.
One current example is the handling of the Skøyen area zoning plan. The Skøyen area zoning plan is under consideration by the Ministry of Local Government and Regional Development, with well-documented violations of both the wording of the law and the ministry’s own legal guidelines on participation. The zoning plan has been resistant to Norwegian law throughout the entire process, including documented legal violations identified by the Oslo Municipal Audit Office. The risk is now high that the government will gloss over these illegalities and seal lawlessness as acceptable practice.
Another example is the handling of court fees. Over time, the courts have developed legal practice in conflict with the law’s intent and text. Because laws are not consistently followed from enactment to practice, legal practice emerges that does not correspond with society’s sense of justice or democratically adopted policy.
Bankruptcy proceedings form part of the same pattern.
Bankruptcy entails state coercive administration. The estate’s assets are identified, assessed, realized, and distributed with legally binding effects. For this reason, the Bankruptcy Act requires an audit of the estate accounts before the court may discontinue the administration of the estate.
From section 90 of the Bankruptcy Act, second paragraph:
It is incumbent upon the auditor:
Further:
If the estate is simple and transparent, or its funds are so limited that it can hardly bear the costs of appointing an auditor, the court may entirely refrain from appointing an auditor. If no auditor is appointed to perform the duties under the second paragraph no. 2, these duties shall be carried out by the court, by the creditors’ committee, or by a specially appointed auditor in accordance with instructions given by the court.
The requirement concerns method, not person. Good auditing practice is a legal standard that presupposes planning, risk assessment, the collection of audit evidence, documentation, and verifiable conclusions. The audit is intended to ensure completeness in the mapping of the estate’s assets.
Disbursements from the estate can be documented through bank statements. They show which amounts have been paid out and to whom. They do not, however, provide documentation of which assets should have been included in the estate before the disbursements took place.
The audit must encompass assets that do not necessarily leave bank traces, including outstanding receivables, intangible rights, contractual positions, guarantee claims, recourse claims, and avoidance claims. Such assets may be material without appearing in account movements.
Limiting the audit to a review of disbursements means that central parts of the estate’s asset base remain uncontrolled.
The estate accounts constitute the estate’s comprehensive statement of how assets have been identified, assessed, realized, and distributed throughout the bankruptcy administration. They are intended to make it possible to follow a coherent line from the opening of the estate to final distribution.
Without an audit, the estate accounts lose their function as a verifiable trace. The accounts may appear consistent, but without independent control they lack the legal quality required by law.
The Bankruptcy Act links the court’s authority to discontinue the administration of the estate directly to a condition: audited estate accounts must be available and approved. The provision is constructed as a barrier.
When the court nevertheless discontinues the administration of the estate without documented audit in accordance with good auditing practice, this barrier is set aside. The conclusion then takes place without the control presupposed by law having been carried out.
A significant number of bankruptcy estates are registered as concluded, including in the Brønnøysund Register Centre. The registration gives the impression that the bankruptcy administration has been lawfully concluded with final effect.
The registers do not, however, verify whether the estate accounts have been audited in accordance with good auditing practice. Registration therefore does not necessarily mean that the statutory conditions for discontinuance have been fulfilled.
If a bankruptcy is not lawfully concluded, the legal effects that rely on it also lack a valid legal basis. This applies to measures such as enforcement proceedings, liability assessments, and other legal consequences affecting legal entities and natural persons.
When statutory control points in coercive processes are not enforced, trust in the rule of law is undermined. At the same time, the balance between the branches of government is shifted, as the judicial branch in practice departs from its control function.
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