The accountancy sector has attracted much attention lately. The Dutch Authority for the Financial Markets performed an investigation and reached the conclusion that the quality of the statutory audits by the big four audit firms had insufficiently improved over the last few years. The profession has proposed measures that primarily focus on governance, management and the revenue model of audit firms. The Minister of Finance has also announced that he will propose additional regulations to procure improvement in terms of quality on the part of the accountants and the statutory audit statement. In this newsletter we will discuss three developments including the more elaborate audit statement that auditors will have to provide in respect of the annual accounts of Oobs for the year 2014.
- Audit statement: Audit firms have an obligation to issue a more elaborate audit statement with respect to annual accounts of Oobs over the year 2014. The Dutch professional organization of accountants NBA has drawn up a standard for that purpose and has published a brochure in relation thereto. In the new audit statement auditors will provide more information, in addition to their "fair view" statement, about the manner in which the audit has been performed and about the most important points of attention ("key audit points") raised during the process. The NBA is anticipating European developments with this standard. A similar audit statement will probably be required from the financial year 2016 by a standard of the International Auditing and Assurance Standards Board and the amended European audit regulations (Regulation and Directive).
- Appointment of and communication with the auditor: The basic rule is that it is the legal entity that gives the auditor instructions to audit the annual accounts. The general meeting has the authority to appoint the auditor. If the general meeting does not use this authority, the supervisory board is the competent body to do so, but if there is no supervisory board or if it fails to take action, the managing board is authorized to make the appointment. The NBA has come to the conclusion that in practice the managing board often plays an important role in the process of selection of the auditor and that in reality the auditor is instructed by the managing board. The NBA feels that the fact that the auditor primarily performs its audit for the public interest does not correspond with an appointment or compensation by the managing board. The Minister of Finance has agreed to introduce a legislative proposal to abolish the possibility of appointment of the auditor by the managing board. This authority would from then on be exclusively vested in the general meeting and the supervisory board.
- Rotation requirement: On 1 January 2016 the obligation of Oobs to regularly rotate the firm that performs the company's audit will enter into force. Under current law an audit firm may not act as auditor for more than eight consecutive years and the same firm may only perform the statutory audit of this company again after a period of two years. The Minister of Finance has announced an amendment of the law which will align these periods with those applicable under the European Audit Directive, ultimately by 1 January 2106. The rotation period will be fixed at ten years and the cooling off period will be increased from two to four years. Furthermore, the key audit partner within the audit firm cannot be responsible for the statutory audit for longer than 5 years.