Recently, changes in legislation applicable to public-interest entities (such as listed companies, licensed credit institutions and insurance companies) entered into force regarding the composition of audit committees, mandatory audit firm rotation and the procedure of appointment of the statutory auditor.
Regulation 537/2014 (on specific requirements regarding statutory audit of public-interest entities; the Regulation) and Directive 2014/56/EU (amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts; the Directive) entered into force on 17 June 2016 and are currently being implemented in Dutch legislation.
The Directive provides a set of requirements regarding all statutory audits, whereas the Regulation provides specific auditor reporting requirements for public-interest entities (PIE’s). PIE’s include entities established in the EU whose securities are admitted to trading on an EU regulated market as well as licensed credit institutions and insurance companies having their registered office in the EU. It is expected that (large) housing corporations, network administrators, pension funds and large organisations for science policy will also become subject to the regulations for PIE’s as from 1 January 2018.
The Directive mainly imposes changes in the internal governance of audit firms (including the separation of statutory audit and non-audit services) and extends the authorities of the AFM. The Directive also contains mandatory provisions in respect of the composition of audit committees of PIE’s (for more information, see our Legal Flash of 4 February 2016).
The Regulation provides for a mandatory firm rotation by limiting the possible duration of engagement of a statutory auditor (five years) and audit firm (ten years). In addition, the Regulation includes rules regarding the procedure of appointment of the statutory auditor or audit firm. For more information, see our Legal Flash of 17 June 2016).