On 8 December 2016 the Dutch Corporate Governance Code Monitoring Committee (Committee) presented the final revised Dutch Corporate Governance Code (Code). The Code is applicable for financial years commencing on or after 1 January 2017 (see Legal Flash: The Monitoring Committee presents the revised Dutch Corporate Governance Code). On 7 September 2017, the legislative proposal (Proposal) containing the relevant implementation resolutions was adopted by the Dutch Government and published in the Dutch Official Gazette (Staatsblad). During discussions in Dutch parliament the Dutch government announced to amend the Proposal to extend the scope of the external auditor review on the corporate governance statement.
Currently the role of the external auditor is limited to review whether all required elements of the corporate governance statement are included in the board report. In addition, the external auditor verifies whether the description of the relevant characteristics of the management and control system regarding the financial reporting process of the listed company and its group and of certain other elements which need to be included in the corporate governance statement pursuant to the Decree ex Article 10 Takeover Directive (2004/25/EC) are consistent with the annual accounts.
According to Section 2:393 paragraph 3 Dutch Civil Code, the external auditor verifies whether the board report contains all required elements and is consistent with the annual accounts. Recently, the scope of the auditor’s review was extended: for financial years commencing on or after 1 January 2016 the auditor must also verify whether the board report - in the light of the knowledge and understanding gained by the auditor during the audit in respect of the legal entity and its surroundings - contains material misstatements. The non-financial information which must be included in the board report of large public-interest entities for financial years starting on or after 1 January 2017 (see Legal Flash: Disclosure requirements of non-financial information for large PIEs) is subject to the same extended audit review. In order to avoid discrepancy with the review standards of the corporate governance statement, the Dutch government amended the Proposal to align the review standards of this statement with the review standards of the other elements of the board report.
The Proposal comes into effect as of 1 January 2018, as a result of which the corporate governance statement in the annual reports for financial years starting on or after 1 January 2017 will need to apply the Code and will be audited based on the new standards.