Consultation on Audit Quality Indicators in the Netherlands launched
The Quartermasters, appointed to ensure the audit reform delivery in the Netherlands, have drawn up 10 Audit Quality Indicators (AQIs) to gain more insight into the quality of the accountancy sector. The AQIs can provide users of the annual accounts with further insight into factors that influence the quality of the annual statutory audit.
The 10 proposed AQIs are:
Level 1: Quality of the engagement file
1. Involvement of the external auditor
2. Errors in the Annual Financial Report
3. Fraud and going concern
Level 2: Quality Control System (within the audit firm)
4. Quality enhancing measures
5. Quality control system
Level 3: Context (in regard to audit firm)
6. Turnover in audit team
8. Willingness to innovate
9. Budget overrun
Level 4: Ecosystem
10. Client satisfaction
The Consultation (web page in Dutch) wants to give stakeholders the opportunity to express their opinion on the proposed set of quality indicators. It is open for comment until 19 September 2021.
Netherlands: 20 largest accountancy firms must set up a supervisory board
The Dutch Minister of Finance Hoekstra has announced proposals on better governance of accountancy firms.
The proposals include that:
- The 20 largest accountancy firms should have a supervisory board. These supervisors would have more say, for example, about the amount of the profit distribution within the firm
- The Dutch Authority for the Financial Markets (AFM) would assess the suitability of directors and supervisory directors of these 20 firms
Read more (in Dutch)
New law strengthening the integrity of the German financial market
The law was passed on 28 May and most of its provisions are applicable already from 1 July 2021. It came as a response to the Wirecard case.
The law focuses on auditor independence, auditor liability and also introduces stringent sanctions for auditors found to have signed an incorrect auditor’s report.
Key changes to current practice impacting auditors now include:
- 10-year mandatory external auditor rotation; beyond PIE auditors as required at EU level, it applies to all financial service entities’ auditors
- 5-year mandatory internal rotation for engagement partners who sign the auditor’s report
- Prohibition of non-audit services in line with the EU Audit Regulation, hereby reversing the previously exercised EU Member State option to allow certain specific advisory services
- Auditor liability:
- Unlimited liability in cases of gross negligence for (most) PIE audits
- Raised liability caps for ordinary and gross negligence
- Tightened sanctions for signatories of the auditor’s report and raised fines for audit firms in case of professional misconduct
The focus of the new law is mostly on audit, but there are also changes aimed at strengthening certain aspects of corporate governance and increasing the power of Germany’s regulatory oversight authorities.
Read more (in German)