Future of audit – “To audit or not to audit, that is the question”
It has been only twelve and a half years ago since the Dutch Government issued the Audit Firms Supervision Act (Wet toezicht accountantsorganisaties). Through this law audit entities require a license to perform statutory audits. The law also introduced public oversight by the Dutch Authority for the Financial Markets (AFM) on audit entities that provide audit reports that are relevant to the Dutch capital markets. However: audit quality evolved in the last decade and the public discussion about the further improvement of audit quality and auditor’s independence remained.
In the public interest
In 2014, The Netherlands Institute of Chartered Accountants (NBA) presented a report, named ‘In the public interest’, established by a working group, with several measures to improve the quality and independence of the audit in The Netherlands. Almost five years later, many of the measures has been adopted by audit entities and also the NBA itself incorporated most measures.
Commission on the Future of Accountancy (CTA)
Late 2018, the Dutch Minister of Finance presented a commission (established as per the first of January 2019) that would investigate the future of audit, again to improve quality of audits. According to the Ministry, several investigations conclude that the profession as itself shows inadequate progression to establish sustainable improvements. As well as the AFM, The Dutch Minister of Finance also realized that the change process, as started in 2014, takes time, and at the same time he does not exclude that more fundamental intervention may be necessary. Nonetheless, international alignment needs to be kept in mind. It is to be expectedthat late 2019, the findings of the commission will be presented.
Audit developments in the United Kingdom
Although most of us might focus on the possible impact of ‘Brexit’, also the audit market is facing major changes in the United Kingdom. The Competition and Markets Authority (CMA) has published (late 2018) an update paper outlining serious competition concerns and proposing changes to legislation to improve the audit sector. The CMA’s recommendations include the operational split of the Big Fours’ audit work and more choice to increase resilience by introducing mandatory joint audit. Crowe UK already communicated formally that they support the introduction of mandatory joint audits. Nigel Bostock, Chief Executive, Crowe, said: “Crowe recognizes change is needed if the profession is to rebuild public trust in audit and we support the CMA’s efforts and recommendations.”
Expectations in The Netherlands
Based on the presented action plan of the CTA and the following public consultation, 43 parties in The Netherlands responded publically. It is expected that the measures as suggested by the CMA will be investigated, amongst all other possibilities, such as an audit only model or even the cancelation of the mandatory statutory audits. One thing seems certain, changes are to be expected for the audit market in The Netherlands and The United Kingdom, but also the European Commission will follow the developments with major interest.
Future of audit
As said, it is within expectations that the audit market will change. But what would it mean for you as a company, registered in The Netherlands? Crowe Peak can inform you in depth on possible changes and the impact for your company. If you have any questions on the future of audit, please contact us.