On 16 June 2014, a European regulation and a European directive regarding the reform of the audit market came into force (OJ L 158). These new European regulations are intended to further define the role of statutory auditors, strengthen independence and reinforce professional critical assessment. The regulation covers statutory audits of public-interest entities (‘PIOs’) and amends the current directive regarding statutory audits of annual accounts. The regulation has direct effect from 17 June 2016. By this date, the regulation must be implemented in Dutch legislation. This has a number of consequences, such as a compulsory rotation of accountancy firm.
Part of the new European regulations concern the obligation of PIOs (currently this only includes listed companies, non-listed banks and insurers) to change their accountancy firm every ten years. In the Dutch Accountancy Profession Act (Wet op het Accountantsberoep) the rotation period is eight years. This obligation comes into force in the Netherlands on 1 January 2016 for the financial years starting on or after such date. However, in practice, changes are already taking place. The Dutch Minister of Finance confirmed that the Dutch regulations will be aligned with the rotation period of ten years in the European directive. It is unclear when this will be done and what the implications will be for those PIOs that have been using the same accountancy firm for more than eight years, but less than ten years, on 1 January 2016. In addition, the partner that signs the auditor’s statement on behalf of the audit firm must be changed every five years. In the Netherlands, the maximum period after which the partner signing the auditor’s statement must be changed is seven years. Furthermore, the cooling-off period, after an accountancy firm has been engaged by a PIO as a controlling auditor, will be extended from two to four years.
Another aspect of the new European regulation is the separation of audit services and advisory services. Dutch regulation in this respect exists already, but the methodology for the separation of audit services and advisory services in the Netherlands is different from the methodology used in the European regulation. European regulation works with a list of activities that are prohibited, while the Dutch regulation works with a list of activities that are allowed. Dutch law will not be changed in this respect.
For more information regarding the Dutch legislation and regulations we refer to our Corporate Alert of 11 December 2012 and our Corporate Update of 11 July 2013.