AFM: increasing attention for supervision of non-Public Interest Entity audit firms

The supervision performed by the Netherlands Authority for the Financial Markets (AFM) in respect of accountancy firms that perform audits at non-Public Interest Entities is on schedule. They perform approximately 25 percent of the number of statutory audits in the Netherlands and have a share of approximately 11 percent of the total number of statutory audits in the Netherlands. At the end of December 2010, 468 non-Public Interest Entity licence holders were included in the AFM's public register.

Following up granting of licences
The AFM performed an extensive assessment at 200 licence applicants during the granting of permits during the transitional scheme. This involved the assessment of the operation of the quality control system and internal quality assurance. As the AFM still had outstanding issues during this granting of licences with respect to 151 non-Public Interest Entity audit firms, it started a project at the end of 2008 to establish whether the licence holders had since implemented or followed up on these issues.

In this connection, 142 requests were sent in 2009 to non-Public Interest Entity accountancy firms, which had not yet informed the AFM of their own accord concerning the measures implemented by them and subsequent actions. Ultimately, nearly all assumptions and/or points for attention were implemented by the licence holders. Only a few non-Public Interest Entity accountancy firms were informed by the AFM of the outstanding issues the AFM will include in future regular investigations.

Regular investigations
In 2009 and 2010, the AFM performed regular investigation at non-Public Interest Entity audit firms within the context of continuous supervision. As regards supervision of these firms, the AFM collaborates with the Cooperative Chartered Accountants and. Accounting-Administration Consultants (SRA) on the basis of a covenant. In 2009 and 2010, the AFM independently performed a total of seventeen regular investigations at non-Public Interest Entity audit firms. This includes a number of firms at which the SRA has performed an investigation and which investigations the SRA transferred to the AFM.

The investigations at the non-Public Interest Entity audit firms focused on the quality of audits and quality assurance areas of investigation. The AFM will report in 2011 on the investigations performed at non-Public Interest Entity audit firms in 2009 and 2010. In 2012 and 2013, the AFM will focus on the performance of regular investigations at non-Public Interest Entity licence holders. The AFM expects to report on these regular investigations in 2013.

The number of investigations performed in 2009 and 2010 at non-Public Interest Entity audit firms remained limited in number, because the AFM focused mainly on the big 4 firms from the perspective of its risk-based supervision. This does not alter fact that the AFM, during its continuous supervision, devotes a great of attention to signs of possible harmful behaviour by accountancy organisations or an increased risk of harmful behaviour.

The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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