Slight decrease in the number of material errors in the financial statements

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In 2011, the quality of the financial reporting improved slightly in the Netherlands. Fewer material errors were discovered, which were made by fewer companies. The Netherlands Authority for the Financial Markets (AFM) discovered material errors made by four out of ten companies reviewed, against five out of ten in 2011. The average number of material errors decreased from a little less than three in 2011 to a little less than two last year. Larger companies, of which fewer financial statements were reviewed, generally score better than smaller companies.

Despite these improvements, the AFM calls on companies and their auditors to be attentive when preparing and auditing the financial statements for 2012. These statements must provide a true picture.

Mr Ton Meershoek, Head of the Financial Reporting Supervision Division of the AFM: ‘Fortunately, the quality of the financial reporting slightly improved last year. The majority of the companies comply with the requirements. However, the AFM is still concerned about those companies where we unfortunately still find obvious material errors and shortcomings in their financial reporting’.

The AFM supervises the correct application of the financial reporting requirements and in particular the international financial reporting requirements IFRS. Apart from various thematic reviews, the supervisor also carries out reviews concerning the annual financial statements on a regularly basis.

The annual activity report that is published today shows the results of the actions taken by the AFM. A part of these results were already published in the course of 2012. Companies and auditors are advised to take due note of the various considerations published by the AFM at the end of 2012 and the beginning of 2013.

In 2012, in total 83 (2011: 85) reviews were completed of which 9 were started in 2011. These reviews also included 38 follow-up reviews and 36 so-called desktop reviews, which were selected on the basis of a risk analysis.

Twelve companies were able to remove the AFM’s doubt about the correct application of the reporting requirements. The AFM issued one or more notifications to eighteen companies. This is a formal measure which forces companies to implement adjustments in their future financial reporting.

In three cases companies also received a recommendation to make publicly known this notification by issuing a press release. This press release must explain in what respects the financial report would have been impacted had the issuer applied the relevant financial reporting standards correctly.

In 2012, the AFM continued, as in previous years, its more informal working method with the completion of the ongoing reviews from 2011, the follow-up reviews and desktop reviews. On the basis of the more informal completion and informal contacts, the willingness of companies to implement adjustments increased, which improved the quality of financial reporting without formal legal action. The AFM considers the improvement of the financial reporting as a confirmation that the informal working method is effective. 

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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