On 16 March 2016, the Netherlands Authority for the Financial Markets (AFM) imposed an administrative fine of €845,000 on PricewaterhouseCoopers Accountants N.V. (PwC). An inspection performed by the AFM showed that PwC failed to comply with its duty of care in the period from 08 September 2011 to 22 May 2013 (Section 14 of the Audit Firms Supervision Act).
Audit opinions insufficiently supported
Audit firms are subject to a statutory obligation to ensure that its auditors comply with the professional standards. At PwC four out of the ten audits the AFM inspected, contained such significant shortcomings that the auditor did not obtain sufficient and appropriate audit evidence in order to support the auditor’s opinion. This means that PwC as an organisation acted contrary to the law.
The AFM considers a fine of €845,000 applicable and appropriate for this offence. The AFM took into account the seriousness and culpability of the offence when it determined the amount of the fine. The fact that the shortcomings partly took place during a period in which the old (lower) fine regime applied was also taken into account.
2014 report on deficiencies
Auditors have a statutory audit function. Investors, creditors and other interested parties must be able to rely on the opinion of an auditor as expressed in the audit opinion that accompanies the financial statements. This is only possible if an audit opinion is substantiated with sufficient and appropriate audit evidence. A previous inspection carried out at KPMG and the other three Big 4 audit firms showed that there were serious shortcomings in the audits of financial statements for the 2012 financial year. The AFM published a report concerning this subject in September 2014: ‘Results of the inspection of the quality of statutory audits at the Big 4 audit firms'. By imposing the fine the AFM takes action against the shortcomings in the audits of KPMG identified in that report.
Change and improvement
The Big 4 audit firms, including PwC, have since announced several improvement measures. In 2015 the AFM reviewed the design of the changes and improvement measures at PIE audit firms. The AFM published its findings in October 2015 in the report entitled 'Dashboard 2015 - Change and Improvement Measures PIE Audit Firms'. It shows that PwC is embracing fundamental change and improvement of the preconditions in order to increase the quality of its audits and thereby acting more in the public interest. This year, the AFM will review whether the measures designed by the audit firms are operating effectively and the AFM will again inspect the quality of the audits conducted. This can also be read in Agenda 2016-2018.
Parties concerned can request a judicial review of the AFM decision. If you have questions or complaints, you can contact the AFM's Financial Markets Information Line: 0800-5400 540 (free of charge).
This is an English translation of the original Dutch text, furnished for convenience only. In the event of any conflict between this translation and the original Dutch text, the latter shall prevail.
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