Quality change of PIE audit firms too slow

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The implementation of changes by PIE audit firms in order to improve the quality of their audits is too slow. This is the conclusion of the AFM report published today. The rate of progress does, however, vary. Deloitte, PwC and KPMG have achieved more than other PIE audit firms. In addition, the quality of the inspected statutory audits by the Big 4 audit firms is still not satisfactory. It is essential for the proper functioning of the capital markets that the auditor’s opinion is beyond doubt.

Also prompted by the AFM, at the end of 2014 the audit sector started an improvement programme in relation to areas such as conduct and culture as well as governance. The AFM has assessed the current state of affairs in two ways. At eight PIE audit firms the AFM assessed the changes made and embedded with the aim of creating a quality-oriented culture. Additionally, the AFM inspected the quality of 32 statutory audits performed by the Big 4 audit firms.

Split in results of improvement programmes

None of the PIE audit firms meets all expectations regarding sustainable improvement of audit. Deloitte, PwC and KPMG have made more progress with respect to conduct, culture and governance than Mazars, BDO, EY, Accon and Baker Tilly Berk. The latter group still lags (far) behind on most of the assessed elements. For instance, the Boards of these firms have not achieved adequate results with regard to managing quality. The monitoring of the effects of actions that have been taken is also too weak. The implementation of the desired quality-oriented culture also lags behind. These firms are also lagging in terms of carrying out root cause analyses and making quality a decisive factor in the policy for partner remuneration. Grant Thornton was not assessed, since the AFM had concluded that this firm had not made sufficient progress on designing improvement measures for an assessment to be possible at all.

Quality of the inspected statutory audits by the Big 4 not satisfactory

In 19 of the 32 inspected statutory audits by Big 4 audit firms, neither sufficient nor appropriate audit evidence was obtained to substantiate the audit opinion. The quality safeguards at the audit firms did not prevent this. What were examples of the problems? The testing of the operating effectiveness of internal controls was inadequate. Secondly, tests of details and analytical procedures were not carried out properly. The nature of the deficiencies is similar to the results of the previous review in 2014. The findings generally align with the conclusions in the report ‘2016 Inspection Findings Survey’ of the International Forum of Independent Audit Regulators (IFIAR), in which inspections by national audit supervisors are summarized.

Important public interest role of auditors

PIE audit firms perform the statutory audits of Public Interest Entities. These are listed companies, banks and insurers. PIE audit firms are subject to stricter requirements due to their public interest role. The conclusions and findings from the assessment of improvements and the file inspections give investors and other stakeholders better insight into how PIE audit firms compare in terms of quality.

Restoring confidence requires better quality

Gerben Everts, Board Member of the AFM: ‘Although steps have been taken, the monitoring of quality by audit firms continues to be a concern and implementing the change agenda continues to be difficult. It is now essential that Boards at audit firms show perseverance and demonstrate that a robust improvement of quality within the existing business model is possible and that resources are actually made available for this. The AFM may intervene appropriately and impose measures that may vary for each organisation on the basis of the inspections. We have also seen good audits, which proves that auditors can deliver quality. But this has to apply consistently across the board in the coming period.’


For further information please contact Daniëlle de Jong, press officer of the AFM, on 020-797 2129 or

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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