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AFM expects auditors to better fulfil their gatekeeping role with regard to fraud and fraud risks

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Identifying and following up on fraud and fraud risks is a vital responsibility of auditors. In a new position paper, the Dutch Authority for the Financial Markets (AFM) states that audit firms could fulfil this role more effectively. The AFM wishes to see clear indications in the coming years that audit firms are devoting increased and structural attention to the detection and follow-up of fraud risk in the statutory audits they perform.

In brief

  • Fraud is a broad social issue
  • The audit sector is still not adequately developed to deal with fraud and fraud risks
  • The AFM expects the sector to better fulfil its gatekeeping role
  • Fraud to be a permanent supervisory theme for the AFM

Fraud is a broad social issue

Fraud at companies has a serious social impact. It can lead to sizeable losses for investors and harm confidence in the financial system. This problem is expected to become more widespread, due to trends such as sustainability, technological development and the internationalisation of business.

The audit sector is still not adequately developed to deal with fraud and fraud risks

Although there is no fully objective view, it appears that the audit sector in general needs to improve its ability to identify and address fraud and fraud risks. In its position paper, the AFM cites several potential causes, including level of knowledge, role perception and culture. Next week, industry organisation the NBA (Netherlands Institute of Chartered Accountants) will publish its report ‘Fraud demands a more critical basic attitude’, which confirms this view.

The AFM expects the sector to better fulfil its gatekeeping role

In the position paper, the AFM explains how it sees the role of the auditor in the identification and follow-up of fraud and fraud risks, and our expectations of the sector in this respect. Responsibility for combating fraud of course rests primarily with the audited entity.

Fraud to be a permanent supervisory theme for the AFM

Fraud will be a permanent item on the AFM’s supervisory agenda, and the AFM will carry out a range of related supervisory activities in the years to come. For instance, the AFM wishes to see improvement in the analysis of fraud and fraud risks by auditors and the procedures they perform in this respect.

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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