The Dutch regulator, the Authority for the Financial Markets (AFM), must change its oversight of the profession as its investigations are not thorough enough, according to the District Court of Rotterdam which has decided on 20 December to cancel fines imposed on EY and PwC.

According to the AFM, the auditors from PwC and EY did not have sufficient or suitable information in their audit files but the court said that the AFM did not present enough facts that the auditors had undoubtedly violated their duty of care. The court stated that the auditors shortcomings are not are not sufficient reasons to conclude the audit firm does not fulfil duty of care, without further investigation.

Therefore the court cancelled the administrative fines of €2.2m (US$2.6m) for EY and €845,000 for PwC which had been issued last year for 2011 and 2012 audits. Deloitte and KPMG also received fines of €1.8m and €1.25m respectively for a similar offence, but they accepted the penalties and have yet to confirm if they will appeal in future.

The court believes that change to the AFM’s oversight arrangements is fundamental, and the ruling could have major consequences on the duties and legislation of the regulator. The AFM is considering to appeal against the ruling.

Additionally, the European Securities and Markets Authority (ESMA) also strongly criticised the supervision method of the AFM on 5 December arguing that it fails to comply with European guidelines.

AFM director Gerben Everts informed Dutch publication De Telegraaf that the AFM will not fundamentally change its approach because bringing individual accountants in front of the disciplinary court is not very effective.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

“The judge is taking a big step back in time. We do not aim to impose fines, but to lift the sector to a higher level,” Everts said. “Complaints and penalties for individual accountants do not change anything in the industry.”

Corporate governance forum Eumedion director Rients Abma said to the FD, a financial publication from the Netherlands, that the audit firm must remain responsible for a failing accountant. “Otherwise, the penalty tool becomes powerless,” he argued.