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    Country by Country Financial Reporting and Auditing Framework

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    The Netherlands – Accountantskantoor Foederer B.V. (prepared May 2014)

     

    Preparation of and Filing of Statutory Financial Statements

     

    In the Netherlands the following entities are required to prepare annual financial statements and file these at the Trade Register of The Chamber of Commerce:

     

    • Limited Liability Companies*
    • Cooperatives
    • Mutual Insurance Societies
    • Financial Institutions
    • Companies without limited liability, whose owners are foreign companies only
    • Associations and Foundations who maintain an enterprise with a commercial purposes and exceed certain limits

    * In the Netherlands the following Limited Companies exist:

    • B.V. (Besloten Vennootschap)
    • N.V. (Naamloze Vennootschap)

    The main difference comes from the ownership of the company:

    • The B.V. has shares that are owned by a private group of shareholders. The shares belong to a specific legal entity or person and are not for trade in public. Most Limited Companies are established as a B.V.
    • The N.V. has shares that are public transferable to any legal entity or person, mostly on a stock exchange. Most N.V's are listed companies.

    The above mentioned entities are required to prepare and file their financial statements at the Trade Register not later than within 13 months of the accounting reference date. Listed companies have to prepare and file their financial statements at the Trade Register within 4 months. Private companies and partnerships are not required to prepare and file annual financial statements.

     

    The Dutch Civil Code makes a distinction between small, medium and large entities:

     

    num

    Small sized entities have the option to file abbreviated financial statements at the Trade Register with reduced disclosure. For example, the profit and loss account doesn't have to be published. The requirements for the financial statements of large entities are more extensive as are the requirements for the financial statements of a medium entity.

     

    Large and medium-sized groups are required to prepare consolidated financial statements. Small entities, however can take advantage of the option to prepare entity financial statements only. Large and medium-sized companies who are included in the consolidation of a parent company, are also exempt from the consolidation obligation.

     

     

    Financial Reporting Framework

     

    Companies in the Netherlands are required to prepare their financial statements in accordance with Dutch GAAP, except for the consolidated financial statements of listed companies. The consolidated financial statements of listed companies have to be prepared in accordance with the International Financial Reporting Standards (IFRS). IFRS is also permitted for all other companies.

     

    IFRS for Small and Medium-sized Entities (IFRS SME) is not yet formally allowed as an alternative to Dutch GAAP in the Netherlands.

     

    Audit Requirements for Companies Registered in the Netherlands

     

    The above mentioned companies who are obliged to prepare and file financial statements must have an audit of the financial statements, except for the small companies.

     

    Audit Exemption

    In general there is no exception for subsidiary companies. Only if the parent company has filed an official statement  at the Trade Register of being fully liable for the subsidiaries' obligations (in accordance with the Dutch Civil Code article 2:403), the subsidiary is excepted from preparing and publishing financial statements and an audit.

     

    An audit must be performed by a registered auditor. The register is publicly available at https://www.nba.nl/Site/English/.

     

    Audit Appointment, Rotation and Joint Audits

     

    An auditor must be appointed every year in pecking order by the shareholders, supervisory board or board of directors. Auditors are not appointed for a fixed period. For most companies there is no rule for mandatory rotation of auditors and audit firms. Rules for mandatory rotation do only apply for Public-Interest Entities (PIEs). Within European Law, auditors of a PIE must rotate every 7 years.  Within Dutch Law, audit firms can not perform an audit of a PIE for more than 8 years in a row.  

     

    Joint audits are rare in The Netherlands.

     

    Auditing Standards

     

    Dutch audit firms are required to undertake its audit and express an opinion on the financial statements in accordance with applicable Dutch law and audit standards. Those standards require audit firms to adhere to the legal provisions and the relevant professional standards on performing an audit, according the audit standards issued by The Netherlands Institute of Chartered Accountants (NBA). Those audit standards are based on, and therefore quite consistent with, the Clarity ISA issued by the IAASB of International Federation of Accountants (IFAC).

     

    Ethical Framework

     

    The Ethical Framework for each Dutch auditor (Verordening gedrags- en beroepsregels accountants :  VGBA) is based on the Code of Ethics for Professional Accountants (CoE) of the International Ethics Standards Board for Accountants (IESBA) of the International Federation of Accountants (IFAC). It is the responsibility of each auditor to comply with those ethical requirements.

     

    Independence

    Although the key principles of independence rules are also basically equivalent to the IESBA Code, specific attention should be paid to any potential additional requirements. The standards for independence are included in the Dutch Regulation of Independence (Verordering inzake Onafhankelijkheid : ViO)

     

    Since 2013 the Dutch audit law and standards implemented a prohibition for audit firms to provide a combination of audit services and other services for audits of PIEs. For companies that are not a PIE, the standards are also more strict since 2013.

     

    Audit Regulation

     

    Auditor Registration

     

    Dutch practitioners who wish to sign company audit reports must gain the Register Accountant (RA) status. The requirements to gain this status consist of a theoretical study and a practical pathway to gain experience (3 years). The study has to be completed with a paper and an oral exam.

     

    Accountantskantoor Foederer B.V. is subject to the following external and internal monitoring processes with regard to their audit practice.

     

    External Monitoring

     

    Audit firm and registered auditors have to comply with quality demands that are described in the Audit Firms Supervision Act (in Dutch it is called 'Wet Toezicht Accountantsorganisaties (WTA)'. The Audit Firms Supervision Act sets rules concerning the quality of audit entities and auditors. The primary goal of the Act is to help restore confidence in the work of auditors. The Audit Firms Supervision Act introduces public oversight by the Netherlands Authority for the Financial Markets (AFM) on audit entities that provide audit reports that are relevant to the Dutch capital markets. Since 1 October 2006, audit firms need to have a license from the AFM in order to perform statutory audits in the Netherlands. The AFM is qualified to perform Quality Audits on all audit firms. In 2014, Foederer was subject to an external quality audit in accordance with the Audit Firms Supervision Act. The result of this audit confirmed the appropriateness of our company's quality assurance measures with no restrictions whatsoever.

     

    Internal Monitoring

     

    The internal quality review is an essential element of our quality assurance system. It is designed to guarantee that the quality assurance system complies with legal and professional requirements and that, if necessary, adjustments are made on a timely basis. The responsibility of the internal quality review system lies with the compliance officer.

     

    Every performed audit by Foederer is reviewed by a partner who's not concerned with the client each year (engagement quality review). The review is performed after the risk assessment and performance of the testing the internal controls, but before the performance of substantive testing of the financial statements. Periodically, a full engagement quality review has to be done including the review of the performance of substantive testing. An audit report may not be signed before the explicit approval of the quality review partner and compliance officer. Every new audit has a full engagement quality review in the first year to guarantee the quality of the audit.

     

    Responsibility for the review lies with the management of the firm (audit director) which can draw on sufficiently experienced and competent staff persons for the organization and performance of the review. The review program is based on an internally developed checklist that is integrated in the audit software. In determining and performing the review it is aimed to cover the whole spectrum of audit engagements using a risk-oriented selection approach.  

     

    In addition, Foederer, as member of Crowe Horwath International, is subject to regular network peer reviews (QAR).

     

    Transparency Report

     

    Foederer prepares an internal quality report twice a year that is available on the intranet page. The report consists of the following items:

    • Foreword;
    • General development;
    • Legal structure and ownership;
    • Maintaining and improvement of internal professional expertise;
    • Overview of performed audits divided by audit opinion;
    • Evaluation of internal monitoring;
    • Maintaining and reviewing independence;
    • Permanent Education; Identifications of fraud;
    • Identification of violation of Dutch law, audit standards and ethical framework;
    • Identification of customer complaints and legal procedures against auditors;
    • Conclusion signed by compliance officer and CEO. 

     


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