The Netherlands Minister of Finance Jeroen Dijsselbloem has told auditors that politicians and regulators had taken the first step for the profession to regain the trust of the public, but that auditors themselves have to take the second step.
Speaking at an event jointly held by the Federation of European Accountants (FEE) and the Netherlands Institute of Chartered Accountants (NBA), Dijsselbloem referred to the many financial statements which had received the stamp of approval from audit firms but in fact did not reflect the true state of affairs of companies.
"The situation is, I’m afraid, quite serious: if your seal of approval is questioned, the added value of your work itself is at stake," he said. "And with every new incident, it becomes more and more difficult for the public to determine which charts, figures and results can be trusted."
There’s nothing harder to win back than trust, he continued. "The banks know this. Insurance companies know this. And now audit firms know it too."
Dijsselbloem said audit firms’ approval should not give reason for doubt but should be a byword for reliability and precision otherwise audit firms lose their raison d’etre.
He pointed at the measures adopted at European level to tackle the issue, namely the clear separation between audit and non-audit services introduced by the EU audit reform currently being implemented across the Union.
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Dijsselbloem also took the example of the Netherlands where in 2014 the parliament called on the profession to come up with proposals to improve the quality of audits. Subsequently the Dutch profession under the leadership of NBA submitted 53 proposals for improvement which are currently being implemented by firms in the Netherlands, as revealed in the latest International Accounting Bulletin Netherlands survey.
"New and stricter rules are necessary. And yet, rules alone, however, are not enough. Auditors also have to change their corporate culture. This is no easy task. Clear rules are necessary. You need a framework. The EU has done that. The Netherlands has done that also. But the second step is up to you. You need to take the necessary steps yourself," he said.
Changing a culture is difficult Dijsselbloem admitted. "Unfortunately, we are in a hurry. The Romans were familiar with this challenge. Martial, the Roman author […] once wrote: ‘Divide the work and thus shorten it.’," he concluded. "So this is what we must do. With the EU and the member states, the professional organizations and the audit firms. So people will again trust the watchmen."
Read International Accounting Bulletin 2015 Netherlands survey here: Bloody, but unbowed
Read Dijsselbloem’s full speech here