Helping to sustainably improve audit quality

The audit profession is always on the move. This can, for example, be attributed to changing laws and regulations, as well as changing public expectations in fields such as sustainability, fraud and continuity. PwC wants to help sustainably improve audit quality. We thus examine how things can be improved or done differently, and talk about this with our stakeholders.

Climate change in the financial statements

The urgency of climate change makes it imperative that companies report transparently on its impact. PwC sees that this is not yet happening sufficiently in risk assessments, the management report and the annual report, according to the publication 'Climate change reflected in the financial statements, a role for companies and their auditors'. As a result, investors lack transparent information about the long-term risks and opportunities in relation to climate risks. In order to encourage PwC audited organisations to report transparently and clearly, the assessment of climate-related risks is an explicit element of the audit of the financial statements. From financial year 2022, PwC challenges audited organisations about the transparency of the effects in the financial statements.

Input for the Committee on the future of the audit sector and reactions to findings

Under instruction from the Minister of Finance, the ‘Committee on the future of the audit sector’ (Cta) conducted research in early 2019 into how sustainable improvement can be realised in the quality of audits in the Netherlands. The committee’s final report was published in January 2020. During the committee’s research, PwC offered a wide range of input at various moments during the research process.

Once the Cta had been set up, the board of management (BoM), the supervisory board and the Young Assurance Board shared their visions about the future of the audit practice. The BoM then responded to the provisional findings of the Cta, and this was followed by a joint response from the ‘Young Professionals’ of BDO, Deloitte, EY, KPMG, Mazars and PwC.

Involvement in work Quartermasters future of the audit sector

The Minister of Finance announced a package of measures for the audit sector in March 2020 and, on 1 May of the same year, appointed Marlies de Vries and Chris Fonteijn as Quartermasters for the future of the audit sector. The Quartermasters were instructed to monitor and improve harmony between the audit sector measures announced by the Minister, and to implement several specific measures. This included, for example, compiling uniform ‘Audit Quality Indicators’ (AQI’s), setting up and performing various studies, and taking measures concerning fraud, (dis)continuity and innovation.

PwC supports the work of these Quartermasters wherever possible. For instance, several PwC colleagues are (or have been) actively involved in establishing the AQI’s, and also performed work relating to (dis)continuity and fraud. Furthermore, PwC is actively contributing to the experiment with an intermediary, which is being performed until the end of 2023 and supervised by the University of Amsterdam.

Response PwC to ‘Act on the future of the audit sector’ and ‘Audit Quality Indicators’

In March 2020, the Minister of Finance proposed a list of policy measures in response to the final report of the Committee on the future of the audit sector. Several of these measures require a change in legislation. That is why the Minister published a legislative proposal in July 2021. PwC responded to the legislative proposal for the ‘Wet toekomst accountancysector’ (Act on the future of the audit sector).

One of the Minister’s proposals, of March 2020, involved establishing a uniform set of ‘Audit Quality Indicators’ (AQI’s). Under the responsibility of the Quartermasters for the future of the audit sector, a proposal for these AQI’s was then compiled and published in July 2021. PwC then shared its view concerning the quality indicators. The ‘Young Professionals’ of BDO, Deloitte, EY, KPMG, Mazars and PwC provided a joint response to the AQI proposal.

Response PwC to updating the Corporate Governance Code

The Dutch Corporate Governance Code contains principles and best practice provisions aimed at promoting good governance at listed companies. The Code was updated in 2022. PwC indicated in its response to the proposed update that it is important for the Code to stay ahead of societal developments. We also touched upon four topics that we believe would deserve a (more explicit) place in an updated Code: the role of the audit committee, the chain of responsibility, diversity and tax governance.

Read what else PwC does in the area of corporate governance.

Work groups NBA

PwC is also actively helping to improve the future of the audit profession via The Royal Netherlands Institute of Chartered Accountants (NBA). For instance, Wytse van der Molen - who is chairman of the assurance practice at PwC - is a member of the Public Interest Steering Group. PwC partner Sander Kranenburg is chairman of the Fraud Work Group. In addition, PwC professionals also take part in various other work groups, including Innovation, ESG Assurance, Dashboard Accountancy and Quality-orient culture.

PwC reactions to consultations European Commission

The audit profession is always on the move. For example, in recent years, we have witnessed developments in the field of sustainability and assurance for non-financial information. These developments are partly being shaped by the European Commission (EC) by modifying existing guidelines or developing new guidelines. PwC has responded to several consultations by the European Commission.