The Dutch Minister of Finance has decided to withdraw a bill regarding the rotation of audit firms and to take measures to ensure that an earlier bill on the same topic that was already adopted by Parliament, will not enter into force.
As a result the rotation of audit firms will solely be governed by the rules of the EU Regulation which allow more time for the rotation after June 2016. By doing so the minister confirms the analysis of Hein Hooghoudt and Monique van Dijken-Eeuwijk, who recently concluded Dutch law conflicted with the European regulation regarding statutory audits, which provides for an obligation for audit firm rotation which applies to public interest entities, which include among other entities all listed companies and all financial institutions. With these new measures the minister solves the conflict between the various rules in this respect in favour of the EU rules which are more lenient on the rotation of audit firms.
The minister has indicated in his response to further questions of the Second Chamber of Parliament that indeed, based on the contemplated Dutch rule that will now be withdrawn, the engagement of audit organisations that conduct statutory audits for public interest entities ("PIE auditors") should have been terminated on 1 January 2016 if, on that date, they would have already conducted audits for a particular client for 10 years. However, the premise of the EU Regulation is that the term of 10 years will start running not before June 2014, meaning that PIE auditors will not have to be replaced before June 2024. This ultimate date may be June 2020 or June 2023 if the PIE auditor was already engaged for 20 years or more or for a period between 11 and 20 years respectively.
Hein and Monique are happy with this outcome which they achieved for one of the clients of NautaDutilh that wanted to appoint an audit firm that could not have been appointed under the Dutch rules that are now to be withdrawn. Whatever this means for other public interest entities and for audit firms remains to be seen.