Audit requirements in the Netherlands
Only medium and large companies are required by law to have their annual report audited by independent, qualified and registered Dutch auditors. The auditor is to be appointed by the general shareholders meeting, or in case of default by the supervisory board or the managing board.
The purpose of auditing financial statements is to provide assurance as to their reliability, so that management, shareholders, banks, investors, creditors, grant providers, etc. can use the financial statements for their decisions. When an auditor audits an annual statement, he records his opinion in an auditor's report. Such a statement is mandatory for the financial statements of medium-sized and large companies, including listed companies and for the financial statements of various government organizations such as municipalities. Not every accountant is allowed to perform these statutory audits, for which additional requirements apply.
The exact audit requirements vary depending on the size of the company. A company is classified as either micro, small, medium or large, determined by reference to the following criteria:
The value of the balance sheet assets
The net turnover, and
The number of employees.
The parameters for these classifications are summarized in the table below. The value of the assets and net revenue and the number of employees of subsidiaries and group companies that qualify for consolidation should be included as well. In order to qualify for the medium or large categories, at least two of the three criteria must be met in two successive years.
Consolidation requirements in the Netherlands
In general, parent companies should include the financial data of controlled subsidiaries and other group companies in their consolidated financial statements.
Under Dutch Law, a controlled subsidiary is a legal entity in which the companies can directly or indirectly exercise more than 50% of the voting rights at the shareholders’ meeting or is authorized to appoint or dismiss more than half of the managing and supervisory directors. A partnership in which the company is a full partner also falls within the definition of a subsidiary. A group company is a legal entity or partnership, which is part of a group of companies. The deciding factor in consolidation is the (managerial) control over the entities, irrespective of the proportion of shares held.
The financial data of a subsidiary or group company does not have to be included in the consolidated financial statements if:
Its importance is negligible in comparison to the group as a whole:
it is rather expensive or time-consuming to get its financial information
it is only held to alienate
Consolidation may be omitted if the subsidiary or group company to be consolidated:
satisfies the criteria for being described as a small company for Dutch Statutory purposes (see the criteria set under filing requirements)
is not quoted on a stock exchange
Consolidation may also be omitted if:
the company has not been notified in writing of an objection against not consolidating within 6 months after the end of the financial year by at least one-tenth of its members or by holders of at least one-tenth of its issued capital.
the financial information which the company should consolidate has been included in the financial statements of its parent company
these consolidated financial statements and the annual report have been prepared in accordance with the stipulations of the 7th European Directive
the consolidated financial statements, the auditor’s opinion and annual report, insofar as these have not been translated into Dutch, have been prepared or translated into French, German or English and are all in the same language.
within 6 months of every balance sheet date or within one month of a permitted later publication, the documents or translations mentioned in the previous paragraph have been filed at the offices of the trade register at which the company is registered or a notice has been filed referring to the offices of the trade register where the same are available.
Audit requirements in the Netherlands
The auditors’ report must include the following points:
whether the financial statements provide information in accordance with the accounting principles generally accepted in the Netherlands and are an accurate representation of the financial position and result for the year. A proper judgement can be made as to the solvency and liquidity of the company;
whether the management boards’ report meets the legal requirements; and
whether adequate additional information has been provided.
The auditor should report to the managing and supervisory boards. Before determining or approving the financials statements, the competent body should have taken notice of the auditors’ report.
If the audit is not obligatory, parties may opt for a voluntary audit.
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