Dutch Authority for the Financial Markets finds two thirds of reviewed statutory audits had insufficient work on fraud risks

The Dutch Authority for the Financial Markets has published the results of a review of auditors’ work on fraud risks in statutory financial statement audits, concluding that procedures are often not sufficiently specific or in-depth, creating a risk that fraud is missed. Across 32 audits, the AFM found deficiencies in fraud-risk work in around two thirds of the engagements reviewed. The review covered 32 statutory audits at 13 audit firms with both regular licences and public interest entity audit licences (OOB). In 23 of the 32 audits, the auditor did not obtain sufficient and appropriate audit evidence for one or more fraud risks, and the nature, timing and extent of procedures were not, or not sufficiently, tailored to the identified risks. The AFM also found that in 10 audits the separate fraud paragraph in the audit report (“Audit approach to fraud risks”) was incorrect or incomplete, presenting an overly positive picture of the work performed. The AFM expects audit firms to consider the findings, reflect on them and implement improvements where needed. Together with the Royal Netherlands Institute of Chartered Accountants (NBA) and SRA, it has called on auditors and audit firms to develop improvement plans, including addressing behavioural factors that hinder or support professional scepticism, and notes that auditors’ role in identifying and following up fraud risks will remain a recurring supervisory theme in 2025.