Dutch Authority for the Financial Markets issues recommendations for public-interest audit firms to make audit quality the leading driver of remuneration

The Dutch Authority for the Financial Markets (AFM) published findings from its review of how the six public-interest entity audit firms implement the Netherlands Institute of Chartered Accountants (NBA) measures on “appropriate remuneration” and concluded that, while most measures have been introduced, firms should take further steps to ensure audit quality is leading across their entire remuneration policy. The AFM issued three practical recommendations aimed at improving visibility into performance incentives and strengthening the link between pay, culture and statutory audit quality. The recommendations focus on: (1) deepening the monitoring and evaluation of remuneration policies to identify and address vulnerabilities, noting that maturity levels vary across firms and that supervisory boards can play a stronger role; (2) increasing transparency on how quality is reflected in remuneration design, including how equity partners are grouped for profit-sharing and how criteria for that grouping align to long-term organisational objectives where quality is a core element; and (3) making audit quality demonstrably decisive in variable remuneration, using audit quality as a key performance indicator to support monitoring and a learning culture. The AFM expects audit firms to work over the coming period on strengthening their remuneration policies in line with these recommendations.