Dutch Authority for the Financial Markets calls for stronger internal quality reviews at six public-interest audit firms

The Dutch Authority for the Financial Markets has published findings on internal quality reviews, known as IKO, at six public-interest audit firms and concluded that the reviews are being carried out in line with legal and regulatory requirements but need to be sharpened. The authority said IKO should provide a clear and in-depth view of the quality of completed statutory audits, help identify deficiencies and risks in time, and support further improvement in audit quality. The review found that firms use IKO broadly to detect shortcomings and risks, which supports continuous improvement, but the selection of files and engagement partners falls short on unpredictability and representativeness. Fixed selection routines, early communication, a focus on large or higher-risk files, and a very small review sample limit insight into day-to-day audit practice and can leave deficiencies undetected or structurally out of view. The authority said firms can improve this by using more random selection and adding an element of unpredictability so IKO works better as both a monitoring and learning tool within the quality management framework. The Dutch Authority for the Financial Markets will share the findings and good practices from its report with the sector and will take the expected adjustments into account in its supervision.