Toespraak van minister Dijsselbloem bij Foundation for Auditing Research

Toespraak van minister van Financiën Jeroen Dijsselbloem tijdens het congres van de Foundation for Auditing Research. De tekst is alleen in het Engels beschikbaar.

Ladies and gentlemen,


Thank you for inviting me here today.

When I think of accountancy, I think of independence.

I think of men and women who are fearless in upholding the truth.

In ancient Greece and Rome, it was considered such a difficult task to act and think independently that they even had a special word for it:


It meant something like: speaking the truth under difficult circumstances.

And circumstances usually were difficult.

A political adviser to a king or emperor would literally risking his life if he dared to give his boss unwelcome news.

So telling the truth was indeed an act of bravery: parrhesia.

Nowadays, we don’t use the word any more.

And that’s a pity.

I think parrhesia is still a very useful concept.

Not least for auditors.

Because over the last few years, auditors have had a bad press.

We’ve seen many cases of financial statements that received the audit firm’s stamp of approval, but turned out not reflect the reality at the organisation concerned.

Perhaps the auditors in those cases lacked parrhesia.

The situation is a serious one: if your seal of approval is called into doubt, the added value of your work itself is questioned.

And with every new incident, it becomes more and more difficult for the public to work out which figures and results they can trust.

So it’s up to you to win back that trust.

That is the task at hand.

It won’t be easy, because we live in a low-trust society.

As a politician, I can tell you two things I know for certain about winning back trust.

One of them is good news and the other is bad.

Let’s start with the bad news:

Regaining trust takes a long time.

It’s an uphill struggle.

And there’s no guarantee of success.

But here’s the good news:

Committing yourself to winning back trust is an easy decision to make.

Because you have no choice.

It’s the only way forward.

As auditors you want to belong to a profession that is justly proud of its work.

You don’t want your profession or professional opinion to be open to doubt; it should be a byword for reliability and precision.

That’s the heart of the matter.

If it’s not, audit firms have no value.

So the challenge is clear: we want to strengthen the quality of audits and restore faith in audit firms and auditors.

The question is, how do we do this?

What’s my role?

And what’s yours?


Let’s start with my side of things: what politicians can do.

As you probably know, the Netherlands the Authority for the Financial Markets, or AFM, is the supervisory body responsible for overseeing audit firms.

In September 2014 the AFM published a report on the quality of statutory audits carried out by the ‘Big Four’ audit firms.

The AFM investigated ten statutory audits per firm; forty in total.

Of these forty statutory audits by the Big Four, 45 per cent were not up to standard.

Nearly half.

Now, I realise not all these cases involved catastrophic mistakes.

But imagine you bring your car to a mechanic for a regular maintenance check and he doesn’t test the brakes.

It doesn’t mean the car won’t brake any more.

The brakes may be fine.

But it does mean that an essential part of the vehicle hasn’t been checked and that the mechanic’s seal of approval is deficient.

I should add that a similar study in 2010 revealed that the percentage of deficient statutory audits was even higher: 52 per cent.

The improvement made in the intervening years was too small as of yet.

And this problem was not confined to the Big Four.

The work of small audit firms was also below par.

The Dutch parliament called on the sector to come up with proposals to enhance the quality of statutory audits.

The Netherlands Institute of Chartered Accountants and the rest of the sector responded swiftly, submitting 53 proposals for improvement.

They contain important elements like, for example, quality-based remuneration and a claw-back scheme for audit firm partners, a better leverage model, and a promotion policy which takes proven professional qualities as its starting point.

The call for improvement also led to the establishment of the Foundation for Auditing Research.

So it’s fair to conclude that a number of good things came out of the unfortunate situation I described.

Over and above the profession’s own proposals, I have drawn up a package of legislative measures to improve the quality of audits.

The Dutch parliament will vote on this bill soon.

Let me run through some of the measures it contains:

More transparency about the  AFM’s findings on audit quality.

A mandatory internal supervisory body at audit firms, comparable to a supervisory board. Because independent internal supervision can help ensure that audit firms adopt a long-term policy.

A policy aimed at integrity, independence, professional skills and effectively changing the corporate culture.

And requiring members of the executive and supervisory boards at audit firms to pass a ‘fit-and-proper’ test. Because it’s crucial that audit firms are run by people who have the right knowledge, professional qualities and competences.


Of course, the need for change is evident not only in the Netherlands.

In Europe as a whole, several measures have been taken to refocus audit firms on their main tasks.

I’d like to highlight two measures in particular.

Firstly, the EU has introduced a strict separation of audit and non-audit services such as tax advice and other forms of consultancy.

Because many firms were providing both services to the same client at the same time.

This situation creates too much potential for conflicts of interest.

And it creates potential for the last thing you need: doubts about your independence.

Secondly, the EU has introduced mandatory rotation of audit firms.

This prevents auditors becoming ‘one of the family’.

As from last year, companies have been required to switch to a different audit firm after 10 years.


Ladies and gentlemen,


Let’s go back to parrhesia.

In 1951, social psychologist Solomon Asch conducted an experiment to investigate how social pressure from a majority group could induce a person to conform and even to lie.

Asch filled a room with students to perform a simple task.

Most of them were in on the experiment and had agreed in advance that they would give incorrect answers to simple questions.

Asch wanted to know whether the minority could resist this peer pressure and give the right answer when faced with many of their peers giving the wrong answer.

A staggering 75 per cent of the minority succumbed to peer pressure and gave the wrong answer.

Even though they knew it was wrong.

Succumbing to peer pressure is not only typical of students.

It’s typical of people in general.

Including auditors.

In particular, peer pressure comes to the fore if you want to change a corporate culture.

Often you need an outsider to initiate change.

This is what we are doing by introducing new and stricter rules.

And yet, rules alone are not enough.

Not enough to resist peer pressure.

And not enough to win back trust.

Ultimately, the change has to come from the inside.

This was also one of the conclusions of the Monitoring Commission on Accountancy.

This commission investigated the effectiveness of the 53 proposals and new rules.

The conclusion they reached at the end of last year was clear:

‘Not enough to solve the structural problems.’

The commission identified a number of ‘wicked problems’ that still need to be addressed, such as the impact of the profession’s business model on its corporate culture, the balance between private and public interests and the question what ‘a high quality audit’ actually means.

Moreover, the commission stated that a more profound analysis is needed to address these problems, so the accountancy sector can change its culture and improve the quality of its work.

This is where the Foundation for Auditing Research comes in.

The FAR is concerned with figuring out the underlying factors that determine the quality of audits.

Or, to paraphrase Matt Damon in the film The Martian, the foundation is trying to ‘science the hell out of the problem’.

To that end, you’ve set up six research groups, in collaboration with eight different universities.

Tackling a wide range of research questions, from the loss of talent to learning from mistakes.

I think this will help to pin down more precisely where things go wrong and how to improve them.

And that’s a necessary step on the road to changing the corporate culture of audit firms.

Because auditors need to show they are independent.

Auditors need to show they have the public interest at heart, even when they are paid by an organisation with a private interest.

To have that difficult conversation wit a customer who may not be ready to hear what you have to say.

Auditors need to show they deserve our trust.

Auditors need to show parrhesia.


Thank you.