According to the 2004/2005 Annual Report of the Netherlands Institute of Registered Accountants (NIVRA), the national auditing standards are known as the Dutch Standards on Auditing (RACs). Most International Standards on Auditing (ISAs) have been translated and incorporated in the RACs, with adaptations to reflect the local legal environment. The NIVRA 2006 self-assessment confirmed that the Netherlands adopts International Auditing and Assurance and Standards Board (IAASB) pronouncements as national standards, again with changes in accordance with the Dutch legal and regulatory environment. On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force. This requires all statutory audits of annual and consolidated accounts to be carried out on the basis of ISAs as adopted by the European Commission. European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

General Overview

According to the Netherlands Institute of Registered Accountants' (Nederlands Instituut van Registeraccountants, or NIVRA) self-assessment of 2006, pronouncements by the International Auditing and Assurance and Standards Board (IAASB) "are adopted as national standards and amended as necessary to address differences due to conflicts with legal or regulatory requirements" (p. 30). These pronouncements are adopted as the Dutch Standards on Auditing (Richtlijnen voor de Accountantscontrole, or RACs). The self-assessment added that all new IAASB pronouncements are translated and the differences between Dutch standards and International Standards on Auditing (ISAs) are highlighted in the following manner: "(1) if a statement is needed for the Dutch situation, but is not issued by IFAC, it is numbered xxxN'; (2) if a text does not apply in the Netherlands, it is not translated; (3) if a text is added to reflect the Dutch situation, it is in italics" (p. 34). By 2004, a number of ISAs had been posted on the NIVRA's website and became mandatory for application in independent audits, as noted in the 2004/05 NIVRA Annual Report. In the following year, NIVRA published several newly issued, amended, or translated standards. Overall, although auditing standards in the Netherlands are based on ISAs, they are not identical to the international standards. Despite the differences, NIVRA supports global harmonization of auditing standards and the harmonization in the EU area in particular.

On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force requiring all statutory audits of annual and consolidated accounts to be carried out on the basis of ISAs as adopted by the European Commission. The Directive aims at high-level -- although not full -- harmonization of statutory audit requirements. European Union member states shall adopt and publish the provisions necessary to comply with the Directive before June 29, 2008. According to the Directive, in order to achieve a maximum degree of harmonization, member states should be allowed to impose additional national audit procedures or requirements. Additionally, member states may also make adjustments to resolve conflicts with national law. Member states may impose these additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

As described in the 2005 NIVRA self-assessment, the legal framework for financial reporting in the Netherlands is largely based on the Dutch Civil Code, Registered Accountants Act, Law on the Supervision of Accountants, Code of Conduct for Accountants, and the Dutch Independency Code. The Accounting Firms (Supervision) Act (AFSA) came into effect in October 2006 and introduced the shared responsibility for the supervision of the accounting profession by the NIVRA and the Financial Markets Authority (Autoriteit Financiele Markten, or AFM). Under the Act on Financial Supervision (Wet op het financieel toezicht) which came into effect on January 1, 2007, the AFM regulates financial sector in the Netherlands. According to the NIVRA's 2005/06 Annual Report, "this not only meant a new regime for accounting firms but also a new era for the public profession, with self-regulation now being supplemented by public accountability and external supervision of the statutory audit function" (p. 6). The 2006 NIVRA self-assessment further explains that "under the new law, the AFSA, the audit firm will be subject of the public oversight system, but individual accountants will be monitored as well, if and when their work is reviewed as part of the oversight" (p.4).

According to the 2004 Bebbington and Song report, the Chartered Accountants Act of 1962 created the NIVRA. The NIVRA is the national auditing standard-setter. As explained in the NIVRA 2006 self-assessment, another professional body, the Netherlands Accounting Association (NOvAA) is responsible for establishing auditing standards for its members and in practice, NIVRA and NOvAA work together to establish one set of standards for all members. According to the NIVRA Annual Report of 2005/06, a new code of ethics was published in August 2006, entitled Code of Conduct Regulation or "VCG". The VCG is based on the International Federation of Accountants (IFAC) code of ethics. As explained in the 2006 self-assessment, "as a result the proposed code equals the IFAC-code and a few extras" (p. 38). NIVRA is listed as a member on the IFAC website.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

II

According to the NIVRA 2006 self-assessment, the Netherlands adopts IAASB pronouncements as national standards, adapting them in accordance with the Dutch legal and regulatory environment. However, there is insufficient publicly available information to assess Dutch compliance with this principle.

ISA 210 Terms of Audit Engagements (effective 2006)

II

See ISA 200.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

II

See ISA 200.

ISA 230R Documentation (effective 2006)

II

See ISA 200.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

II

See ISA 200.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

II

See ISA 200.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

II

See ISA 200.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

II

See ISA 200.

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

II

See ISA 200.

ISA 320 Audit Materiality (effective 2004)

II

See ISA 200.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

II

See ISA 200.

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

II

See ISA 200.

ISA 500 Audit Evidence (effective 2004)

II

See ISA 200.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

II

See ISA 200.

ISA 505 External Confirmations (effective 2004)

II

See ISA 200.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

II

See ISA 200.

ISA 520 Analytical Procedures (effective 2004)

II

See ISA 200.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

II

See ISA 200.

ISA 540 Audit of Accounting Estimates (effective 2004)

II

See ISA 200.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

II

See ISA 200.

ISA 550 Related Parties (effective 2004)

II

See ISA 200.

ISA 560 Subsequent Events (effective 2006)

II

See ISA 200.

ISA 570 Going Concern (effective 2004)

II

See ISA 200.

ISA 580 Management Representations (effective 2004)

II

See ISA 200.

ISA 600 Using the Work of Another Auditor (effective)

II

See ISA 200.

ISA 610 Considering the Work of Internal Auditing (effective 2004)

II

See ISA 200.

ISA 620 Using the Work of an Expert (effective 2005)

II

See ISA 200.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

II

See ISA 200.

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

II

See ISA 200.

ISA 710 Comparatives (effective 2004)

II

See ISA 200.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

II

See ISA 200.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

II

See ISA 200.