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08 July 2021 Supervision Supervision label Q&A

Question:

What kinds of incidents and indications at payment and electronic money institutions should external auditors report? How and to which authority should these notifications be made (notification duty)? What exactly does the auditor's duty to provide information comprise (information duty)?

Answer:

Notification duty

Pursuant to Section 3:88 of the Financial Supervision Act (Wet op het financieel toezicht – Wft), external auditors are under a duty to notify the competent authorities of prudential incidents or indications of such incidents. The notification obligations set out below apply to the auditor of (amongst others) payment and electronic money institutions.

First, (on the basis of Section 3:88(1) of the Wft), an auditor who performs the audit of the annual accounts of a payment and electronic money institution, or of the statements of a financial enterprise with its registered office in the Netherlands as referred to in Section 3:72(1) or (3) of the Wft, must notify De Nederlandsche Bank N.V. (DNB) as soon as possible of any circumstance of which the auditor has become aware in the course of performing the audit and which:

  1. is in breach of the obligations imposed pursuant to this part (Section 3 of the Wft); or
  2. jeopardises the existence of the financial enterprise.

Second, pursuant to Section 3:88(2) of the Wft, an auditor auditing the financial statements of a financial enterprise having its registered office in the Netherlands as meant in Section 3:72(1) or (3) of the Wft, must promptly notify DNB of each and any circumstance that has come to their knowledge in the course of the audit and which would lead to the auditor not issuing its opinion regarding the truth and fairness of the statements or to make qualifications.

Both notification duties correspondingly apply to external auditors which in addition to the audit of the financial enterprise's annual financial statements also audit the annual accounts or financial statements of a person linked to the financial enterprise in a formal or factual governance structure (based on Section 3:88(3) of the Wft).

Based on these notification duties, the external auditor is not required to conduct any other work than the work to be conducted under the engagement to audit the annual financial statements. This implies that the focus of an external auditor's work is not on a systematic check of compliance with all relevant statutory and regulatory requirements. The audit of a financial enterprise's annual financial statements focuses on the truth and fairness of these statements, which does not necessarily mean that all circumstances of interest to supervisory authorities are actually reported to them in time.

The notification duties for external auditors are subject to the following procedural requirements and safeguards. Pursuant to Section 3:88(5) of the Wft, DNB will allow the financial enterprise to be present when the external auditor makes its notification or provides its information. Pursuant to Section 3:88(6) of the Wft, external auditors that make a notification or provide information to DNB are not liable to any damage or loss caused to third parties, unless it is made plausible that, considering all facts and circumstances, the external auditor should not have made the notification or provided the information.

Where to report incidents/make notifications

You can contact the supervisors of payment and electronic money institutions at DNB directly by email at infobetaalinstelling@dnb.nl to report any prudential incidents or indications of prudential incidents. We will process your notification confidentially.