Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code
The revised Dutch Corporate Governance Code of 2016 (hereafter “the Code”) comprises provisions regarding the existence of an internal audit function. Following the comply or explain principle of the Code, Euronext Amsterdam listed companies with a registered office in the Netherlands either have es...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Pensoft
2020-04-01
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| Series: | MAB |
| Online Access: | https://mab-online.nl/article/50021/download/pdf/ |
| _version_ | 1828913129521676288 |
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| author | Robert Bogtstra Inge Garretsen Remko Renes |
| author_facet | Robert Bogtstra Inge Garretsen Remko Renes |
| author_sort | Robert Bogtstra |
| collection | DOAJ |
| description | The revised Dutch Corporate Governance Code of 2016 (hereafter “the Code”) comprises provisions regarding the existence of an internal audit function. Following the comply or explain principle of the Code, Euronext Amsterdam listed companies with a registered office in the Netherlands either have established an internal audit function or have to explain why they did not. Our research shows that the number of listed companies with an internal audit function has since grown. In 2016 53% of Euronext Amsterdam listed companies with their registered office in the Netherlands have established an internal audit function; in 2018 this figure is 64%. More than half of these listed companies have an in-house independent internal audit function, whereas other companies have internal audit functions with different characteristics, such as a combined internal audit and risk management function or have outsourced the internal audit function. The majority of the companies without an internal audit function provide inadequate arguments for this absence. They thereby do not meet the standards as set forth in the Code. In most cases, the argument for not having an internal audit function is: “the organization is too small”. This is not a valid argument, as the Code specifically addresses this situation stating that in case the size of a company is not suited for an internal audit function, outsourcing may be an appropriate alternative. We conclude that management boards should give this topic better thought and give better insight in their judgement by explaining the arguments. We therefore advocate that the principle of “comply or explain” should be “comply and explain”. Such is the case in the South African corporate governance code (King IV). The effect will be that management boards mindfully have to elaborate on how they obtain independent assurance on the company’s governance, risk management and control systems. |
| first_indexed | 2024-12-13T19:31:47Z |
| format | Article |
| id | doaj.art-1ad1e2d4b2fa4a108fa94ecdf395b4f9 |
| institution | Directory Open Access Journal |
| issn | 2543-1684 |
| language | English |
| last_indexed | 2024-12-13T19:31:47Z |
| publishDate | 2020-04-01 |
| publisher | Pensoft |
| record_format | Article |
| series | MAB |
| spelling | doaj.art-1ad1e2d4b2fa4a108fa94ecdf395b4f92022-12-21T23:33:54ZengPensoftMAB2543-16842020-04-01943/49310110.5117/mab.94.5002150021Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance CodeRobert Bogtstra0Inge Garretsen1Remko Renes2FSV Risk AdvisoryFSV Risk AdvisoryNyenrode Business UniversiteitThe revised Dutch Corporate Governance Code of 2016 (hereafter “the Code”) comprises provisions regarding the existence of an internal audit function. Following the comply or explain principle of the Code, Euronext Amsterdam listed companies with a registered office in the Netherlands either have established an internal audit function or have to explain why they did not. Our research shows that the number of listed companies with an internal audit function has since grown. In 2016 53% of Euronext Amsterdam listed companies with their registered office in the Netherlands have established an internal audit function; in 2018 this figure is 64%. More than half of these listed companies have an in-house independent internal audit function, whereas other companies have internal audit functions with different characteristics, such as a combined internal audit and risk management function or have outsourced the internal audit function. The majority of the companies without an internal audit function provide inadequate arguments for this absence. They thereby do not meet the standards as set forth in the Code. In most cases, the argument for not having an internal audit function is: “the organization is too small”. This is not a valid argument, as the Code specifically addresses this situation stating that in case the size of a company is not suited for an internal audit function, outsourcing may be an appropriate alternative. We conclude that management boards should give this topic better thought and give better insight in their judgement by explaining the arguments. We therefore advocate that the principle of “comply or explain” should be “comply and explain”. Such is the case in the South African corporate governance code (King IV). The effect will be that management boards mindfully have to elaborate on how they obtain independent assurance on the company’s governance, risk management and control systems.https://mab-online.nl/article/50021/download/pdf/ |
| spellingShingle | Robert Bogtstra Inge Garretsen Remko Renes Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code MAB |
| title | Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code |
| title_full | Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code |
| title_fullStr | Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code |
| title_full_unstemmed | Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code |
| title_short | Compliant in principle! and in practice? Internal audit at listed companies in the Netherlands: beyond compliance with the Dutch Corporate Governance Code |
| title_sort | compliant in principle and in practice internal audit at listed companies in the netherlands beyond compliance with the dutch corporate governance code |
| url | https://mab-online.nl/article/50021/download/pdf/ |
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