When the group auditor’s instructions land in your inbox, the clock starts ticking. Just Audit explains what these instructions usually ask for, what your finance team needs to prepare, and how it fits with the Dutch statutory audit.
A group audit instruction tells the local auditor of your Dutch subsidiary what work the group auditor needs, by when, and in what format. For your finance team, it means a reporting package to deliver, a set of deadlines to meet and a number of specific questions to answer, often well before the Dutch statutory accounts are finished.
Why the Group Auditor Sends Instructions
If your Dutch company is part of an international group, the group auditor signs the opinion on the consolidated accounts. To do that, it relies on work performed on the group’s components, including your subsidiary. NV COS 600, the Dutch standard based on ISA 600, sets out how the group auditor directs and reviews that work. The instruction is how that direction reaches your local auditor, and indirectly, your finance team.
What the Instruction Usually Contains
Every group writes its own instructions, but most cover the same ground:
- Scope of work: whether the group needs a full audit of your reporting package, specific procedures on selected balances, or a review.
- Materiality: the component materiality set by the group auditor, which is usually lower than what a standalone audit of your company would use.
- Deadlines: dates for the reporting package, the auditor’s clearance and any interim deliverables. These are often weeks before the Dutch statutory deadline.
- Specific risks and procedures: areas the group auditor wants extra attention on, such as revenue recognition, intercompany balances or impairment.
- Reporting: the format in which the local auditor reports back, usually a memorandum with findings, uncorrected misstatements and an independence confirmation.
- Events after the reporting date: how long the local auditor must keep monitoring and when an update is due.
What Your Finance Team Needs to Prepare
The instruction is addressed to the auditor, but much of the work lands with your team. In practice, the group auditor will expect the reporting package to be complete and reconciled to your ledger. Intercompany balances need to agree with the counterparties, and that is usually the first place where delays start. Two group companies, one transaction and, somehow, two different amounts.
It also helps to collect the supporting documents early: contracts, bank confirmations, the tax position and the supporting evidence behind key estimates. Management representations for the group are often requested separately from those for the Dutch accounts, so check which ones are needed.
The Reporting Package Is Not the Dutch Annual Accounts
This is where many subsidiaries get caught out. The reporting package follows group accounting policies, often IFRS, and group deadlines. The Dutch annual accounts follow Title 9 Book 2 BW and must meet their own legal requirements, unless the group exemption of art. 2:403 BW applies.
That means there may be two sets of deliverables, sometimes under two frameworks. A well-planned audit combines the work where possible, so the same testing supports both the group clearance and the statutory auditor’s report. Ask your auditor at the start how they will do that.
Getting the Timing Right
Group deadlines rarely move, and hoping they will is not a plan. Work backwards from them instead. Agree a timetable with your local auditor as soon as the instruction arrives, and check which items the group needs first. If the deadline is unrealistic for your situation, raise it with the group early rather than missing it quietly.
How Just Audit Can Help
Just Audit B.V. is an independent, audit-only firm with an AFM licence for statutory audits (excluding OOBs). We reported so often to group auditors that we can do it in our dreams. But instead, we actually report to group auditors with great attention and quality. Our auditors are RAs registered with the NBA, and our team works across the Netherlands. Have a look at our group audit services or our page for Dutch subsidiaries, and read more about the Dutch auditing standards.
