FAR Director and researchers University of Amsterdam present research report to Finance Minister

24 November 2023

Amsterdam Business School professor of Accountancy & FAR Director Jan Bouwens and 4 researchers presented a research report to the Dutch Minister of Finance on 22 November 2023. The report explores the impact of introducing an intermediary to improve the quality of financial audits.

The report was commissioned  by the Kwartiermakers Toekomst Accountancysector, a governmental body focusing on the future of the accountancy sector. The other researchers involved in the report were Sanne van Duin, Jeroen van Raak, Ioan Gheorghe Ivanescu (all part of the ABS Accountancy section) and ABS alumnus Sanne Gaspersz (Deloitte Staff Audit).

The research used a number of different studies to explore the effects of using an intermediary in the corporate audit process. When a company’s accountant issues an annual report, this report is audited by an external accountant, or auditor. A potential conflict arises when major interests are at stake. The company’s accountant wants to present the best possible financial picture of the company. But this may not be the most accurate picture. The auditor identifies these discrepancies as ‘audit differences’.

Impartial

If major interests are at stake, the question arises as to whether the auditor is free of conscious or unconscious bias to impartially carry out the auditing duties. The researchers looked at what happens when an intermediary is appointed as an independent observer between the company issuing the annual report and the auditor. During the auditing process, the intermediary can question or point out possible shortcomings that reduce bias and influence the quality of the annual report.

Better Quality

The research carried out by Bouwens and his team found there was no change in the number of errors corrected by the accountant. However, they did see an improvement in the quality of the work delivered by the organisation issuing the annual report. Case studies also showed that the report’s quality was improved due to the ‘instructional’ role of the intermediary. The researchers believe it is likely that the intermediary has an impact on the process of preparing an annual report. The team’s quantitative study showed that there were fewer audit differences. This is a result of the intermediary’s monitoring of the annual report process and asking critical questions during the audit process.

The full report (in Dutch) with details about the research design and findings can be viewed online