Encourage supervisory directors to engage actively with accountants
February 11, 2015 | 3 min read
Accountants have been in the spotlight over the past year. The work group Toekomst Accountantsberoep (Future of the Accountant Profession) (2014) issued an advisory report regarding the improvement of auditing, the AFM (2014) published a study into the Big 4 accounting firms, and Minister Dijsselbloem announced a number of legal measures. All this attention, however, still underexposes the value accountants add to the work of the supervisory director. The supervisory director is also increasingly regarded as the accountant's client and should therefore have an opinion on the way the accountant operates. According to Mijntje Lückerath-Rovers and Auke de Bos, in order to take advantage of the knowledge and expertise of accountants, supervisory directors should actively engage with accountants much more frequently.
The Opinion of Supervisory Directors
Recently we published the Nationaal Commissarissen Onderzoek (National Supervisory Director Study) for the eighth time. This year, the relationship between the supervisory director and the accountant took centre stage. The study dealt with the role of the supervisory director in things such as the selection and the appointment of accountants, in which areas the accountant can be of added value for the supervisory director, and, of course, how this may be improved. Around 300 supervisory directors from multiple sectors participated in the study, making this the largest study amongst supervisory directors in the Netherlands and providing a broad picture across multiple sectors in which supervisory directors are active. The supervisory directors who took part in the study collectively hold more than 880 supervisory directorships, and 10 years of experience as a supervisory director on average.
Importance of Accountants
One of the questions in the study focused on the importance and the appreciation of the extent to which the work of accountants contributes to the supervisory director's work. Through the various governance codes, supervisory directors have been assigned a series of tasks including things such as monitoring strategy development, risk management, financial reporting and corporate social responsibility. Supervisory directors also usually nominate and assess the directors, and they are becoming increasingly aware of the desired behaviors within and the appropriate culture of the organisation. In order to be able to asses these topics, supervisory directors get information from a variety of sources. It makes sense that these sources include the views of the accountant.
The supervisory directors who took part in the study are divided about the role of the accountant, however. There are supervisory directors who see accountants as glorified bookkeepers, implying that he should take good care of the accounts and not interfere with anything else. And there are also supervisory directors who see accountants as full discussion partners, not just with regard to natural topics such as the accounts and financial risks, but also regarding the analysis of future risks, developments in the sector that are of strategic importance and the analysis of the tone at the top. All supervisory directors agree on the contribution of the accountant to their supervision of financial reporting and analysing current risks, including fraud. And they do rate this contribution relatively high. But other topics, and especially the contribution of the accountant with regard to judging the tone at the top of the organisation, are not considered to be important by everyone. In this respect, the contribution of the accountant is rated relatively low.
Underestimation of the Value of the Accountant
Supervisory directors may, however, benefit from the knowledge and vision of their accountant by considering him to be a pair of extra eyes and ears. The accountant is regularly present at the organisation, can compare organisations and will have a professional view of subjects other than just financial reporting. Think about the company culture, for instance, or how the balance of power within the firms is reflected, how financial and strategic risks are dealt with, and whether the company is aware of future changes in the sector. The publication ‘De Signalerende Accountant’ (The Observant Accountant) of the Nederlandse Beroepsorganisatie voor Accountants (Dutch Association of Accountants) distinguishes between a professional opinion and the opinion of a professional. A professional opinion is based on audit work and covers the accuracy of the financial statements. The opinion of a professional concerns the views of the accountant regarding other topics, with the accountant playing a more informal role. The knowledge and experience of the accountant, also regarding the tone at the top of the organisation, can definitely provide added value in this respect.
Open Relationship Significant
Here it is important that the accountant and the supervisory director have an open relationship, in which both officials can discuss certain topics on an equal footing and both are open to an open dialogue. If an organisation wishes to improve its knowledge about the ins and outs of the company, it is in the interest of that company to encourage supervisory directors to become more actively engaged with the accountant.
AFM, 2014, Uitkomsten onderzoek kwaliteit wettelijke controles Big 4-accountantsorganisaties, Amsterdam
Lückerath-Rovers, M. en A. de Bos, 2014, Het Nationaal Commisssarissen Onderzoek 2014, TIAS/Erasmus Universiteit, Tilburg/Rotterdam
Werkgroep Toekomst Accountantsberoep, 2014, In het publieke belang, NBA, Amsterdam