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Compliance with legal requirements

The EY Global Code of Conduct provides a clear set of standards that guide our actions and business conduct.
Ernst & Young Accountants LLP complies with applicable laws and regulations, and EY’s values underpin our commitment to doing the right thing. This important commitment is supported by a number of policies and procedures, including:

Anti-bribery
The Anti-bribery Global Policy provides our people with direction around certain unethical and illegal activities. It emphasizes the obligation of our people to comply with anti-bribery laws and provides greater definition of what constitutes bribery. It also identifies reporting responsibilities when bribery is discovered. In recognition of the growing global impact of bribery and corruption, efforts have been increased to embed anti-bribery measures across EY, and training is mandated for all our people.

Anti Money Laundering
Our risk policy in the context of the Dutch Money Laundering and Terrorist Financing Prevention Act (Wwft) sets out the principles to be applied by our staff to counteract money laundering and terrorist financing. The two major subjects with regard to the Wwft are client examination and the reporting of unusual transactions; both subjects are addressed in this policy.

Trade sanctions
Given the level of EY’s global integration, it is important that we are aware of the ever-changing situation in respect of international trade sanctions. EY monitors sanctions issued in multiple geographies and provides guidance to our people on impacted activities.

Insider trading
The Insider Trading Global Policy reaffirms the obligation of our people not to trade in securities with insider information, provides detail on what constitutes insider information and identifies with whom our people should consult if they have questions regarding their responsibilities.

Data privacy
The Global Personal Data Privacy Policy sets out the principles to be applied to the use and protection of personal data, including that relating to current, past and prospective personnel, clients, suppliers and business associates. This policy is consistent with applicable laws and regulations concerning data protection and privacy for maintaining and processing personal data. Furthermore, we have a policy to address our specific Dutch data privacy requirements and business needs.

Document retention
Ernst & Young Accountants LLP’s record retention policy applies to all engagements and personnel. This policy emphasizes that all documents must be preserved whenever any person becomes aware of any actual or reasonably anticipated claim, litigation, investigation, subpoena or other government proceeding involving us or one of our clients that may relate to our work. It also addresses Dutch legal requirements applicable to the creation and maintenance of working papers relevant to the work performed.

Litigation

Transparency in the Public Interest
When performing their work, individual external auditors and their firms must put the public interest first. Therefore, when our firm needs to decide what information to provide to society at large, the main question we ask ourselves is: what degree of transparency will best serve the public interest?

In the world of auditing, the public interest is served by a high quality of audits and audit opinions, also in terms of reliability and relevance. That is why we focus on quality issues in our communications with the outside world. This quality-focused transparency also includes being open about what we learn from internal and external reviews, and from instances in which the quality of the work of our firm or one of its auditors is questioned. For us, transparency in these cases is about communicating what lessons we have learned and what we are doing to further improve the quality of our audits.

We fully acknowledge that such quality-focused information may at times be more technical and tedious than other information related to these inspections or instances of controversy.

We believe that from the perspective of the public interest, it is more important for us to be transparent about the lessons learned from recent or current inspections and controversies rather than to provide information regarding, for example, the amount for which we have settled a civil case related to an audit performed many years ago.

In our litigious society, there will always be tension between the duty (and indeed the desire) to be transparent, in the public interest, about lessons learned, on the one hand, and the need to be prudent from a legal point of view and not to undermine one’s position in existing litigation or induce new litigation, on the other. Indeed, in many cases there will be legal and contractual restrictions to our transparency, as or our external communications may be limited by our duty to respect the privacy of individual persons involved.

In a healthy society, the degree of transparency of private firms will always be a matter of debate. We accept that debate and will try to focus on the essential question: how can we align our transparency with the public interest?

Disciplinary cases
During fiscal year 2015/2016, four new disciplinary proceedings were initiated against auditors of our firm. All three proceedings initiated before and pending on 1 July 2015 were finalized in fiscal year 2015/2016. Of the four new disciplinary proceedings, two were still pending on June 30, 2016.

Proceedings finalized in fiscal year 2015/2016
The first case concerned the proceedings initiated by the AFM against the auditor of DSB Bank. Further details of this case are included in our 2012-2013 Transparency Report. The Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven) heard the case in June 2014 and issued its judgment in November 2015. The auditor was temporary deregistered for six months.

Another case involved a complaint against two auditors of our firm and concerned the depreciation of replacement investments in the financial statements of a municipality. The Disciplinary Council of Accountants and Auditors (Accountantskamer) decided the complaint was partly inadmissible and partly unfounded. An appeal was filed with the Trade and Industry Appeals Tribunal, which issued its judgment in March 2016 and upheld the decision of the Disciplinary Council.

The third complaint was filed by former shareholders in a private limited liability company against its auditor. In the past, the auditor also audited the financial statements of these shareholders. The complainants claimed that the auditor had not audited those financial statements properly. Furthermore, they claimed that an assurance report issued by the auditor was not in compliance with applicable regulations. In July 2014, the Disciplinary Council decided that part of the claim was inadmissible. The other part was declared unfounded. The complainants then filed an appeal with the Trade and Industry Appeals Tribunal, which handed down its judgment in June 2016 and confirmed the decision of the Disciplinary Council.

The fourth case – initiated after 1 July 2015 – concerned complaints regarding a report on the valuation of shares. This valuation had been requested with respect to the former CEO’s obligation to offer his shares to the other shareholders. The complaint was submitted by the former CEO and withdrawn before the auditors submitted their defense.

The fifth case – also initiated after 1 July 2015 – concerned a forensic investigation performed between 2007 and 2009. The presiding judge of the Disciplinary Council decided that the complaint was inadmissible due to lapse of time.

Proceedings still pending
As of 1 July 2016, there are two disciplinary proceedings pending.

The first one relates to the 2013 financial statements of a private limited liability company, for which the auditor issued an unqualified opinion. Two minority shareholders of the company who are required to offer their shares to the majority shareholder claim that the financial statements contain material misstatements. In May 2016, the Disciplinary Council decided that part of the complaint was well-founded and the auditor received a reprimand. The complainants and the auditor filed an appeal with the Trade and Industry Appeals Tribunal.

The second case involves two shareholders of a bankrupt public limited company who, in May 2016, filed a complaint against the auditor of that company. They claim that the 2012 end 2013 audits were not performed properly. The auditor is preparing his defense.

Claims under civil law relating to professional conduct
Four claims under civil law were pending on 1 July 2015, and all of these were still pending on 30 June, 2016. One of these cases is, although pending, inactive. In the other three cases, the courts have not yet rendered their (final) decisions. These decisions may take several years. We refer to our Transparency Reports of recent fiscal years for further information.

The Landis case
Over the years, the Landis case – which concerns work we performed between 1999 and 2001 – has received some media attention. In fiscal year 2011/2012 we entered into a settlement agreement with receivers and the banks, without accepting any liability. In August 2013, (supervisory) directors of Landis sent us a letter claiming that we would be liable for the money they will have to pay to the Landis estate following a court decision between receivers and the (supervisory) directors. We denied any liability and have not received any communication from them since. In addition, Vereniging VEB-NCVB holds us liable on behalf of the shareholders of Landis as does Stichting Landis leed II. In compliance with NBA guidance in these matters, and as we are still engaged in discussions, we will not cover this case in further detail in this report.