Note: This analysis will be updated to reflect 2020’s market share once all annual reports have been filed.
In a previous blog, we noted that as of the end of 2019, there were only six audit firms licensed to audit PIEs (Public Interest Entities) in the Netherlands and we looked at the market concentration of these auditors.
Here, we examine the auditor market share of Euronext Amsterdam’s top three indexes: the AEX 25, AMX 25, and AScX 25 – which, at maximum, consists of 75 companies from the Netherlands, Belgium, France, Luxembourg, and the United Kingdom. The 2019 composition consisted of 74 companies, two of which have a joint audit, making the auditor count 76.
- AEX 25, with a combined market cap of over €779 billion, is composed of the 25 largest companies on Euronext Amsterdam;
- AMX 25 is the mid-cap index that includes the next 25 largest companies with a total market cap of roughly €68 billion; and
- AScX 25 contains the following 25 largest companies with a market cap of over €11 billion. (Note: This index will consist of fewer than 25 companies if 25 fail to meet the conditions, as we see in the 2019 index composition.)
Due to the limited number of auditors, it is not surprising that the Big Four have a monopoly across all three indexes, with Ernst & Young holding the most audits overall by just two companies, or 2.7%.
In 2019, Deloitte holds the most audits for the AEX at 38% while PwC holds the least with 15%. Audit Analytics has recorded one auditor change within this index for the 2020 audit; ASR Nederland (ASRNL), which will reduce EY’s share and increase KPMG’s.
The market share of the AMX is similar in that one firm holds 38% of the market, but here it is EY. PwC again holds the least with 12%. There is also one auditor change for this index for the 2020 audit; Altice Europe (ATC), which will reduce Deloitte’s share to 16% and increase KPMG’s to 35%, making them a very close second to EY in this market.
PwC manages to top the others in the AScX with 33% of the companies, but we see from the chart that this market is shared more evenly than the prior two. Currently there are no reported changes for the 2020 audit that will shift the percentages here, but that may change in the future.
The Netherlands implemented EU Audit Reform for PIEs following Directive 2014/56/EU and Regulation (EU) 537/2014 of the European Parliament, which became effective in June 2016. While member states could interpret certain articles in their own way, the Netherlands adopted the reform in almost its entirety.
Until October 2018 they maintained the same PIE definition as the EU Reform, but then Dutch law expanded upon that definition to include network administrators, large organizations for scientific research, and large pension funds.
The Netherlands maintains a strict policy on auditor rotation for PIEs. The minimum initial duration of an engagement must be one year, and the engagement cannot exceed ten years. They do not allow extensions for tenders or joint audits.1
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1. EU Statutory Reform pg. 107 https://www.europarl.europa.eu/RegData/etudes/STUD/2019/631057/IPOL_STU(2019)631057_EN.pdf