Supervisory Report: Control over the Use of Time and Resources and Fees Charged

SUPERVISORY REPORT
December 2025
Control over the Use of Time and Resources and Fees Charged

In Brief
At the end of 2025, the AFM conducted research among ten audit firms holding a regular license. The subject matter was the use of time and resources and the fees charged. This document contains several general observations and good practice examples that we have seen on these topics. Information that you can use to (further) strengthen your control over the use of time and resources and the fees charged as important prerequisites for ensuring the quality of the statutory audit.

About Our Research
In our research, we assessed how the ten audited audit firms with a regular license have sufficiently safeguarded the prerequisites of time, resources, and fees charged within the system of quality management. Additionally, it was assessed how these important prerequisites were applied in two selected statutory audits per audit firm. The research contained both testing and exploratory elements.

We share general observations and good practice examples on these three topics:
1. Time, human resources, and qualified personnel
2. Technological and intellectual resources
3. Fees charged

1. Time, Human Resources, and Qualified Personnel
Observations – What Have We Seen on This Topic?

• All audited audit firms assess whether sufficient time, resources, and qualified personnel are available. Plans are often drawn up and monitored at the annual, monthly, or weekly level, supported by periodic planning meetings. Depending on the size of the audit firm, different levels of experience are involved, ranging from the entire engagement team or from the audit leader and upwards.
• Most audit firms evaluate at the engagement level after the completion of an audit assignment to what extent the budgeted hours were sufficient (analysis of budgeted versus realized hours). The outcome of this is taken into account in the budget for the next audit assignment, taking into account the nature and circumstances of the audit assignment and the significant matters that arose during it.

Grip on Time, Resources, and Fees 2
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Observations – What Have We Not Seen, But Should Be There?

• The evaluation of whether sufficient time, resources, and qualified personnel are available is not always formalized. Formalizing this can contribute to clarity and quality monitoring, especially in larger audit firms with multiple locations.
• Many audit firms do not have written policies, procedures, or guidelines for assessing the competencies and capacities of engagement team members and engaged experts. The use of criteria such as job descriptions, experience levels, and sector knowledge makes the external auditor's evaluation of the team composition more transparent and consistent.
• In some audit firms, it is not assessed in advance of engagement acceptance or continuance whether sufficient time, resources, and qualified personnel are available. This assessment is then documented after agreeing on the terms of the audit assignment or at the start of the (interim) work. A timely assessment is crucial to identify potential risks and threats in advance. See also our CEAC research from 2022.
• The external auditor often does not include a substantiated explanation in the audit file regarding the assessment of the required time, resources, and qualified personnel. In several cases, the assessment is limited to a 'yes' or 'no' in a checklist, without substantiation or context. As a result, it is not clear in the audit file which work was performed to substantiate this assessment. See also our CEAC research from 2022.

Good Practice Examples on the Topic 'Time, Human Resources, and Qualified Personnel'

• An audit firm has a description of knowledge, experience, and expertise for each member of the engagement team. The external auditor explicitly assesses per audit assignment whether engagement team members have the required competencies and capacities, adjusted to the nature and complexity of the audit assignment. Hereby, the external auditor uses the descriptions to align the suitability of engagement team members with the nature and complexity of the audit assignment.
• An audit firm has a SWAP team that monitors the availability of sufficient hours for the execution of statutory audits. When accepting a new audit assignment, the SWAP team assesses the current team occupancy and planning and determines whether the new assignment fits within the current capacity. If necessary, another audit assignment is terminated ('swapping') to ensure careful execution of the statutory audit.
• An audit firm has a planner who is not part of the engagement team. This employee draws up the planning together with external auditors and audit leaders. Because the planner is not involved in the daily execution of the audit assignment, they can look more objectively at capacity and time expenditure. This can prevent planning from being influenced by daily pressure or interests and can promote careful and realistic planning.
• Some audit firms plan reserve weeks without audit assignments to absorb delays and unexpected circumstances in ongoing audit assignments. In addition, these audit firms structurally allocate hours for indirect activities such as study, leave, and training.

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• An external auditor engaged an accountant from another organization to ensure sector knowledge in the audit of a financial service provider. Due to team changes, the knowledge could not be sufficiently retained within the team. The external auditor therefore decided not to continue the audit assignment; another audit firm takes over the audit.
• Several audit firms have made planning a fixed agenda item during periodic management meetings or departmental meetings. This allows engagement team members to share their experiences and make planning bottlenecks discussable. By structurally paying attention to this and holding conversations between members of different experience levels, an open culture emerges in which signals can be recognized early and picked up jointly.
• An audit firm analyzed retrospectively, based on all executed audit assignments, whether the budgeted hours were sufficient by comparing budgeted and realized hours. It appeared that significantly fewer hours were spent on an audit than expected. This signal gave rise to deploy a quality assurance measure.

2. Technological and Intellectual Resources
   Observations – What Have We Seen on This Topic?

• Audit firms use various technological and intellectual aids in the execution of the statutory audit. Intellectual resources are developed internally as well as made available externally by service organizations. Most of the technological aids used are made available by external parties. The use of advanced technological aids, such as AI applications for the execution of audit work, is not yet applied by most audit firms.

Observations – What Have We Not Seen, But Should Be There?

• Almost all audit firms do not have written policies, procedures, or guidelines that describe in which situations, under what conditions, and for what purpose technological and intellectual aids may or must be deployed within audit assignments. Drawing up policies, procedures, and guidelines can strengthen both quality monitoring and the correct and consistent application of technological and intellectual aids.
• Almost all audit firms do not have procedures to evaluate how technological and intellectual resources contribute to the desired quality of the statutory audit and quality objectives. A periodic evaluation can support the early recognition and limitation of negative effects on audit quality.

For more information on the use of advanced (GenAI) audit tools, we refer to the publication: '12 Building Blocks for Safer Use of Advanced (GenAI) Audit Tools'.

Good Practice Example on the Topic 'Technological and Intellectual Resources'

• An audited audit firm has an AI policy for the responsible use of AI. The policy describes among other things applications such as automated data analysis for financial reports, machine-learning models for risk assessment, and language models. The policy states that only approved tools may be used and what safeguards apply for this. Hereby, attention is paid to ethics, transparency, privacy, security, and human responsibility and oversight.

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3. Fees Charged
   Observations – What Have We Seen on This Topic?

• In most audit files, the external auditor assesses in advance of engagement acceptance or continuance whether the fee is sufficient for the execution of the audit assignment. Thereby, the external auditor compares the fee with that of the previous year and determines a suitable fee based on the expected time expenditure.
• Many audit firms do not work with fixed fees, but charge actually spent hours against an agreed rate. This offers flexibility, especially in unforeseen circumstances or delayed delivery of information by audit clients. As a result, audit firms can experience less budget pressure.
• Audit firms experience limited price or budget pressure from audit clients in selected audit assignments when aligning fees. The fee is usually determined in advance of engagement acceptance or continuance by policy makers and/or the external auditor. It is important that signals from colleagues at different experience levels are also taken into account, so that potential bottlenecks are recognized and discussed in time.

Observations – What Have We Not Seen, But Should Be There?

• A threat that requires a measure occurs when the total of fees charged at an audit client is of material significance to the audit practice, the network, or the external auditor. Most organizations evaluate this at the organizational level, but not always at the network and external auditor level.
• The external auditor often does not include a substantiated explanation in the audit file regarding the assessment of the fees charged. In several cases, the assessment is limited to a 'yes' or 'no' in a checklist, without substantiation or context. As a result, it is not clear in the audit file which work was performed to substantiate this assessment.

Good Practice Example on the Topic 'Fees Charged'

• An audit firm gathers input from all members of the engagement team for each audit assignment. Annually, it evaluates all audit assignments on, among other things, attractiveness, integrity, profitability, and occupancy. The fee is a fixed component here. In many audit firms, the fee is primarily determined by the external auditor and/or policy maker, but this organization actively involves colleagues at different experience levels in the determination. The aim is to signal bottlenecks early and make them discussable, also at different experience levels.