Role of the auditor towards the works council
A company that employs more than 100 persons (to be computed based on specific formulae) needs to have a works council, composed of representatives of the employers and employees and workers. These representatives of the employees and workers are chosen in elections that take place every 4 years. The functioning of the works council is defined by internal rules.
The statutory auditor cannot be appointed (or re-appointed) without the pre-approval of the works council. The works council votes by simple majority, but this majority must be obtained in both delegations (i.e. employers’ and employees’).
The statutory auditor has several obligations towards the works council:
- To issue a report, in writing, on the statutory annual accounts and the report of the board of directors similar to the statutory audit report;
- To attest in a specific written report on the completeness and fairness of view of the economical and financial information that management gives to the works council, as far as this information derives from the books and the annual accounts of the company or other verifiable source;
- To explain and analyse, especially to the members appointed by the employees or workers, the meaning of the economical and financial information in relation to the financial structure and the evolution of the financial situation of the entity. This can be done orally or through specific notes.
If the statutory auditor believes he is not able to give an opinion on the completeness and fairness of view of the financial information, he must inform the board of these findings. If the board does not react within a month after this notification, the auditor must inform the works council on his own initiative.
It is management’s role to give financial information to the works council. The auditor must respect professional secrecy, and cannot substitute for management in its role of delivering the economical and financial information. The role of the auditor is to help the members of the works council understand and interpret the information provided by management (ratio analysis, (consolidated) financial statements, benchmarks, budget, etc).
The auditor must attend the works council each time he is invited by its members. In these meetings, he will answer all questions that are raised by the members, as far as they relate to matters under his responsibility.
The auditor can be invited to a preparatory meeting with the representatives from employees and workers. The statutory auditor can accept this invitation and informs the president and secretary of the works council of his/her intention.
The audit program, the form and content of the report and the duties of the auditor have been specified in a standard from the Institute of Company Auditors (NL / FR).
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