Auditors to face sweeping ASIC crackdown
The regulator has warned practitioners to come clean and self-report breaches as it probes compliance with conflict of interest and independence rules.
Auditors nationwide are being warned of a looming ASIC crackdown on their controls and ethics in the wake of “recent events that have undermined public confidence in the [industry’s] integrity”.
ASIC’s sweeping, data-driven surveillance campaign would involve engaging with auditors “at scale” and using statutory powers to force firms flagged by its systems to hand over information, the regulator said in a letter to some 3,000 registered practitioners this week.
“We are using a range of internal and public data sources to identify potential non-compliance with independence and conflicts of interest obligations,” commissioner Kate O’Rourke wrote.
“We intend to engage with auditors at scale, using our compulsory information-gathering powers under the Corporations Act to inquire into the potential issues identified through our data analysis.”
Auditor rotation practices, relationships between audit firm personnel and their clients and whether a firm’s provision of non-audit services compromised their independence or raised conflict concerns would all be scrutinised as part of the crackdown, ASIC said.
“For some auditors, this will extend to asking for information about the systems and controls they have relied upon to ensure compliance with their independence and conflicts of interest obligations.”
Auditors were advised to proactively self-report violations, with ASIC noting voluntary disclosure would be considered when determining potential enforcement actions.
It comes after audit quality, independence and conflict concerns were raised by the parliamentary inquiry, triggered by the PwC tax leaks scandal.
The inquiry heard evidence from experts including former ACCC boss Graeme Samuel, who called for big four firms to be banned from providing any type of consulting services to their audit clients.
PwC, Deloitte, EY and KPMG dominate Australia’s audit and assurance sector, responsible for 97 per cent of external audits for ASX 300 companies, according to the ABC.
ASIC said confidence in the audit profession and the quality of audit services underpinned the effectiveness of its financial reporting framework.
“These letters respond to recent events that have undermined public confidence in the integrity of the audit industry in Australia,” O’Rourke said. “This surveillance is part of ASIC’s wider, ongoing work to improve the quality of financial reporting and audit in Australia.”
“It is critical to maintaining trust in, and the integrity of, our capital markets and enabling investors to make informed decisions.”
The regulator plans to publish its surveillance findings in the third quarter of 2025.
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