Cuts to ASIC’s audit oversight ‘concerning’, says CA ANZ
The accounting body has raised concerns about the removal of ASIC’s financial reporting and audit team and its potential impact on capital markets.
CA ANZ has outlined concerns about ASIC’s recent restructure and the implications it could have for auditing and accounting profession as well as capital markets.
ASIC recently revealed that as part of a restructure of the organisation, it had decided to combine its financial reporting surveillance with it audit inspection programs, which were previously separate, as reported by ABC’s 7.30 this week.
In a recent statement, CA ANZ said while it acknowledges the objectives of ASIC’s recent restructure in streamlining enforcement and faster decision making, it remains “concerned about the removal of a dedicated financial reporting and audit team and chief accountant”.
“ASIC’s oversight role and statutory powers on reporting and audit are Australia’s main regulatory defence serving to ensure we have reliable information in the capital markets,” CA ANZ said.
“We share concerns at the extent of apparent cutbacks in ASIC’s audit and reporting oversight, and we have raised this with ASIC.”
The accounting body said it was in the best interest of the auditing and accounting profession to have a “strong and very well-funded regulator”.
“Its purpose is very much aligned in the public interest to ensure the reliability, efficiency, and attractiveness of Australia’s capital market is assured,” it said.
“Government needs to ensure that this funding is long term and reflects the proportionality of other regulated capital markets.”
Government urged to review Regulation of Auditing in Australia Report
The accounting body has also urged the government to respond to the findings made by the inquiry into the Regulation of Auditing in Australia’s 10 recommendations to address some of the current concerns with the quality of audits.
"That inquiry, which started in 2019, looked deeply at audits in Australia, received more than 100 submissions, held several days of hearings and a received plethora of other evidence,” said CA ANZ.
“The Inquiry examined audit regulation, quality, independence, the market and other related matters – and ultimately put forward clear bipartisan conclusions and 10 recommendations.”
CA ANZ said the recommendations within the final report would help strengthen independence standards and the role of governance and professional scepticism.
The accounting body said the federal government should undertake the consultation and scoping needed to realise the package of reforms made by the inquiry.
One of the recommendations made by the inquiry called for the Financial Reporting Council to develop defined categories and associated fee disclosure requirements in relation to audit and non-audit services and a list of non-audit services that audit firms are explicitly prohibited from providing to an audited entity.
It also recommended that the Accounting Professional and Ethical Standards Board consider revising the APES 110 Code of Ethics to include a safeguard that no audit partner can be incentivised, through remuneration advancement or any other means or practice, for selling non-audit services to an audited entity.
The Committee also recommended that the Financial Reporting Council oversee the revision and implementation of Australian standards to require audited entities to disclose auditor tenure in annual financial reports.
This disclosure would include both the length of tenure of the entity’s external auditor, and of the lead audit partner.
CA ANZ said while the profession, directors and auditors have made efforts towards addressing the spirit of the recommendations, a government response was still needed.
The accounting body noted that market participants still have a high level of confidence in auditors and audited financial reports.
A recent investor survey by CA ANZ indicated that confidence in Australia’s audited financial reports remains at around 90 per cent, and that auditors remain the most trusted intermediary when it comes to protecting investors’ interests, followed by regulators and analysts.
“However, we recognise maintaining this demands rigorous diligence, a course of continuous improvement and a focus on the risks,” said CA ANZ.
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