Urgent action needed to improve audit regulation, warns CPA

Urgent action is required to make audit regulation more supportive and sustainable, CPA Australia has told the Australian National Audit Office (ANAO).

In a recent submission to ANAO’s review into ASIC’s effectiveness in regulating registered company auditors, the professional body has called for a raft of changes including a streamlined registration process for company auditors, a redesign of ASIC’s surveillance and inspection and better coordination across ASIC’s audit functions.

CPA Australia, audit and assurance lead Tiffany Tan said registered company auditors play a crucial role in safeguarding Australia’s financial markets.

Tan said the ANAO review would provide the opportunity to “reduce unnecessary complexity and burden, while upholding quality and trust in financial markets”.

“The number of registered company auditors has more than halved over the past two decades,” she said.

“Without urgent action to make audit regulation more supportive and sustainable, we risk not having enough professionals to meet the rising demand for assurance, especially in areas like sustainability reporting.”

The CPA submission noted there has been a significant decline in the number of RCAs in the past two decades, from over 7,000 to around 3,200 in 2025.

“While there are likely multiple factors behind this trend, ASIC’s current regulatory approach, including rising cost recovery levies and compliance demands, may be contributing to the declining pipeline,” said CPA.

“With the increasing importance of sustainability reporting and the emerging need for assurance in this space, there is an urgent need to support and grow the audit profession.”

Another contributing factor to the decline is the pathway to the RCA registration process.

CPA Australia has called for a more streamlined and proportionate auditor licensing framework, similar to New Zealand’s two-tier system.

The accounting body said this would reduce barriers for smaller firms while maintaining audit quality and oversight.

The professional body also recommended a fundamental redesign of ASIC’s audit surveillance program to address concerns around its limited scope, biased sampling, unclear reporting, and inefficient implementation.

“A more robust and representative approach, combining risk-based and random sampling, clearer objectives, and expanded reviews, is needed to ensure audit quality is accurately assessed,” it said.

“Improvements in inspection expertise, timeliness, and transparency, along with better public reporting and a clearer escalation process, will enhance confidence, reduce unnecessary burden, and align the program with international best practice.”

CPA said there was also a need for greater transparency, engagement, and collaboration between ASIC and the profession, similar to models in New Zealand.

“We emphasize the importance of sharing detailed findings with industry stakeholders, including standard-setting bodies, to improve audit quality,” it said.

“A more open, consultative approach would foster better regulatory outcomes and strengthen industry engagement.”

Tan said CPA Australia believes there are significant opportunities to improve the timeliness, certainty and transparency of ASIC’s audit inspection process to enhance real-time feedback to firms, increase efficiency and improve market integrity.

“We would like the ANAO to consider opportunities to modernise audit inspection engagements and improve communications and information sharing within ASIC itself, as well as with auditors, firms and professional accounting bodies, including CPA Australia,” she said.

“We want to see ASIC working more transparently and collaboratively with the profession. More open dialogue and sharing of findings will lead to better outcomes for all.”