The Institute of Certified Management Accountants (ICMA) chief executive Professor Janek Ratnatunga believes the current corporate audit controls are inadequate to reign in bad behaviour.
“The failure of the audit profession is illustrated by the recent revelations by Mr Rod Sims, chair of the Australian Competition and Consumer Commission (ACCC) of corporate misbehaviour, of companies found guilty of concealing faulty products, safety issues, price-fixing, criminal cartels, false, misleading and deceptive advertising, and false product claims,” said Professor Ratnatunga.
“The external audit is supposed to operate as a trust mechanism to persuade the public that capitalist corporations and management are not corrupt and that companies and their directors are held accountable.
“Perhaps it's best to have a royal commission on the auditing profession to evaluate if auditors have been short-changing their clients, who are the shareholders and not the directors and management.”
Further, Professor Ratnatunga believes penalties should be 10 to 20 times higher than they are today.
“It is important for government legislation to significantly increase the cost of bad behaviour. Currently, penalties are often easily absorbed by the sheer volume of revenue generated by such unethical actions,” said Professor Ratnatunga
“Alongside such hefty fines, a statutory strategic audit and strong whistleblower protection will increase the chance of bad behaviour being exposed and fined, and their executives sent to jail,” he urges.