Last week, the Senate voted to establish an inquiry into the regulation of auditing, with the Parliamentary Joint Committee on Corporations and Financial Services set to issue a report by 1 March 2020.
The inquiry will look at the relationship between auditing and consulting services and potential conflicts of interests; the level and effectiveness of competition in audit and related consulting services; and audit quality, including valuations of intangible assets.
It will also look at the role and effectiveness of audit in detecting and reporting fraud and misconduct; the adequacy and performance of regulatory, standards, disciplinary and other bodies; and the effectiveness of enforcement by regulators.
Chartered Accountants Australia and New Zealand (CA ANZ) reporting and assurance leader Amir Ghandar welcomed the inquiry, noting the increased focus on audit quality on a global scale.
“High-quality financial statements continue to be fundamental to any market-based economy. Recent studies by the Australian Financial Reporting Council as well as regulatory financial reporting surveillance show a high level of confidence and quality in Australia’s audited financial reports,” Mr Ghandar said.
“However, this is against a backdrop of a new premium being placed on integrity and trusted information by the public.
“This is an opportunity for Australia to join the global discussion on the purpose of audit so we can continually evolve to meet modern stakeholder expectations.
“Current global debate, such as in the UK, shows it is time for a rethink on product, scope and purpose, rather than focusing just on process.”
The establishment of the audit inquiry comes after ASIC put auditors on notice after its latest audit inspections found that further work was needed to “improve quality”.
The Joint Committee on Corporations and Financial Services also expressed concerns about audit quality in Australia, noting that the issue was an international problem with some “deep-rooted problems” in the audit market, and calling for a serious review.
Further, the Financial Reporting Council delivered a scathing assessment of the current state of auditor disciplinary functions, with recommendations including the naming and shaming of auditors and firms that fail to meet audit quality expectations.
Some of the largest audit firms in the country have also called for ASIC’s audit inspection program to be revisited, after Accountants Daily revealed the individual audit results of the six largest firms earlier this year.