The submission by Accountants and More, a firm from northern New South Wales, claims smaller accounting firms are at a competitive disadvantage due to the policy currently upheld by ASIC in relation to registering company auditors.
According to the submission, Terry Murphy CPA, principal accountant at the firm, has had two auditor registration applications rejected by ASIC under both the 2,000 hours rule (in 2004), and under the supervision method (2013), leading to subsequent legal challenges on each occasion.
In each case, according to the submission, ASIC’s argument was that if the regulator approves an auditor registration that auditor then has the ability to audit large organisations such as BHP. This attitude leads to ASIC placing unrealistic and unfair requirements on applicants, the submission reads.
“Mr Murphy will allege that ASIC are not upholding the national interest in relation to competition by this closed shop approach,” the submission said.
“Mr Murphy calls on the Productivity Commission to allow the registration of company auditors on a more fair and equitable basis and believes this registration should be removed from ASIC and from the accounting bodies who appear to have an informal understanding to refuse applications”.
According to the submission, current regulation policy means that company auditing is now almost exclusively the domain of the big four accounting firms.
“The Institute of Accountants and CPA both seem very comfortable with this arrangement, clearly years of lobbying politicians have paid big dividends for the large end of town”.
While CPA Australia declined to comment on the submission, Amir Ghandar, policy advisor – audit and assurance at CPA did comment on competition in the auditing sector in general, saying CPA research has found “healthy competition” exists.
CPA’s Competition and Independence in the ASX Listed Company Audit Market: Summary Of Findings, released in 2014, shows that in reality, the top four firms only audit around 44 per cent of ASX listed companies.
Between the years 2000 and 2011, medium and small audit firms increased their market share from around 37 per cent to 56 per cent.
In terms of registration policy, Mr Ghandar said the requirements for registration need to be primarily about ensuring people have reached the right level of competency, and not driven by a desire to increase competition.
“It’s not about lowering the bar, it’s about having the bar at the right place,” he said.
ASIC declined to comment with regards to the issue when contacted by AccountantsDaily.
Are you thinking of expanding your offering into SMSFs to grow your client base? Become a pro at SMSF fundamentals and make your clients bulletproof with the SMSF Foundations course. Learn directly from Aaron Dunn from Smarter SMSF as he deep-dives into the fundamentals you need to know to successfully undertake your work as an SMSF practitioner. Earn up to 21 CPD hours! Learn more