The Australian parliamentary inquiry into regulation of audit – what you need to know

The Parliamentary Joint Committee on Corporations and Financial Services tabled an Interim Report in Parliament on 27 February 2020. The recommendations outlined in the Interim Report are in step with community and stakeholder expectations, and will improve confidence and quality in audit, as well as provide cover for the risks facing Australians, says Reporting & Assurance Leader Amir Ghandar FCA. We are continuing to engage primarily in relation to how the recommendations are scoped and may impact SMEs, and the design and transitional arrangements of some of the recommendations.

Background

On 1 August 2019 the Senate referred an inquiry into the regulation of auditing in Australia to the Parliamentary Joint Committee on Corporations and Financial Services for report by 1 March 2020.

On 12 February 2020, the Senate extended the time for the presentation of the report to 1 September 2020.

CA ANZ welcomes the inquiry as an opportunity for Australia to join the global discussion on the purpose of audit so we can continually evolve to meet modern stakeholder expectations.

Our engagement

Our overall approach is focused on being an active voice and facilitator in the debate, making a difference on the issues surrounding audit regulation and the future of audit, and advocating for sensible and effective solutions in the public interest.

We have engaged with members and key stakeholders in Australia and New Zealand throughout 2019 to develop a vision around the future of audit, including on the key issues being debated.

This has included roundtables, workshops and meetings involving members in audit firms, commerce and industry, regulators and policy makers, as well as investor, governance, and business groups.

Our submissions

Submission 1

The committee secretary asked CA ANZ to provide some plain language information about auditing in Australia and relevant comparisons and developments overseas, to help the Committee as well as others wishing to make submissions.

We have prepared 'frequently asked questions' starting with 'what is an audit' and simple visuals summarising the financial reporting and auditing regulatory eco-system. We have also outlined key developments and background in the UK and elsewhere internationally so the inquiry can draw on up-to-date information around this.

Submission 2

CA ANZ has proposed a bold, comprehensive 15-point plan to provide new and better ways to improve the confidence, relevance and quality of audits and cover the risks facing Australian businesses and consumers.

Our 15 Point Plan sets out how auditors, boards/audit and risk committees, management/CFOs, and other key participants in the chain should refocus their approach to ensure:

• Conflicts of interest are mitigated and meet public expectations
• The level of risk tolerance and management are in keeping with the business environment, and
• The quality of audits continue to be well resourced, robust and transparent to key decision makers.

CA ANZ’s 15 Point Plan for audit

In the media

• Financial Review | Audit inquiry to shut down early | 29 September 2020
• Accountants Daily | Sweeping changes recommended in UK audit review | 20 December 2019
• Australian Financial Review | UK review provides 'food for thought' for audit inquiry | 19 December 2019
• Accountants Daily | CA ANZ details audit improvement plan | 29 October 2019
• ABC Online | Auditors told to swallow some medicine in wake of bank scandals | 29 October 2019
• ABC Radio | "Swallow some medicine": audit firms warned on independence, conflict of interest problems | 29 October 2019
• Money Management | CA ANZ releases 15-point audit roadmap | 29 October 2019
• Australian Financial Review | Investors right to expect auditors to check for fraud risk | 24 September 2019
• The Australian | Investors most willing to trust independent auditors | 4 September 2019
• Accountants Daily | Investors still trust auditors, says CA ANZ | 5 September 2019
• Accountants Daily | Senate establishes inquiry into audit quality | 5 August 2019