Financial planners will have to take greater care with the auditing of their company accounts, with the Australian Securities and Investments Commission (ASIC) warning that new auditing standards for all businesses are now legally enforceable.
ASIC chief accountant Greg Pound told the Certified Practising Accountants (CPA) Congress in Melbourne earlier this month that new auditing standards under CLERP 9 are now law and will be enforced through pro-active surveillance.
“Auditing standards are now legally binding and they are standards ASIC can enforce,” he said.
The new standards will apply to all companies, although ASIC’s surveillance program will initially focus on listed companies.
The changes include new rules to ensure the independence of auditors.
Pound said auditors are now legally required to avoid conflicts of interest with the businesses they audit.
“The Act requires the auditor to have actual independence and be perceived as independent.”
This means the firm offering audit services cannot be used for other financial advice unless it can be proved the actual auditor, or their team, remain independent.
Any breaches must be reported to ASIC within seven days and the problem has to be fixed within 21 days.
“If the problem cannot be fixed, the company has to find a new auditor,” Pound said.
“We will undertake an audit surveillance program before the end of the year looking at the [audit] quality control provisions in companies.”
ASIC will initially look at the four main accountancy firms and then move on to the second tier. It aims to work its way through publicly listed companies, which will include dealer groups and fund managers.
“If you are on an audit committee, you will have to provide a declaration to the directors of the company that there have been no conflicts of interest,” Pound said.
