A key Parliamentary committee has given the audit sector a comparatively clean bill of health because even though the Australian Securities and Investments Commission (ASIC) delivered critical inspection reports, the regulator said this data should not be relied on.
The chair of the Parliament Joint Committee on Corporations and Financial Services, Senator James Paterson said the committee had not identified any new empirical evidence of systemic audit failure in Australia but acknowledged that this was largely due to ASIC’s explanation that its inspection reports were not indicative of the existence of broader problems.
“The most commonly relied upon evidence to claim we have systemic audit failure in Australia was the ASIC inspection reports. These have certainly attracted significant media attention and commentary in recent years, and they are reason for some concern,” Senator Paterson said.
“But as ASIC was at pains to point out on multiple occasions during the inquiry, this data should not be relied upon to make judgements about the entire industry because they are not designed to be either a representative or random sample. Instead, ASIC deliberately targets audit files based on risk. This is entirely appropriate for a regulator.”
“As ASIC says, this means we must be very careful extrapolating on this data. As other witnesses raised, and ASIC acknowledged, the figures also incorporate all issues with audit from the least serious to the most significant,” the senator said.
The Parliamentary Committee’s interim recommendations include mandating disclosure of ASIC’s individual firm inspection reports, clear definitions of audit and non-audit services, expanded auditor independence declarations, restrictions on audit partner remuneration, audit firm public tender and compulsory digital reporting.
