Audit review missing key concerns

The Treasury’s Audit Quality in Australia review does not address vital issues that threaten to undermine the quality of auditing, according to accounting and business advisory firm BDO.

Audit technical expert, BDO director Wayne Basford, said that while BDO is supportive of some recommendations in the report, the review has not considered the medium to long-term sustainability of the audit profession. He added that it has not addressed the issue of discounted audit fees in an increasingly complicated audit environment, which is “the most urgent and current issue facing the accounting profession”.

BDO, however, is supportive of suggestions in the review that the requirement to have an audit committee be shifted into the Corporations Act from Australian Securities Exchange (ASX) listing rules as well as an extension of the rules to the top 500 ASX companies.

The review paper, which was released for consultation on Friday, aimed to identify the key drivers of audit quality and to assess whether any measures should be taken to address any threats to these drivers of audit quality, said the chairman of the Financial Reporting Council, Jeffrey Lucy.

“Transparent and credible financial reporting together with an effective audit function underpins confidence in our financial system and is essential for sound economic growth,” he said.

He added that while Australia’s financial reporting system and audit regulation is both robust and stable, with no need for fundamental reform, the global financial crisis presented the auditing profession with challenging risks and uncertainties.

Lucy said research undertaken by the Treasury “has identified a significant number of important policy issues that warrant consideration by the key stakeholders in Australia”.