Australian audit body questions European reform approach

The body responsible for setting auditing and assurance standards in Australia has questioned whether changes being proposed to European audit regulation will achieve their stated objectives.

The Australian Auditing and Assurance Standards Board (AUASB) said the draft European standards aimed at improving audit quality and restoring confidence in financial statements might prove counterproductive in some respects.

Commenting on the European changes, AUASB chairman Merran Kelsall said that a number of the proposals such as the mandatory separation of auditing and non-auditing services, and mandatory audit firm rotation, were contentious and likely to meet significant resistance from the accounting profession.

"Any measure that results in arbitrary structural changes to the international accounting firms is potentially counterproductive to audit quality," she said.

However Merran welcomed the European Union moving towards the mandatory introduction of international audit standards, issued by the International Auditing and Assurance Standards Board and adopted in Australia in 2010.

"As the auditing standards setter in Australia, we welcome any measure that will create a more consistent, robust and reliable system internationally for the delivery of high quality audit services," she said. "The confidence of capital markets in the standards that govern audit practitioners and statutory financial reporting services is essential to maintaining a stable yet dynamic audit market."