MEDIA RELEASE: PJC Corporations and Financial Services - Interim report on the Regulation of auditing

MEDIA RELEASESenator James PatersonChair, Parliamentary Joint Committee on Corporations and Financial ServicesLiberal Senator for VictoriaTabling of interim report: Regulation of auditing inquiryhttps://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/RegulationofAuditing/Interim_reportThursday 27 February 2020Today, the Parliamentary Joint Committee on Corporations and Financial Services has tabled an interim report on the regulation of auditing in Australia. The committee has made 10 recommendations to improve confidence in audit services.Auditing is systemically important to a healthy financial system. It gives investors’ confidence they can rely on financial statements made by companies. Audit therefore needs not just to be high quality but be seen to be high quality.Thus far, through more than 110 submissions, and 32 witnesses at four public hearings, no new empirical evidence of systemic audit failure was uncovered. However, stakeholders presented anecdotal evidence and raised fears about audit quality. This indicates a lack of trust in the audit industry that must be remedied.The committee’s recommendations seek to remedy this trust deficit by providing greater transparency, clarity and confidence of the auditing industry in Australia.They 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 tendering, compulsory digital reporting and other related matters.The committee has carefully weighed international experience to make recommendations which seek to balance competing factors of auditor competence and independence to deliver an audit market which is efficient, effective and trusted.For example, based on experience overseas, technological innovation through digital reporting has the potential to lower the costs, increase the accuracy and improve the transparency of financial reporting. But there was no evidence to support radical measures which have been abandoned or discounted internationally, such as mandatory structural separation of audit firms.The committee is releasing these recommendations on an interim basis because the policy lessons have been clear from the hearings already conducted. There should be no delay to the action required by regulators, firms and government to address the concerns raised about the industry. The committee will hold further hearings before a final report due in September.ENDSMedia inquiries: Sophie McKendry, Media Advisor, P: 0451 007 915For background information: Committee SecretariatP: +61 2 6277 3583 E: corporations.joint@aph.gov.auFor more information about this Committee, you can visit its website.