BOTH GUIDANCE AND OVERSIGHT ESSENTIAL FOR AUDITORS, AS ASIC RELEASES NEW COMPLIANCE REVIEW

Chartered Accountants ANZ

Chartered Accountants Australia and New Zealand (CA ANZ) has welcomed a new review of auditor compliance, as greater understanding of evolving expectations will support the audit profession to meet its obligations and maintain trust.

The Australian Securities and Investments Commission (ASIC) has released the Building Trust report into auditors’ compliance with independence and conflict of interest obligations, following on from its recently updated guidance on self-reporting by auditors, RG 34.   

The new guidance has signalled to the audit profession that the regulator will expect more breach reporting and encourages a move towards a banking-style ‘breach and report’ model.

“Auditors play a critical role in our economy, and their skills and independence are key to confidence in financial reporting,” said Amir Ghandar FCA, Reporting and Assurance Leader at CA ANZ.

“We welcome ASIC’s data-led review of auditor independence and the findings will help improve systems and practices – but it is also important to note that the overall breach rate across all audits is likely much lower than the results suggest.”

ASIC identified breaches in approximately one-third of the 48 cases it investigated in-depth, but the review covered over 2,900 auditors, homing in on risks through data analysis and other regulatory techniques.

“Ethical judgment is at the heart of audit – auditors often go beyond compliance and rules to assess both actual and perceived independence,” said Mr Ghandar.

“We will continue to work constructively with ASIC to ensure the audit profession is supported to understand this evolving area of judgment, especially after the updated guidance on self-reporting clarified expectations around ‘when and what’ to self-report,” said Mr Ghandar.

“Although its new guidance was issued after the review period, ASIC noted that none of the flagged breaches were self-reported, unlike in sectors such as financial services, where breaching and self-reporting is more common.

“Auditor breach reporting has in the past focused on contraventions by audited entities, with auditors working to avoid breaching the law at all themselves, rather than a breach and report model,” Mr Ghandar said.

“The profession is committed to continuous improvement and welcomes collaboration with ASIC to ensure audit independence remains robust, transparent, and trusted.”

About Chartered Accountants Australia and New Zealand

Chartered Accountants Australia and New Zealand represents more than 140,000 financial professionals, supporting them to make a difference to the businesses, organisations and communities in which they work and live. Chartered Accountants are known as Difference Makers. The depth and breadth of their expertise helps them to see the big picture and chart the best course of action.

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