Draft legislation released today will help improve audit quality in Australia and deliver greater transparency and reliability, said the Parliamentary Secretary to the Treasurer, David Bradbury.
The Corporations Legislation Amendment (Audit Enhancement) Bill 2011 is the product of industry consultation and will introduce a range of reforms to help improve the standards of audits.
"Independent external audits, undertaken in accordance with high quality auditing standards, help to ensure that the financial statements of companies and other reporting entities are reliable and transparent, which is essential for ensuring confidence in well-functioning markets," said Mr Bradbury.
"These reforms have been developed following extensive consultations with key stakeholders in response to Treasury's consultation paper Audit Quality in Australia: A Strategic Review", Mr Bradbury said. "The Government has worked closely with the auditing profession and I thank them for their cooperation and input into this process.
"While Australia's audit regulation framework is robust and stable, the proposed amendments will implement important reforms to enhance audit quality and ensure that Australia's regulatory framework remains in line with international best practice."
The reforms contained in the draft legislation include:
- maintaining the existing five year mandatory rotation period for audit partners and the current two year time out period, with an option to extend the rotation period up to an additional two years, provided the directors and audit committee are satisfied that the extension is necessary to safeguard the quality of the audit and would not give rise to an auditor independence conflict of interest situation;
- requiring the larger audit firms to prepare annual transparency reports which would be placed on their websites;
- replacing the auditor independence function of the Financial Reporting Council (FRC) with a strategic audit quality policy advisory role, eliminating duplication with ASIC's ongoing audit inspection program;
- permitting ASIC to publish reports on firms that have failed to address, within six months, an audit deficiency identified by ASIC; and
- empowering ASIC to communicate directly with a company, its directors or its audit committee in relation to significant matters relating to the company's compliance with its financial reporting and continuous disclosure obligations or the conduct of the audit of the company.
Copies of the draft amendments and the explanatory material which includes the Regulation Impact Statement can be obtained from the Treasury website.
The closing date for submissions is 28 October 2011.
30 September 2011