AUDITORS remain hopeful that self-regulation will remain the order of the day in their industry.
AUDITORS remain hopeful that self-regulation will remain the order of the day in their industry.
They agree audit independence is an issue but feel that much of the pressure on auditors is unfair because the public does not understand the role of auditors.
The Federal Government commissioned Ian Ramsay’s report into audit independence, which has been largely accepted by the accounting industry.
The report focused largely on the separation between audit and non-audit services provided by accounting firms to their clients.
Mr Ramsay recommended the regulation of non-audit services be dealt with by professional ethical rules and those rules be updated to reflect the latest International Federation of Accounting proposals.
However, Mr Ramsay proposed making disclosure of non-audit services part of the Corporations Act if the accounting standards were not updated.
Audit independence has been the major factor questioned in the wake of recent corporate collapses – especially that of US energy trading giant Enron.
That collapse seems likely to trigger the fall of big five accounting firm Andersen, which was responsible for auditing Enron’s books, but also did lucrative consulting work for it.
Parliamentary Secretary to the Treasurer, Ian Campbell, recently called for submissions on the Government’s report into audit independence.
Submissions closed last month and the Government will study those before putting out its response.
A spokesman for Mr Campbell said he was unsure what form the Government’s response would take or when it would come.
Groups such as the Australian Shareholders Association have been calling for the Government to introduce legislation to control auditor independence.
However, other groups, including The Australian Institute of Company Directors, and professional accounting bodies CPA Australia and the Institute of Chartered Accountants back a self-regulatory regime.
AICD chief executive officer John Hall said prescriptive legislation would not be the answer.
Both professional accounting bodies have recommended updating their accounting standards to include IFAC’s proposals.
Their joint working party’s suggestions included a mandatory two-year waiting period before a retired audit partner involved in the audit of a client could become a director of that client, and assurance fees from a single client not exceeding 15 per cent of total fees.
ICAA chief executive officer Stephen Harrison said a new accounting standard governing auditors should be in place by May.
But that standard also will consider corporate governance and management responsibility alongside audit independence.
Deloitte Touche Tohmatsu audit partner Graham McHarrie said there was a public misconception about the purpose of an audit and what it could deliver.
“An audit is principally focused on the correct presentation of a company’s position at a given period of time,” Mr McHarrie said.
“All the auditor is saying is that the results are correctly presented.
“An audit doesn’t comment on whether there has been any fraud in the organisation, for example.”
CPA Australia WA chief executive officer Justin Walawski said it was not an auditor’s job to uncover any improper conduct within an organisation.
“Auditors will test that internal controls exist, but if somebody wants to hide something, they will.”
p See page 16.
They agree audit independence is an issue but feel that much of the pressure on auditors is unfair because the public does not understand the role of auditors.
The Federal Government commissioned Ian Ramsay’s report into audit independence, which has been largely accepted by the accounting industry.
The report focused largely on the separation between audit and non-audit services provided by accounting firms to their clients.
Mr Ramsay recommended the regulation of non-audit services be dealt with by professional ethical rules and those rules be updated to reflect the latest International Federation of Accounting proposals.
However, Mr Ramsay proposed making disclosure of non-audit services part of the Corporations Act if the accounting standards were not updated.
Audit independence has been the major factor questioned in the wake of recent corporate collapses – especially that of US energy trading giant Enron.
That collapse seems likely to trigger the fall of big five accounting firm Andersen, which was responsible for auditing Enron’s books, but also did lucrative consulting work for it.
Parliamentary Secretary to the Treasurer, Ian Campbell, recently called for submissions on the Government’s report into audit independence.
Submissions closed last month and the Government will study those before putting out its response.
A spokesman for Mr Campbell said he was unsure what form the Government’s response would take or when it would come.
Groups such as the Australian Shareholders Association have been calling for the Government to introduce legislation to control auditor independence.
However, other groups, including The Australian Institute of Company Directors, and professional accounting bodies CPA Australia and the Institute of Chartered Accountants back a self-regulatory regime.
AICD chief executive officer John Hall said prescriptive legislation would not be the answer.
Both professional accounting bodies have recommended updating their accounting standards to include IFAC’s proposals.
Their joint working party’s suggestions included a mandatory two-year waiting period before a retired audit partner involved in the audit of a client could become a director of that client, and assurance fees from a single client not exceeding 15 per cent of total fees.
ICAA chief executive officer Stephen Harrison said a new accounting standard governing auditors should be in place by May.
But that standard also will consider corporate governance and management responsibility alongside audit independence.
Deloitte Touche Tohmatsu audit partner Graham McHarrie said there was a public misconception about the purpose of an audit and what it could deliver.
“An audit is principally focused on the correct presentation of a company’s position at a given period of time,” Mr McHarrie said.
“All the auditor is saying is that the results are correctly presented.
“An audit doesn’t comment on whether there has been any fraud in the organisation, for example.”
CPA Australia WA chief executive officer Justin Walawski said it was not an auditor’s job to uncover any improper conduct within an organisation.
“Auditors will test that internal controls exist, but if somebody wants to hide something, they will.”
p See page 16.
