September 29, 2020
The parliamentary committee looking at audit quality has abandoned plans to hold more hearings and will instead produce final recommendations aimed at improving the standard of auditing and company reporting in Australia.The move will see the inquiry's interim recommendations form the basis of a final report that is handed to the government.
Committee member Labor Senator Deborah O'Neill has repeatedly pressed the government to adopt the recommendations as a matter of priority amid the COVID-19 pandemic.
The 10 interim recommendations, published in February, include tougher auditing standards and new requirements around tenders for auditors at public companies.The committee also recommended that listed companies be forced to publish their results using a standard digital format and that clearer rules be established around the types of non-audit work auditors can provide their audit clients.“In my view the committees interim recommendations have stood the test of time,” Liberal senator and inquiry chairman James Paterson said.“What has changed is the radically different economic climate since the report was released. Given that, the government will have to consider appropriate timelines and thresholds for implementation.
“The last thing we want to do is impose transitional costs of a new regulatory framework when businesses are rightly focused on staying afloat, saving jobs and growing out of the crisis.”
The inquiry had been originally scheduled to hand down a final report in March but Senator O'Neill pushed for an extension to September to allow time for extra hearings.At the time, she said certain firms had refused to comply with information requests from the committee. This issue was resolved with the firms subsequently becoming more forthcoming to questions on notice.The final reporting date was moved again in May to December because of disruption to the committee’s work caused by the COVID-19 outbreak.The pandemic-induced recession led to the members of the committee changing their views about the need for extra hearings.In June, Senator O'Neill wrote to the government calling for the immediate adoption of the inquiry's interim recommendations, following the collapse of German payments company Wirecard, which was undetected by accounting giant Ernst & Young.She repeated the request in in August, this time over concerns that the uncertainty caused by COVID-19 had increased the risk of deception in annual reports presented by listed companies.The inquiry has held four days of hearings and received more than 100 submissions with general agreement from the firms, the corporate regulator and some experts that the current state in audit is not serving the users of financial information adequately.At the same time, professional bodies and academics are split on whether there was a problem with audit quality at all.The inquiry has seen the big four consulting firms Deloitte, EY, KPMG and PwC, which are traditionally tight-lipped about internal operations, forced to reveal the way auditors are evaluated and paid, details about clients that have collapsed under their auditing watch, the tax arrangements of partners and the amount that retired partners are paid.
