The Government has introduced the Corporations Legislation Amendment (Audit Enhancement) Bill 2012 into the House of Representatives.
UPDATE 3 July: The Act received Royal assent on 27 June 2012.
Measures in the Bill include:
• Requiring audit firms to publish an annual transparency report if they conduct audits of 10 or more of the following types of entities: schemes, authorised deposit-taking institutions (ADIs) and insurance companies. An auditor’s transparency report is to be published on the auditor’s website within four months of the end of the year to which the report relates. A copy of the report is to be lodged with ASIC on or before the day it is published. The disclosures to be made in the transparency report will be prescribed in the Corporations Regulations.
• Providing more powers to ASIC to issue an audit deficiency report in relation to an individual audit firm if it identifies an audit deficiency in the auditor’s quality control system or the conduct of an audit that may be detrimental to the overall quality of the audit.
• Removing duplication of audit inspection responsibilities so that ASIC continues its audit inspection program and the Financial Reporting Council (FRC) focuses on providing strategic policy advice and reports in relation to the quality of audits conducted by Australian auditors.
• Allowing ASIC to communicate directly with an audited body. The current law prevents ASIC from being able to disclose information, because of confidentiality requirements, to an audited body or its audit committee where it becomes aware of significant matters affecting the audit of a company.
• Maintaining the five-year auditor rotation requirement but allowing a two-year extension where it will not give rise to a conflict of interest and will prevent the loss of knowledge and experience in situations where rotation could undermine the quality of the audit.
