The draft Corporations Legislation Amendment (Audit Enhancement) Bill 2011 which will introduce a range of reforms relating to company audits has been released for comment.

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 of listed companies 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 (who conduct audits of ten or more Australian entities of the following categories: listed companies, listed registered schemes, authorised deposit-taking institutions (ADIs) and insurance companies) to prepare annual transparency reports which would be placed on their websites;

•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.

The closing date for submissions is 28 October 2011.