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Tech & Science Auditors told to swallow some medicine in wake of bank scandals

08:15  27 november  2019
08:15  27 november  2019 Source:   msn.com

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a close up of a computer keyboard: Auditors' independence has been questioned in the wake of the bank scandals uncovered by the royal commission. (Flickr: teegardin)© Provided by Australian Broadcasting Corporation Auditors' independence has been questioned in the wake of the bank scandals uncovered by the royal commission. (Flickr: teegardin)

Having escaped scrutiny at last year's financial services royal commission, auditing firms are being urged by their own professional body to confront concerns about independence and conflicts of interest that are damaging public confidence in the sector.

In a submission to the parliamentary inquiry into the auditing profession, Chartered Accountants Australia and New Zealand (CAANZ) wants to "clarify and strengthen" prohibitions on audit firms providing often-lucrative consulting services to companies they audit.

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CAANZ Reporting & Assurance leader Amir Ghandar said a 15-point plan in the submission would include an "if not, why not" review on firms providing "non-audit" services that risk real or perceived conflicts of interest.

"We absolutely recognise that there's a need for the profession to swallow some medicine and make sure that our rules are up to date," Mr Ghandar told the ABC's AM program.

"We have to make sure that the way we are addressing potential conflicts of interest and independence is keeping pace with what the public expects. We can see that there is a great deal of scrutiny, including from the parliamentary inquiry.

"Australians have a fair and reasonable expectation that auditing and other lines of defence will protect them from risks and shocks in their financial and consumer lives."

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CAANZ represents 125,000 auditing and accounting professionals including the "big four" accounting firms KPMG, EY, PWC and Deloitte, which are facing heat from the parliamentary committee.

Although the royal commission's terms of reference did not include the auditing profession, critics including former corporate crime investigators believe investors have been exposed to potential misconduct by conflicts of interest and poor auditing standards.

Mr Ghandar conceded confidence and trust in the auditing profession had been damaged by revelations from the royal commission.

"It's an admission that we very much have to keep pace with public expectations," Mr Ghandar said.

"Many institutions right now are under pressure when it comes to trust. I think trust is certainly not something that can be taken for granted by any institution."

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Former ASIC investigator Glen Unicomb, who led the probe into failed insurance giant HIH, told the ABC last year auditing firms needed to face a royal commission to prove their independence.

The joint committee on corporations and financial services said earlier this year it had been, "concerned for some years about audit quality" and cultural problems which were "deep-rooted".

The committee expressed concern the "big four" firms had become corporate insiders and that their role as "independent outsiders scrutinising the accounts of major corporations" was being compromised.

In a statement, CAANZ said the submission was "a roadmap to the future" on new ways to improve the confidence, relevance and quality of audits.

International regulators face rising pressure from shareholders to consider tighter auditing and disclosure requirements to warn investors about companies at risk of collapse.

In Britain, the Financial Reporting Council last month said auditors would have to more "robustly challenge" company director statements about why their corporations were unlikely to fold after the collapse of industrial giant Carillion.

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