Australian Audit Firms Face Tighter Rules

Audit firms working in Australia will now be required to dramatically improve the quality, regulatory oversight and transparency of company audits.

The move follows Australian government legislation that will compel audit firms to publish an annual transparency report when they conduct audits of 10 or more companies. The Corporations Legislation Amendment (Audit Enhancement) Bill 2012 gives the corporate regulator new powers to publicly shame accounting firms where it discovers problems with internal controls or a specific audit which are not remedied.

It also maintains the five-year auditor rotation requirement but will allow a two-year extension where this 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.

The Bill also keeps the mandatory five year auditor rotation requirement but adds a two-year extension exception rule where it does not create a conflict of interest and will prevent the loss of knowledge and experience in scenarios where rotation could undermine the quality of the audit.