CPA Australia CEO Chris Freeland has commented on the implications of a recent Australian Securities and Investments Commission (ASIC) report that scrutinised auditor adherence to independence and conflict of interest rules as stipulated by the Corporations Act 2001.
The report should be viewed as a catalyst for positive change within the audit industry, according to Freeland.
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It focused on the compliance of Registered Company Auditors (RCAs) and Authorised Audit Companies with the Corporations Act 2001.
ASIC’s annual report for 2023-24 indicates that it oversees less than 3,200 RCAs.
Out of approximately 2,900 auditors, a risk-based approach led to a review of 109 auditors, with 15 identified to have likely breached independence obligations.
The findings particularly highlighted issues with auditor rotation rules, with nine of the 15 auditors breaching mandatory rotation periods.
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By GlobalDataFreeland points out that the rotation rules are complex and suggests that ASIC’s guidance on auditor rotation, which has not been updated since 2007, could be revised to reflect the dynamic nature of the audit sector.
The breaches were predominantly found in smaller firms and among individual practitioners, indicating the need for more focused educational initiatives and support for these groups.
CPA Australia advocates for a more thorough approach to evaluating threats to independence and implementing safeguards, which is particularly pertinent in a compact market like Australia.
To improve practices, CPA Australia supports the report’s recommendations for enhanced documentation and communication regarding independence assessments.
The organisation also encourages cooperation between ASIC and professional bodies to strengthen ethics and independence through education and updated guidelines.
In a statement, Freeland said: “Independence requirements are particularly complex, spanning legislation, ethical codes and auditing standards. They are designed not only to address actual conflicts but also to safeguard against perceived ones. ASIC’s recent findings reinforce the need for continuous improvement, not alarm.”
Prior to this, CPA Australia supported the Australian Government’s decision to adjust superannuation tax concessions for accounts exceeding A$3m ($1.95m), set to take effect from 1 July 2026.
