Audit of Australia's auditing laws reveals serious anomalies
Thursday, 10 March 2016
In a real case of "who watches the watchers?", researchers at the University of Adelaide have conducted a major review of laws related to auditing across the nation, and found widespread inconsistencies.
Many organisations in Australia – from the largest multinational companies through to local tennis clubs and churches – have an audit conducted annually.
But who conducts these audits has been the focus of a study conducted by researchers in the University's Business School.
The results of their work are now leading to a rethink of who audits what in Australia.
"One of the key issues is that the various laws relating to who is designated to conduct audits vary, sometimes quite widely, between the States, Territories and the Commonwealth. The laws of the Australian jurisdictions appear to have been drafted with little or no coordination with each other. It's all a bit of a mess, really," says the project leader, Dr Max Bessell from the Adelaide Business School.
"Many audits relate to the annual financial statements of an organisation, but they can also include other engagements, such as the trust accounts of solicitors and land agents, and to ascertain if government grant recipients have spent their funds appropriately," Dr Bessell says.
Chartered Accountants ANZ engaged the University to conduct research into the demand for the services of Registered Company Auditors (RCAs) in Australia.
"An RCA is the primary auditor designation in Australia and is established by the Corporations Act. However, over time and because the RCA is the only suitable auditor designation, many other laws in the Commonwealth, States and Territories have adopted it," Dr Bessell says.
"Some laws specify the use of an RCA only, others stipulate an RCA and/or a member of a professional accounting body, and others have no mention of who the auditor should be at all.
"The resulting picture is one in which the demand for the RCA has extended far beyond what they were designed for."
Chartered Accountants ANZ has presented the research findings to the Financial Reporting Council, the body responsible for the financial reporting framework in Australia and includes oversight of auditing standards.
“It's pleasing to know that the results of our work will be considered by the Financial Reporting Council as part of their responsibilities," Dr Bessell says.
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