ASIC issues warning to company auditors as part of misconduct crackdown

In a recent letter sent to all company auditors, ASIC has reminded company auditors of their legal, ethical and professional obligations and warned auditors that auditor misconduct remains an enforcement priority for ASIC.

The corporate regulator noted that there had been a significant focus on the conduct of auditors and audit firms which had led to concerns about trust and confidence in the profession.

"As the regulator of registered company auditors, ASIC is concerned about issues that have been raised about auditors who have not complied with the law and professional and ethical standards to act independently and ethically," it said in the letter.

ASIC also reminded auditors of its longstanding surveillance program of reviewing financial reports and audit files.

It also informed auditors that it had commenced separate surveillance activities to examine complaints received by large audit firms about their audit practice.

"In relation to ASIC enforcement, auditor misconduct is one of our specific enforcement priorities. We will commence investigations where we have sufficient initial concerns regarding a possible breach of the Corporations Act and we have done so in relation to recently raised allegations," the corporate regulator said.

"Where we identify sufficient evidence that a registered company auditor has failed to comply with their obligations and meet the standards required of them, we may take enforcement action which can include an application to the Companies Auditors Disciplinary Board seeking cancellation or suspension of their registration, issuing an infringement notice or taking civil action."

ASIC also reminded company auditors of some of their specific duties as auditors, including independence, providing accurate and timely information to ASIC, reporting relevant matters to ASIC and acting ethically.

ASIC said it will also be initiating twice-yearly meetings open to all registered company auditors where it will discuss its priorities, focus areas, findings and recommendations for good practice and hear from auditors about any emerging issues and questions they might have.

The letter also stressed the vital role that auditors play in Australia’s financial market.

"Investors, consumers and other stakeholders in our financial system rely on quality financial reports to make informed decisions. Auditors play a critical role in giving investors and other users of those reports confidence that they have a clear view of a company’s position and performance. This is vital for maintaining trust and confidence in the financial system," it said.

"ASIC remains committed to ensuring the strong oversight of auditors and enhancing the integrity and quality of financial reporting and auditing in Australia."