Audit regulation disproportionate, multidisciplinary firms must remain, BDO says

In response to Treasury’s regulation of accounting, auditing, and consulting firms in Australia options paper, BDO has dialled in on audit regulation, stressing that the current regulatory frameworks do not create an equal playing field, noting inconsistency in regulatory accountability across firm structures.

“A corporate structure ensures regulatory oversight and Corporations Act responsibilities, bringing clearer lines of authority, public reporting obligations, directors’ duties, whistleblower safeguards, and governance obligations,” the firm said in its response.

“Regulatory reform should strengthen governance, transparency, and firm-level accountability in a way that enhances public trust while preserving competition, innovation and market choice.“

The firm agreed with Treasury’s option 3C: require reporting entities to obtain audit services only from an authorised audit company.

“BDO supports consideration of expanded reliance on authorised audit companies (AAC) as part of broader audit market reform.”

“Firms operating through AACs are subject to regulatory levers, governance requirements and enforceable obligations that do not apply to large partnerships.”

It stressed that complex audits require access to multidisciplinary expertise and said that reforms should not undermine audit quality, competition or the sustainability of the audit profession.

“BDO’s experience operating through an AAC demonstrates that firm-level accountability can coexist with a multidisciplinary business model.”

The firm noted, however, that this requirement may have the unintended consequence of limiting the diversity of skills, experience, and perspectives available at the board level for the AAC.

“If Treasury pursues this approach, the associated regulatory framework should be reviewed and modernised to address the practical governance and ownership limitations that can make the model difficult to administer within large multidisciplinary firms.”

It noted that Treasury should consider whether this option duplicates its option 1A: require reporting entities to obtain audit services only from audit firms licensed by ASIC.

The firm did not support Treasury’s option 2C: mandate structural separation. It emphasised that removing access to multidisciplinary expertise could weaken the quality and efficiency of audits.

“Complex audits require specialist non-assurance input. A multidisciplinary approach is required to deliver a high-quality audit, as auditors must be able to draw on the expertise and skills of specialists in other areas, such as taxation, valuations and sustainability.”

BDO said that it thus does not recommend that Treasury proceed with structural separation, emphasising that the concerned conflicts in multidisciplinary firms can be addressed through targeted safeguards, firm-level accountability, enhanced surveillance, stronger governance requirements and stricter independence obligations.

“Our experience as an AAC demonstrates that firm-level accountability, independent governance and transparent reporting can be successfully implemented within a multidisciplinary model,” it said.

“Treasury’s reform agenda should therefore focus on strengthening these foundations while avoiding structural interventions that risk reducing competition, limiting access to specialist expertise and increasing market concentration.”