Hall Chadwick NSW auditors breach rotation requirements

Off the back of ASIC’s proactive auditor independence surveillance and subsequent investigations, it has been discovered that three Hall Chadwick NSW auditors were acting as lead auditors despite being ineligible.

The regulator revealed it had accepted three court enforceable undertakings for multiple auditor rotations breaches by Drew Townsend, Sandeep Kumar, and Graham Webb between 2019 and 2023.

While the three auditors were at Hall Chadwick, they acted as lead auditor on a combined 14 occasions across eight listed companies when they were not eligible to do so.

Instead, Townsend, Kumar and Webb relied on Hall Chadwick NSW having a system of quality management in place to address compliance with the independence and auditor rotation requirements – which ASIC considered to be “deficient”.

ASIC said auditors were permitted to act as lead auditor of a listed company for five years and if certain requirements were met, the auditor could extend their role for up to two more years.

Based on these guidelines, it was found Townsend, Kumar and Webb did not meet these eligibility requirements to extend beyond five years on these occasions.

“The registered company auditor members of Hall Chadwick NSW subsequently admitted they failed to adequately and properly design, implement and operate a system of quality management to ensure its personnel complied with the relevant requirements, including those related to independence,” the regulator said.

From these circumstances, the current registered company auditor members of Hall Chadwick NSW have agreed to engage an independent expert to review the branch’s system of quality management for compliance with the relevant requirements in relation to auditor independence and conflict of interest obligations.

The implementation of any recommendations made and remedial actions taken would also be tested by the independent expert.

Kate O’Rourke, ASIC commissioner, said the watchdog had accepted undertakings from each auditor for a period of time to inform and submit evidence of compliance when they wished to extend the eligibility term beyond five years.

“It is concerning that the system of quality management at Hall Chadwick NSW failed to prevent and detect multiple breaches of the auditor rotation requirements by three audit partners,” she said.

“The ability to audit a listed company beyond five years is a privilege governed by strict requirements, designed to preserve independence, address conflicts of interest and uphold audit quality. ASIC will take action where auditor independence is undermined.”