Treasury’s options paper must recognise firm size diversity: CPA Australia

The Treasury’s release of its options paper on Wednesday, Regulation of accounting, auditing and consulting firms in Australia, addressed controversy surrounding the Big Four over the years.

CPA Australia welcomed this “long awaited” paper and called for greater attention to proportional reforms to be directed at firms depending on their size.

Speaking to Accounting Times, CPA Australia audit and assurance lead Tiffany Tan said that reforms must acknowledge the differences between the Big Four, mid-tier and small accounting businesses servicing the non-corporate sector.

“Any reforms should be targeted and proportionate, focused on addressing key regulatory gaps and improving outcomes rather than imposing unnecessary burden,” Tan told the masthead.

“Stronger, more prescriptive regulation should be directed towards areas with the greatest public‑interest impact, such as audit of public interest entities, while lower-risk services and smaller practices servicing SMEs should be subject to more proportionate, principle-based oversight.”

In addition to a focus on diversity, CPA Australia called for the reforms to be amended so that they are more targeted to audit quality, independence and public confidence.

“This approach can help drive accountability and quality outcomes while providing smaller firms with the flexibility to meet those expectations,” Tan said.

“We observe that comparable jurisdictions have generally favoured more targeted measures, such as operational separation, non-audit service restrictions, stronger oversight and enforcement.”

She added that the audit reforms must address genuine gaps in oversight, while preserving competition, choice and proportionality across the audit market.

“To build greater confidence in the profession, large firms must demonstrate strong governance, genuine accountability, greater transparency, and a culture that prioritises the public interest over profit. Above all, they must rigorously uphold independence and integrity as the foundation of the profession,” she added.

“Large firms can take proactive steps by introducing more independent governance structures, including independent boards and non-executives.”

Tan stressed that the government plays a significant role in setting and maintaining the regulatory architecture that supports firm-level behaviours and enforcing compliance where necessary.

“Treasury’s Options Paper is an important contribution to the discussion about how we strengthen public confidence in the integrity of Australia’s financial markets,” Tan said.

“While all audit firms must meet high standards, regulatory obligations should reflect differences in firm size, complexity, client base and public-interest impact…Getting the balance right is critical. Reform should enhance confidence and audit quality without creating costs and complexity that ultimately reduce competition and choice in the audit market.

“There is no silver bullet. Reform is complex, regulation needs to be carefully considered and problems properly defined. A deliberative, not reactive approach needs to be taken to ensure the right solutions lead to the best outcomes.”