Auditor oversight in hands of super-regulator
Commerce Minister Simon Power has announced that auditor oversight as it relates to issuer audits is to be the responsibility of the new Financial Markets Authority (FMA).
Last October, Power said practitioners who carry out statutory audits would need to be regulated as a specialised profession by the New Zealand Institute of Chartered Accountants (NZICA).
He also said a reconstituted Accounting Standards Review Board would oversee NZICA's performance by monitoring and reporting on the adequacy and effectiveness of its auditor regulatory systems.
"I have now decided that the oversight function will fit better with the FMA. Audit quality is a core element of financial market confidence.
"It would be inconsistent with my consolidation aims to have a significant market-confidence function being carried out by an agency other than the FMA or the Reserve Bank."
Power says New Zealand will not be able to obtain or retain international recognition of its auditors' qualifications unless practice review becomes the responsibility of an independent regulator.
"Depending on how international practice evolves, it may be open to the FMA to contract NZICA to carry out or contribute to practice reviews."
The NZICA will still promote audit quality, carrying out much of the frontline regulation, subject to FMA oversight. It will also continue to have a major role in relation to non-financial sector audits.
The auditor-related changes are likely to come into force in mid-2012.
The reforms will only affect audits of issuers of securities, along with banks, insurance companies and other entities that take deposits or hold assets for broad groups of investors.
The great majority of entities will continue to be able to have their audits carried out by practitioners who are not Licensed Auditors.
Power says the majority of issuer audits are carried out by the Big 4 and it appears likely that the reforms will impact on 100-odd auditors within ten or so accounting firms.
He believes oversight is needed as the Registrar of Companies noted that there were some finance company audit failures.
"It is essential that the practitioners who carry out financial sector audits have the necessary skills and experience to carry out the work to a high standard.
"In addition, New Zealand's self-regulation system is no longer acceptable internationally. We need to make these changes to allow New Zealand auditors to be recognised by overseas regulators, such as the Australian Securities and Investments Commission."
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