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Auditors to give regulation oversight for free?
The governments preferred option for auditor regulation oversight appears to be based firmly on relying on members of the accountancy profession to give their time for such oversight for free. The regulatory impact statement prepared by Ministry of Economic Development officials accompanying the proposed change, notes the key features of the preferred option are that the accountancy profession will retain responsibility for frontline regulation, with a reconstituted Accounting Standards Review Board (to be called the External Reporting Board or XRB) to carry out monitoring and effectiveness of regulation. This is preferred to the main alternative - a licensing regime - for several reasons, but a key one appears to be "almost all the members of the Institute's regulatory boards and committees provide their time free of charge." There is also no evidence licensing would provide any improvement in quality of oversight for the extra money it would cost the taxpayer. Another saving is it keeps regulation of auditors and other accountants together and this maintains some economies of scale. It is though expected to prevent some existing auditors from practising, although there are no numbers available on this. "The proposals in this paper are likely to significantly reduce the number of Chartered Accountants entitled to carry out statutory audits. "Assuming constant demand, the price of audits is likely to increase. That is not a concern, to the extent that the price increase reflects an increase in audit quality." This is unlikely to be excessive, however, because there will probably be greater competition from overseas as the changes bring New Zealand in line with other markets. Also the barriers to entry will be low. The new regime will still cost the government an additional $700,000 a year. There is one major upside for the profession - it will bring New Zealand oversight in line with Australia's and allow New Zealand auditors to register as company auditors in Australia. Comments from our readersOn 30 July 2010 at 4:04 am David Turner said:
I note that this is effectively little change from what already occurs. That is that senior colleagues from the larger accounting firms contribute their time for free to assist the Institute with the periodic review of their fellow practitioners.
Certainly, it will not change the existing practice of the Institute charging its member practitioners fees (in addition to their annual membership fees) for the privilege of reviewing their audit work every three years.
The questions I ask are: -
1. Will micro to small sized community groups such as early childhood day care or educational organisations funded by public sector or government agencies continue to accept the higher fees associated with full blown audits
expected of them?
Is the Government going to continue to stretch the definition of an "audit" to include what is essentially a "limited review"??
Many do not have the budget to fund the extensive work required.
On 30 July 2010 at 6:43 am Kevin Newson said:
While I agree with David's comments and concerns I should correct one matter on which he may be misinformed. Practice reviewers do not provide their services or time free of charge, whether they are sourced from large firms or small ones (and all the practice reviewers I know of come from small firms or are sole practitioners). Practice reviewers are paid a market rate for their services (as they should be). Members of the Practice Review Board are not paid although that may change in the future as the current Fit for the Few Review process flows through the Institute - particularly with respect to the Chair of the Board. On 30 July 2010 at 11:36 pm Anne said:
David - practice reviewers definitely don't do it for free!
Statutory audits include organisations such as Maori organisations audited under the Te Ture Whenua Act 1993. Quite a different kettle of fish to those required as an issuer.
And there continues to be issues with very small organisations needing an audit if they are to receive MSD funding - no matter how small the amount of funding! Add your comment:Other Ways to Access News
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