Accounting firms welcome auditing rule tweaks
Accounting firms welcome changes to auditing regulation, Deloitte’s Jack says
By Paul McBeth
Oct. 23 (BusinessWire) – The big four accounting firms have “made it clear” they support changes to new auditor regulations that will see the Institute of Chartered Accountants stripped of its self-regulatory role, according to Deloitte chief executive Murray Jack.
The changes, which will bring New Zealand in line with global standards and improve audit quality, have been a long time coming and aren’t merely a knee-jerk reaction to the collapse of the financial sector, Jack said.
“We’re supportive of them – the big four firms have made it clear it’s a positive thing if it improves audit processes and brings New Zealand in line with overseas practice,” Jack told BusinessWire. “The Institute will still keep some regulatory functions such as implementing the code of ethics and conducting practice reviews” though this will be overseen by the new body, he said.
Commerce Minister Simon Power wants to remove the ICA from its dual role of regulating and promoting the profession, and give auditor oversight to a beefed up Accounting Standards Review Board to be called the External Reporting Board, according to a cabinet paper published on the Ministry of Economic Development website.
The changes will see all statutory audits fall under this requirement, and limit more complex operations to suitably skilled practitioners. They will align New Zealand with global standards.
The cabinet paper cited a damning report by companies’ registrar Neville Harris into the failure of finance companies as one of the reasons behind the tougher regulation. The Harris report said the auditing of the sector “lacked the rigour and analytical depth one would expect for entities managing substantial public investments.”
The new entity will cost approximately $400,000 to set up, with ongoing annual costs of around $700,000, and will be fully-funded through levies and fees.
Still, with better service come higher costs and this will “inevitably be passed on to the end client,” Jack said. It’s not all bad as New Zealand has a “relatively low cost system.”
The government hopes to have the new system being up and running in 2011 and Jack says this timeframe is “appropriate.” That the government has been “pretty efficient” on the issue, he said.
He doesn’t expect Deloitte to get a windfall of customers from the tougher requirements as there’s “still a reasonably large number of firms” that can provide auditing services.