Mr DUTTON (Minister for Revenue and Assistant Treasurer) (10:45 AM) —The government would like to thank the member for Hunter for his support of this bill and for his contribution to the debate today. The bill will provide a legislative framework to empower the Australian Securities and Investment Commission, or ASIC, to enter into cooperative audit agreements or arrangements with foreign regulatory bodies. The Australian Securities and Investments Commission Amendment (Audit Inspection) Bill 2006 will also enhance ASIC’s current audit inspection powers.

The framework in the bill will enable ASIC to enter into an audit arrangement with the US Public Company Accounting Oversight Board, or PCAOB, to facilitate the two bodies conducting joint audit inspections of Australian auditors that are registered with PCAOB. There is a clear recognition by the parliament that with the globalisation of capital markets and the cross-border activities of companies and audit firms it is in the public interest to foster closer cooperation between Australian regulators and their overseas counterparts. While PCAOB is the only overseas regulator with whom ASIC at this stage proposes to enter into a cooperative arrangement, the framework within the bill will allow ASIC to enter into arrangements with other foreign regulators in the future with the consent of the minister. The proposed joint inspection processes between ASIC and PCAOB will provide significant cost savings for audit firms in that the firms will only have to accommodate one joint inspection rather than two separate inspections by ASIC and PCAOB.

ASIC’s enhanced audit inspection powers will serve two purposes. They will facilitate the proposed joint audit inspection arrangement between ASIC and PCAOB. The enhanced inspection powers are also designed to reduce compliance costs and clarify uncertainty about the scope of ASIC’s existing powers to review audit firms which the financial reporting council identified in its 2004-05 audit independent report.

The bill also contains an amendment to address a technical issue relating to a transitional provision applicable to auditing standards in the Corporations Act 2001. The life of the auditing standards made by professional bodies was extended by regulation to 29 June 2007. The technical amendment will extend the current immunity against criminal liability under subsection 1455(5) of the Corporations Act to cover all financial reports for periods ending on or before 29 June 2007 that are audited using auditing standards made by the professional bodies. As the drafting of those auditing standards is not as precise as it would be for an instrument intended to have the force of law, it is appropriate that criminal liability should not apply where an auditor fails to comply with the auditing standards. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.