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Tuesday, 13 March 2012
Page: 2763

Dr LEIGH (Fraser) (19:46): I rise to speak in support of the Corporations Legislation Amendment (Audit Enhancement) Bill 2012. As the previous speakers in this debate have noted, this bill aims to improve the quality of auditing in Australia's firms. The process of auditing is absolutely critical to the open, transparent system of corporate governance that we in Australia enjoy. The bill aims to strike a balance between ensuring that auditors understand the companies they are auditing—and certainly we all understand that companies have become steadily more complex over recent years, so understanding a company's accounts is a tougher job than it was in previous generations—and ensuring that auditors do not find themselves in a conflict-of-interest situation. This is good, in the long run, for our corporate system. It is also good for the auditors, who I am sure would not want to find themselves conflicted.

The bill will allow directors of a listed company or a listed registered scheme to extend the five-year auditor rotation period by up to two years, with the extensions consistent with maintaining the quality of the audit, and if it does not give rise to a conflict-of-interest situation. If the directors extend the auditor rotation period for a year they may, before the end of that year, extend it for another year. Australia's five-year auditor rotation period is consistent with that of countries such as Canada, China, South Africa, the United Kingdom and the United States. Each of these countries aims to strike that balance I spoke about—the balance between an auditor's depth and breadth of knowledge of a company's accounts and ensuring that they are not captured by the firm.

The bill also introduces the requirement for audit firms to publish an annual transparency report if they conduct audits of 10 or more Australian entities over the following categories: listed companies, listed registered schemes, authorised deposit-taking institutions and insurance companies. That, again, follows common practice in the European Union and the United States. This transparency report is important because audit firms tend to be structured as partnerships. That means there is less information publicly available about those audit firms than would be the case if, for example, audit firms were corporations. The regulations will provide details about the information that has to be provided in the transparency report. It will have to be posted on the auditor's website within four months of the end of the year to which it relates, and a copy must be lodged with ASIC on or before the day it will be published. It is important in the context of considering these corporate governance reforms also to recognise other ways in which we improve the quality of corporate governance in Australia. It was my pleasure on 23 February to open the Australian Institute of Management's office in Childers Street in Civic in my electorate. That office is a first-rate facility for promoting high-quality management in the ACT with breakout rooms, a high-quality library and facilities for providing training to improve not only private sector but also public sector management in the ACT.

The Australian Institute of Management has also produced an important report recently, Gender diversity in management, which looks at another core corporate governance issue—that is, the share of women on boards. The report notes that if you look at the top 200 ASX boards, as at 31 January 2012 only 14 per cent of those board members are women. If you look at executive key management line roles, only four per cent are held by women. If you look at women in executive key management support roles, only 24 per cent are women. The report considers the question as to whether boardroom gender quotas would be appropriate—this was a proposal made by Elizabeth Broderick in 2009—and recognises there are other countries that have mandated corporate quotas: Norway, Spain, Iceland, France and the Netherlands. It also recognises the countries that are proposing them such as Belgium, Canada and Italy.

I would like to acknowledge much of the important work that has been done within my electorate on ensuring greater gender diversity on boards and in ensuring that women are represented in Australian business as they should be. I would like to pay particular tribute to Julie McKay of UN Women Australia, who spoke extremely articulately at a recent forum at the National Press Club about the importance of raising the share of women in key management roles. Julie spoke also about the fact that these quotas are often initially opposed but are often necessary to bring about cultural change. That cultural change is critical if we are to ensure that Australian companies are as representative as the communities they serve. We have organisations that are dedicated to serving women. The ACT Women's Legal Centre is one of those. These organisations have recognised that providing greater gender diversity is an important part of ensuring a stronger Australia.

Finally, I would like to go to the Corporations Legislation Amendment (Audit Enhancement) Bill, which amends the Australian Securities and Investments Commission Act. This removes the existing auditor independence function from the Financial Reporting Council and gives the FRC a role in providing the minister and the professional accounting bodies strategic policy advice and reports on the quality of audits conducted by Australian auditors. It gives ASIC the power to issue a public audit deficiency report in relation to an individual firm and allows it to communicate directly with an audited body on significant matters that are identified during the course of the exercise of ASIC's statutory functions in an audit.

I congratulate Mr Ripoll on his ascension to the role of Parliamentary Secretary to the Treasurer. I am sure that he will continue to work hard in this area. It is one that he understands perhaps better than anyone else in the parliament. He will work diligently on the issue of gender representation on boards, an issue that is important to me and to many people in this place. I commend the bill to the House.