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Tuesday, 13 March 2012
Page: 2765

Mr RIPOLL (Oxley—Parliamentary Secretary to the Treasurer) (19:54): I want to thank all honourable members who took part in the debate on the Corporations Legislation Amendment (Audit Enhancement) Bill 2012 and say thank you very much to those who spoke for their kind remarks; they are much appreciated.

Australia's audit regulation framework is robust and it is stable. It plays a critical role in the functioning of our economy by producing effective audits that provide a necessary external check on the integrity of financial statements. It is necessary from time to time, however, to examine the framework and make adjustments that respond to the new challenges our economy faces. This bill makes a number of improvements to the audit regulation framework, to ensure that it is operating as best as it can. The bill provides flexibility for directors in the auditor rotation requirements. Auditor rotation is necessary to maintain audit independence but in some circumstances it can result in a loss of knowledge and expertise that is detrimental to the quality of the audit. The bill strikes a balance between these two factors by allowing directors to extend the five-year auditor rotation period by up to two years, if it is consistent with maintaining the quality of the audit and does not give rise to any conflicts of interest.

The bill also introduces a requirement for audit firms performing significant audits to publish an annual transparency report. Firms will be subject to this requirement if they conduct audits of ten or more Australian listed companies, listed registered schemes, authorised deposit taking institutions or insurance companies. The bill removes unnecessary duplication in the work of the financial reporting council, the FRC, and the Australian Securities and Investments Commission, ASIC, by removing the existing auditor independence function from the FRC and in its place giving the FRC a role of providing the minister and the professional accounting bodies strategic policy advice and reports in relation to the quality of the audits conducted by Australian auditors. The bill provides ASIC with the power to issue public audit deficiency reports on individual firms to increase the transparency and accountability of audit firms. Auditors will have the opportunity to remedy a failure and to provide comments on an audit deficiency report before the audit is published. Lastly, the bill allows ASIC to communicate directly with an audited body in relation to significant matters that it identifies during the course of the exercise of ASIC's statutory functions in relation to an audit.

In summary, this bill will make improvement to Australia's audit regulation framework to ensure that it continues to foster high-quality audits that strengthen market confidence and also to ensure that the framework remains in line with international best practice. I commend the bill to the House.

Question agreed to.

Bill read a second time

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