MPs water down new rules for auditors
Key clause removed.
Key clause removed.
MPs have watered down a proposed new rule for auditors by removing a clause which would have made it an offence for accountants carrying out an audit to fail to comply with auditing standards.
"Audit failure" was a contributing factor in the collapse of some of the dozens of finance companies which destroyed the investments of many New Zealanders, and attracted damning criticism in 2009 from Companies Registrar Neville Harris.
New Zealand's auditing of the sector "lacked the rigour and analytical depth one would expect", Mr Harris said in a report on failed finance companies.
The "big four" accounting firms -- Deloitte, Ernst&Young, PricewaterhouseCoopers and KPMG -- were often disinterested in finance company audit appointments, and left the task to second-tier accounting firms which lacked the capability and experience to review the "complex and elaborate company and business structures", Mr Harris said.
Commerce Minister Simon Power has since moved to tighten rules about who can carry out "major" financial audits, such as for banks, insurance companies and businesses listed on the NZX stock exchange.
But yesterday he said he agreed with Parliament's commerce select committee that the Auditor Regulation and External Reporting Bill should not make it an offence for auditors to not comply with auditing standards.
"I agree that this provision is not needed, because the Crimes Act applies to serious offending such as fraud and deception," Mr Power said in a statement.
Mr Power welcomed the select committee's report on the bill, which establishes a new licensing regime for major audits but will not impact on audits of small and medium-size companies and non-profit entities.
All accounting and auditing standards-setting have been pulled into a reconstituted accounting standards review board, to be called the External Reporting Board (XRB).
The Institute of Chartered Accountants will license auditors, and the Financial Markets Authority will oversee the institute.
The XRB will begin operating on July 1.