Post: Auditor and audit firm admit to independence failures

ASIC has accepted a court-enforceable undertaking from registered company auditor Robert Johnson and audit firm Hardwickes, based in Canberra.

Following an ASIC investigation, Mr Johnson admitted he failed to ensure the audit of property development company, Consolidated Builders Limited, was conducted in accordance with ethical requirements outlined in the APES 110 Code of Ethics for Professional Accountants (including Independence Standards).

Mr Johnson audited Consolidated Builders for 32 years. The long association created a familiarity threat to his independence. Hardwickes also provided various non-auditing services to Consolidated Builders which further undermined Mr Johnson’s independence.

Hardwickes also admitted it failed to establish and maintain a system of quality control to ensure its personnel complied with the required auditing and ethical requirements.

Mr Johnson has undertaken to cancel his registration as a company auditor and will not re-apply.

Hardwickes resigned as Consolidated Builders’ auditors in March 2024 and will engage an independent expert to conduct a review of its audit practices. The review will focus on the design, implementation and operation of the firm’s system of quality management for audits, in accordance with Auditing Standard ASQM 1 Quality Management for Firms. Hardwickes will be required to report to ASIC on its remedial action plan.

ASIC’s Deputy Chair Sarah Court said, ‘Misconduct by gatekeepers such as auditors is an enforcement priority for ASIC in 2024. Independence is a fundamental duty of an auditor and we will continue to take action where registered company auditors fail to meet their independence requirements.’

Recently, ASIC announced that auditors’ compliance with ethical and independence standards will become a focus of ASIC’s expanded financial reporting and audit surveillance program (24-101MR).

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