Post: Opening Statement, Inquiry into management and assurance of integrity by consulting services, 12 October

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I am pleased to appear before the Committee today and to provide this short opening statement. My name is Warren Day and I’m the Chief Executive Officer of ASIC joining you from Melbourne. I am joined by our General Counsel, Chris Savundra, Executive Director, Greg Yanco, and Senior Executive Leader, Kate Metz in front of you, in Canberra.

ASIC regulates corporations, markets, financial services and consumer credit and its remit is expanding as markets and services evolve.

As the Committee may know, major accounting, audit and consulting firms (Firms) generally operate as partnerships with corporate structures within the Firms carrying out discrete parts of their operations. ASIC does not have general jurisdiction to regulate partnerships. We note they are primarily regulated by the states and territories.

It is only when the partnership performs certain specific roles, such as where the partnership holds an Australian Financial Services (AFS) licence, that ASIC has jurisdiction (in this example, over the entity’s provision of financial services). Other roles ASIC has jurisdiction over are registered company auditors, Self-Managed Superannuation Fund Auditors, registered liquidators and companies that are registered by ASIC as Authorised Audit Companies. As at 30 June there were 208 Authorised Audit Companies registered by ASIC (none of which were Big Four firms).

Individual partners of Firms and employees may be subject to ethical codes and standards overseen by their relevant professional disciplinary bodies. For example, tax agents are registered and monitored by the Tax Practitioners Board. Other disciplinary bodies in the auditing and accounting profession include: the CPA Australia Disciplinary Tribunal, the Chartered Accountants Australia and New Zealand Disciplinary Tribunal, and the Institute of Public Accountants Disciplinary Tribunal. The jurisdiction of these tribunals is limited to members of the relevant professional association.

ASIC is able to refer registered company auditors to the Companies Auditors Disciplinary Board, Registered Liquidators to the Liquidators Disciplinary Committee, and financial advisers to the Financial Services and Credit Panel for disciplinary or other administrative action. These bodies are constituted under the ASIC Act or Corporations Act.

In terms of regulation of auditing and accounting firms in other jurisdictions, several international jurisdictions have increased regulation of auditing and accounting firms. In the UK, the Government in March 2021, began consultation on improving the UK’s audit, corporate reporting and corporate governance systems. In the USA, the US Congress enacted the Public Company Accounting Reform and Investor Protection Act of 2002 (the ‘Sarbanes-Oxley Act’) to improve auditing and public disclosure by audit firms.

International regulators with the power to register audit firms have taken action for poor culture and governance.

We welcome any questions the Committee may have.

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