Thursday, 12 November 2020
Corporations and Financial Services Committee; Report
On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee's report, incorporating dissenting reports, entitled Regulation of auditing in Australia: final report.
Report made a parliamentary paper in accordance with standing order 39(e).
by leave—Can I just start off by saying what an important report this was. It is the final report of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the regulation of auditing in Australia. I'd just like to highlight some of the important points contained in the report. The inquiry itself has increased reporting transparency in the audit history that has not previously existed. It was quite adamant and clear when we were conducting the inquiry that this was a shortfall. Organisational structures, remuneration and poor outcomes were placed on the public record during the inquiry, and they were placed on the public record more clearly. The committee did not have access—it was unfortunate—to certain information when we presented our interim report earlier, including details on the concurrent provision of audit and non-audit services. This information has since been provided to the committee, and that's why we have this second report.
With regard to auditor independence—and this was one of the areas that the committee looked into intensively—the committee wanted to reiterate its view that auditor independence, both real and perceived, is a key determinant of a robust audit regulatory framework and crucial in the process of building trust, confidence and stability in capital markets. Our financial markets are underpinned by auditing. Our banking systems and our insurance systems are all underpinned by good independent auditing and auditing reports, which then give the investors and other people the ability to know that the information they are receiving is correct and they can invest in confidence that they are investing with a particular group that has all the checks and balances required.
Of course, the changed circumstances we've been operating under since the interim report was lodged mean that some of the recommendations needed to be tweaked regarding suggested start times and expectations. We looked at digital financial reporting because it's becoming standard practice in a growing number of countries, and we recommended, therefore, that the government undertake a review to resolve barriers and also make digital financial reporting standard practice in Australia in the near future.
The opposition members on the committee did have some concerns about ongoing reports of workplace cultural practices that dissuade internal or external whistleblowing, and this was quite evident in the evidence that was given to us. In the workplace settings of the major firms and major companies to whom they supply assurance services, confidential disclosures of unethical and coercive behaviour and sexual harassment continue to be reported to senators and members of parliament. The need for cultural reform to address these instances will remain a focus with the opposition members of this committee in their oversight of ASIC. Of course, safe workplaces are vital to ensure the independent professionalism of each member of an audit team and are so vital to the quality of audit on which Australians rely.
I'd like to thank all the committee members that participated—including James Paterson, the chair, and Deb O'Neill from my side of politics—and, of course, the committee secretariat, who do great work in ensuring that we have our briefings, meetings, minutes et cetera. I couldn't pay credit enough. I just hope the government gets on with the job now and ensures that the recommendations are implemented and that people will have extremely good confidence in auditing companies.
Pardon me. I seek leave to speak to the report.
It may not surprise the House to hear that I have a very different take. This inquiry was moved by the Senate. It was done very surprisingly. There was little matter on the public record, except from a number of journalists—and one in particular—about concerns around the auditing sector. Most of the concerns that people pointed to actually did not occur in Australia but occurred in North America and, in some limited examples, in the United Kingdom. The reforms that have been undertaken in the United Kingdom have had so many unexpected and adverse impacts that they are now being reviewed by the authorities over there to see if some of them need to be reversed.
What we saw in Australia—and let there be no doubt—is that our auditing sector is working incredibly well. In fact, in relation to most of the organisations that have found themselves insolvent, the concerns of auditors around the financial aspects of those businesses were well telegraphed. Australians need to know that our corporate regulations and the providers of financial services in this country are delivering for investors. Some of the allegations about work practices and whistleblowers that were aired during the committee inquiry were certainly made. None of them—not a single one—could be verified. Not one skerrick of evidence was brought to the committee. There seems to be nothing but a healthy sector that is delivering transparent, honest advice to all Australians who invest in corporations in this country. Frankly, it is something that we and this parliament should be proud of, and the committee report demonstrates that. I hope that that is noted out of this report.