ASIC places auditors at forefront of enforcement agenda

According to the report, ASIC enforcement outcomes: January to June 2018, ASIC said it will continue to focus on the conduct of gatekeepers – including auditors, company directors and officers, insolvency practitioners and business advisers – to ensure that they meet the standards of conduct required by law.

It said that, over the next six months, it will have a particular focus on:

- companies with poor corporate governance;

- undisclosed associations and substantial holdings in shares in public companies (including beneficial ownership tracing and corporate fraud);

- related party transactions involving public companies;

- poor financial reporting by listed companies and other public interest entities;

- the quality of audits of listed companies and other public interest entities;

- insolvency practitioners and others who facilitate serious illegal phoenix activity and improper transactions in the face of insolvency;

- debenture issuers and other companies exposed to risk as a result of a declining property market; and

- company directors and officers who fail to stop their companies from making illegal payments to officials of overseas governments.

Since becoming a co-regulator of SMSF auditors with the Australian Tax Office (ATO) in 2013, ASIC has investigated over 120 matters, including 98 referrals from the ATO.

Of those matters, 76 SMSF auditors were removed from the register, 24 had further conditions imposed on their registrations and one was suspended for a period of time.

In terms of areas considered for enforcement action, 75 matters dealt with non-compliance with independence requirements, 74 dealt with non-compliance with auditing standards, 25 handled fit and proper issues, including false and misleading statements, fraud, insolvency or bankruptcy, while 27 handled non-compliance with other requirements, including continuing professional development or professional indemnity requirements.

ASIC noted on its statistics that an SMSF auditor may be referred to ASIC for more than one reason.

“ASIC’s enforcement work plays an important role in promoting trust and integrity in the financial system, which in turn ensures that all Australians can enjoy the benefits of a strong economy,” said ASIC commissioner Cathie Armour.

“This report highlights how we use our regulatory tools to address misconduct in the financial system.”