23 October 2019
Parliamentary Joint Committee on Corporations and Financial Services PO Box 6100
Parliament House CANBERRA, ACT 2600
Dear Committee Secretary,
RE: REGULATION OF AUDITING IN AUSTRALIA
The Institute of Internal Auditors – Australia (IIA-Australia) makes this public submission specifically in response to section 10 of the Terms of Reference of the Parliamentary Joint Committee on Corporations and Financial Services – Regulation of Auditing in Australia, ‘the adequacy and performance of regulatory, standards, disciplinary and other bodies’, and section 12 ‘any other matter’, in relation to the impact on the internal audit profession, and consequently on the quality and reliability of the external audit process itself.
In this submission, we will outline what we believe are weaknesses and inconsistencies in standards and definitions, and the regulatory framework that impacts on the audit process and the internal audit profession.
IIA-Australia recommends that the Parliamentary Joint Committee should address these weaknesses and inconsistencies in its final report, which would consequently improve the governance structures within private and public sector entities, and the quality of external audit reporting.
IIA-Australia understands the primary focus of the Committee will be on external auditors and their audit role, however, that is only one aspect of the governance structure, and the Committee should consider the wider implications of the constraints imposed by inadequate and inconsistent standards and legislative frameworks. To assist the Committee’s understanding in this regard, at the end of this submission we have outlined the key definitional differences between external audit and internal audit.
We will argue that the current inconsistencies impact on the role of the external auditor in their interactions with other assurance providers such as internal auditors.
These omissions in auditing and prudential standards can easily be remedied, and IIA-Australia has made some simple recommendations for the Parliamentary Joint Committee to consider.