ASIC was very careful to highlight the risk of sample error when it briefed the Parliamentary Joint Committee on Corporations and Financial Services about the outcome of a 2017 review of audit quality – but still came firmly to the conclusion that ‘ongoing attention to this area is warranted.’
ASIC told the 16 February hearing that:
“in 25 per cent of the 390 key audit areas that we reviewed across the 93 audit files at firms of different sizes, auditors did not obtain reasonable assurance that the financial report as a whole was free from material misstatement.”
According to the most recent ASIC Cost recovery implementation statement, available here, ASIC allocates $5.003m to regulating the auditors of disclosing entities, and $1.013m towards general regulation of 4,367 registered auditors.
The cost of regulating disclosing entity auditors will be prorated based on fees earned, so there will be considerable variation around the average figure of $43,885. The other costs will be recovered by a flat levy, which means that most auditors will pay a levy of around $250.
It seems likely that ASIC will allocate more resources to the regulation of auditors – if only to ascertain whether or not the 25% deficiency rate is representative of overall audit quality, or whether it is a statistical anomaly.
ASIC allocates $10.196m to regulating 711 registered liquidators. The notional average recovery is therefore around $14,300 – but in practice some liquidators will pay the $2,500 minimum, and some will pay considerably more.
If ASIC increases the budget for the auditor regulation to a level near that for liquidator regulation, there may be some very significant User Pays charge increases on the way for auditors.