10 June 2009
New Zealand could face foreign auditing alienation and a down-graded credit rating for some companies if an independent body overseeing auditors is not established, an accounting expert warns. Professor David Hay, head of The University of Auckland Business School’s Department of Accounting and Finance, says New Zealand could be penalised if it doesn’t copy other countries in bringing in independent regulators in the wake of overseas recession-hit company collapses. Auditors have traditionally been self-regulating, with professional institutes such as the New Zealand Institute of Chartered Accountants handling standards and discipline, Professor Hay says. However, whilst other countries have moved to establish independent regulators, New Zealand has not. There are now 31 countries in the International Forum of Independent Audit Regulators, but New Zealand has not been invited. And Professor Hay says the pleas from both the ‘Big 4’ accounting firms and the Securities Commission to the Government asking for an independent regulator have fallen on deaf ears.
“There is wide-ranging opinion on whether it is actually necessary to establish an independent regulator such as the United States Public Company Accounting Oversight Board here in New Zealand, but I am an advocate of such a move,” Professor Hay says. “If we don’t do something, then it could be that overseas auditors will not recognise work done in New Zealand. It could also affect the credit ratings of New Zealand companies as well. “As far as I’m concerned, those are developments we don’t need at this time of economic turmoil, and something has to be done soon so that our auditing systems are respected around the world.” In March of this year, Parliament released a report about failed finance companies by the Registrar of Companies, which said receivers had observed that if finance companies had been rigorously audited, it was unlikely many of the failed finance companies would have continued in business as long as they did. “The chief executives of the International Audit Networks all believe that independent oversight has led to better auditing,” Professor Hay says. “They also want national differences to be eliminated. “The New Zealand Institute of Chartered Accountants is highly regarded but does not have perceived independence as a regulator, and it is important that New Zealand addresses that quickly.” |