The corporate regulator is ramping up its surveillance of the auditing profession and has ordered the six biggest auditing firms to lift their game.
In a review of 93 audit files, in the 18 months to December 2016, the Australian Securities & Investments Commission (ASIC) found that a quarter failed to satisfy auditing benchmarks.
Speaking at a parliamentary oversight committee this morning, ASIC commissioner John Price said "further attention was required" to improve confidence in auditing quality.
"Auditors did not obtain reasonable assurance that the financial report as a whole was free of material misstatement," Mr Price said.
"The level of adverse findings are very consistent with those of international regulators with responsibility for audit oversight.
"This also suggests our ongoing attention to this area is warranted."
Mr Price said ASIC planned to improve auditing quality through education followed up by inspections, surveillance and enforcement actions.
A warning to the big six
In a warning to the lucrative end of the auditing profession, he warned that the six biggest auditing firms would be targeted to take their own internal action to improve audit quality.
While Mr Price did not name specific companies, the ASIC warning would include the accounting giants PWC, KPMG, Ernst & Young and Deloitte.
"Improving audit quality is a matter needing collective action by various parties in the financial reporting chain in order to be successful," he said.
However, Mr Price urged caution in generalising the outcomes of the report given that 93 files were reviewed from more than 20,000 listed and unlisted entities that are required to be audited under the Corporations Act.
But he said that while the review was targeted, it focused on areas where ASIC believed "there might be problems".
ASIC's accelerated auditing review coincides with the appearance of newly-appointed ASIC chairman James Shipton who will make his debut before the Joint Committee on Corporations & Financial Services later today.
The review also comes in the first week of the Financial Services Royal Commission which is certain to put a spotlight on fairness, honesty and transparency across the sector.
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