Audit Blackout: gatekeepers cuddled while sleeping on the job

Finance & Tax||
Redacted. A page of the audit inspections for public accounts

Why the secrecy? Most of the Big Four’s audit inspections are blacked out; huge chunks redacted by the corporate regulators. In what other field would multiple breaches of the law be tolerated? asks Michael West.

Would the Australian Sports Anti-Doping Authority (ASADA) tolerate multiple drug testing failures by sports people, then hide them?

Would the state law councils tolerate multiple breaches of legal standards by Australia’s top law firms then hide them? (Okay … maybe).

Do the police allow multiple breaches of the drink driving laws, fail to take drink drivers to court then cover up their findings? No.

Why then are the audit inspections blacked out? These are inspections of public documents, of public financial accounts for this country’s largest corporations yet the findings remain largely secret.

ASIC looked at 49 audits for “Listed entities and other public interest entities” and found failures across the board.

In the KPMG inspection, for instance, 19 of the audits were dodgy, or to quote the ASIC narrative from the bits which were not blacked out, “In our view, the auditor did not obtain reasonable assurance that the financial report was free of material misstatement in 15 of the 70 key areas reviewed in total across 19 audits”.

Knapp: Big Four failed Australia for their multinational clients

That 19 out of 49 audits are dodgy – or have “material misstatements” is a severe reflection on the performance of our “Gatekeepers of Commerce”; even more so since many of these appear to be inspections of publicly listed companies.

If there is a material misstatement in financial reports, the report does not comply with AASB standards and therefore does not comply with the Corporations Act.

In what other field of society would multiple breaches of the law be tolerated?

This website has identified hundreds of audit failures over the years, and published many of them, breaches of the audit standards by the likes of Oracle, Goldman Sachs, News Corp, Pfizer, William Hill, American Express Lendlease and Aldi. Our “Dirty Dozen” audits is published here:

Black holes, high-rises and the Meatloaf Principle: Australia’s top audit fails

​Nothing has been done about it however, because the companies and their auditors know they can get away with it. The decline in standards has therefore gathered momentum over the years.

The other point to be made about the ASIC audit inspections is that, although we are not told the breakdown, many are of ASX listed companies. This plays into the hands of the auditors as the Big Four are on their best behaviour when it comes to ASX audits. Investment analysts are watching, investors are watching.

Most multinational companies however are not listed on the ASX, their financial statements cost money to access, $41 a pop, if you know what to look for. This is where the big failures can be found. And this is why, in their submissions to the looming inquiry into the accounting giants, the Big Four are making concessions. Two of their submissions to the inquiry suggest reform about how much money the firms can make while auditing and providing other services to Top ASX companies.

This is a trick. The ASX300 accounts for only a part of the audit scene. Again, this is where audit quality is good. People are watching. It is in the multinational space where all the skullduggery occurs. Therefore the Big Four concessions are sophistry, a PR stunt.

Hearings for the Joint Parliamentary Inquiry into Big Four audit and conflicts of interest kick off next Tuesday in Sydney. Hopefully, the politicians on the committee presiding over the inquiry will demand total disclosure from the Big Four.

Who Guards the Guards? Big Four prepare for war as beach-side senator brings corporate inquiry

Public support is vital so this website can continue to fund investigations and publish stories which speak truth to power. Please subscribe for the free newsletter, share stories on social media and, if you can afford it, tip in $5 a month.

Don’t pay so you can read it.
Pay so everyone can.

Become a supporter

Subscribe to Newsletter

Get Our Weekly Newsletter. Unsubscribe anytime.

Thank you! We'll also confirm via email.

Pin It on Pinterest

Share This