Legal Regulation of Corporate Governance in the Role of Auditors Essay

INTRODUCTION In recent years, general public start to raise questions about the level of audit independence and the quality of audit information, especially after corporate collapses such as HIH, Enron and One.Tel where independent audit reports showed that the companies were making a profit, when in fact they were heavily in debt. This essay is to provide a brief overview of the current regulation of corporate governance in Australia in the role of auditors, and illustrate some gaps in the regulation with examples. In addition, a few recommendations are given accordingly for changes. 1. Legal Regulation of Corporate Governance in the Role of Auditors 1.1 CLERP 9 reforms CLERP 9 reforms largely employed the law reform recommendations in the Ramsay report to address the audit independence controversy. CLERP 9 has significantly changed the way that audit work is carried out in Australia. The most significant changes were: ï  ¬ Improving the standards of auditor regulation through changes to the powers of the Financial Reporting Council and the reconstitution of the Auditing and Assurance Standards board; ï  ¬ Imposing statutory requirements for auditor independence and audit partner rotation; and ï  ¬ Providing proportionate liability in respect of claims made against auditors. 1.2 Performing the audit There is a distinction between the lead auditor and the review auditor. The lead auditor is primarily responsible for conducting the audit, while the role of review auditor is to review the overall conduct of the audit. It is auditor’s statutory right to access the books of the entity. Company officers must provide information and explanations that the auditors required to assist with the audit and to help auditors form more accurate a... ...04) ‘Auditing Handbook’, Prentice Hall, Sydney. "Audit Independence - Independence of Australian Company Auditors." Insert Name of Site in Italics. N.p., n.d. Web. 23 Apr. 2014 . [29] section B of the Joint Code of Professional Conduct [30] Buffini, F. (2003) ‘Andersen’s independence tested’, Australian Financial Review, 14th January, pp. 11, 12. [31] (HIH Report, Vol III, pp 89-90) [32] (HIH Report Vol III, pp91-92). [33] (O’Malley 2000, p.91) "CHAPTER 3 – EARNINGS MANAGEMENT AND FRAUD." Insert Name of Site in Italics. N.p., n.d. Web. 23 Apr. 2014 . [34] O’Malley 2000, p.94 [35] CHAPTER 3 – EARNINGS MANAGEMENT AND FRAUD, http://www.slideshare.net/MRicky/chapter-3-earnings-management-and-fraud (accessed April 24, 2014).