Burns Brendon: Auditor Regulation and External Reporting Bill — In Committee 
Burns Brendon: Auditor Regulation and External Reporting Bill — In Committee 
[Volume:672;Page:18310] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I am very pleased to take a call on the Auditor Regulation and External Reporting Bill having just spent a couple of days in the company of auditors at a conference of the Australasian Council of Public Accounts Committees—or ACPAC—in Perth Western Australia. I must say that it was an interesting couple of days. I had never thought that spending a couple of days with auditors would be one of my life-changing experiences. There were a couple of very good sessions about managing key performance indicators and getting the best performance out of them. There was a very good session from a demographer. 
Lynne Pillay 
: What about the socialising? 
BRENDON BURNS 
: The socialising was pretty good too and auditors do know how to party—I have to say that. They are not just grey men in grey suits like some members opposite. They are interesting individuals with a commitment to their profession. 
The financial rigour that auditors bring is hugely important to us as a society. We need only look back a couple of years to the report of the Registrar of Companies and the criticism that was made about a number of parties and their roles in the financial company meltdowns that took place in this country and across the planet. We need only think about Enron and the rather dubious role of a major accounting and auditing firm that led to the collapse of Enron and to thousands and thousands of investors being duped of their money. 
We have a number of parallels here in New Zealand on a lesser scale. So the role of audit is extraordinarily important. That is why Labour supports this bill as introduced by the Hon Simon Power. We recognise the real importance that is attached to an independent oversight system of audit making sure that the quality and expertise of the audit profession is right up there and making sure that our audit law is aligned with overseas practice. This is a good bill and we obviously want to see that we do everything we can to make sure we restore some of the confidence that New Zealanders lost in their financial markets during the last decade which saw a number of financial companies collapse—about 20 from memory. So it is good to see this bill coming through. 
This bill puts into place some better regulation for registration of individual auditors; they need to be licensed and firms need to be registered. That underpins the quality that is needed. Auditors are there in a sense as the public’s watchdog on the financial probity the financial health of a company. We put a great deal of store upon it. 
There are some scoundrels still out there in the market place. I think of one Mr Bernard Whimp who has announced today that he is pulling out of playing a role in basically rorting the system and duping people into selling shares at below their value. He is boasting of having made $2 million and having now retired. So I know what the Financial Markets Authority will be doing. In fact it has publicly signalled that it will take a very active stance against such practices in the market. It is good to see that that individual has decided to pull in his horns but still a number of people have been duped. 
That is why we need strong financial regulation underpinned by a strong independent audit system. That is why this bill is important in respect of bringing through a little more strength a little more clarity and a little more regulation so people can have more faith in the auditing of our companies—mid-sized companies smaller-sized companies and bigger companies. 
We need to know as a community when we are making investments that there is something underpinning the process and that there will be some clarity in respect of statements that are made by auditors. Therefore people will have more capacity to have faith in their investments in financial markets in companies and in balance sheets that are correct and true representations of the true state and financial health of a company. 
As we have seen all too often in the last few years some of those balance sheets were propped up and were not truly representative of the health of a company and people with large stakes in a company sometimes used it as their personal cash resource and that was not always signalled by the auditing process. So we do need regulation as a nation. It is important. Sometimes it is referred to as “red tape” and “bureaucracy” but that is part of the price we pay for living in an ordered society where people can have every belief that the system will work for them and for their investments. 
Obviously a lot of people are not wealthy. They put their nest eggs their retirement funds into an investment and they need some assurance that the investment will be seen through and that it will not be the subject of a rip-off which has happened quite a lot over the last few years. 
This is a good bill. What we will see from it is the newly created—it is just coming into being now—Financial Markets Authority with a role in the licensing of auditors and in making sure there is oversight of that. I was pleased to see a profile piece in the  
New Zealand Herald 
 at the weekend of the new chief executive of the Financial Markets Authority. I think he was on  
Morning Report 
 only this morning or yesterday morning talking about recruiting and bringing through people from other Government departments and from the private sector and trying to make sure there is a good weight of people in that authority. 
Part of the role the Financial Markets Authority will take up will be to ensure that the audit profession is underscored by high professional standards and by the requirement that people are licensed that firms are registered and that people can have an absolute assurance that when they make an investment in this country it is underpinned by the appropriate regulation and the appropriate audit system. Thank you. 
The question was put that the amendments set out on Supplementary Order Paper 239 in the name of the Hon Simon Power to Part 3 be agreed to. 
Amendments agreed to. 
Part 3 as amended agreed to.