Nash Stuart: Auditor Regulation and External Reporting Bill — Second Reading 
Nash Stuart: Auditor Regulation and External Reporting Bill — Second Reading 
[Volume:671;Page:18007] 
STUART NASH (Labour) 
: 
 It is with interest that I hear Government members say that these bills are so important for our capital markets and our financial markets yet they have very little to say on them. I should have thought that if this bill was such an important bill which I personally think it is then Government members would stand up and put forward the case for why this legislation should go through and would be selling it etc. But they do not seem to be doing that and I wonder why. I wonder whether it is because Government members do not understand what the legislation is about or how it impacts on New Zealanders the economy or the financial market. There does not seem to be any coordinated plan at all. But I stand in support of this bill the Auditor Regulation and External Reporting Bill. 
I note that it is another bill sponsored by the Hon Simon Power. As Simon Bridges informed us a week or so ago Simon Power is the hardest-working National Minister. In fact I think Simon Bridges told us that 40 percent of all legislation before the House this term has been brought forward by Simon Power. I had a look at the Order Paper today and five of the bills on the Order Paper are in the name of Simon Power. The Statutes Amendment Bill (No 2) is in the name of Nathan Guy. I assume that Simon Power handed that bill over to Nathan because Nathan Guy actually has not done anything while he has been a Minister. But it is with concern that I note— 
Hon Member 
: He did order the BMWs. 
STUART NASH 
: Yes there was the BMWs. I suspect that Government members must be incredibly worried that Simon Power is leaving. I do not know why he is leaving but I suspect it is because he is sick and tired of carrying the Government on his shoulders. He does 40 percent of the legislation in this House and he is leaving. He is a very hard-working Minister. Of course there have been rumours about a clash between Simon Power and Steven Joyce. I could not possibly comment even though National members have confirmed it. It is not for me to comment. 
Even though we have a very hard-working Minister in Simon Power the surprising thing is that when he came out with a plan do members know what it was? To sell State assets. The only plan of even the hardest-working Minister on the Cabinet benches was to sell State assets. When is a plan not a plan? When it involves selling State assets; when it harks back to philosophies long discounted and long disproven. Actually I think that is why Simon Power is leaving. It is a hospital pass: “Power you’re leaving. You’ll be the Minister responsible for selling State assets to the public.” He did not want to do that because he knows he cannot do it so he is gone. If Mr Power’s legacy will be selling State assets then that is a bad legacy with which to leave Parliament. 
I come back to the bill. I would like to ask why regulation of auditors needs to be reformed. It is a good question and I will try to answer it. Financial reporting is hugely important to investors. Regulators and other financial market participants need to know that the decisions made by experts are the right ones. There needs to be confidence that general purpose financial reports provide unbiased transparent and relevant information about the economic performance and position of businesses. As has been outlined Labour fully supports this bill. Labour will always support good strong legislation that improves the confidence of investors in our financial and capital markets. 
I have spoken about this issue before in this House many times. I cannot hammer it enough. Investors really need to have confidence in those who profess expertise in certain areas whether they be trustees directors financial advisers or auditors. We all know that investment implies risk. The higher the return the higher the risk—that is how it should work. Most investors tend to understand that. However the risk of incompetence and the risk of negligence are almost impossible to quantify and therefore they are not risks that investors can plan for—nor should they have to and certainly not in a First World country such as New Zealand. If we want to have a great reputation in the global market and if we want to bring foreign direct investment into this country then all investors in this country need to have confidence that our financial regulations are up to scratch that they meet world standards. In fact that is a given. It is not something we can go out and parade and hawk. It is a given because if they are not up to scratch then we will not even be looked at. 
In New Zealand there has been a strong indication that the auditors of some failed finance companies lacked the necessary competence to carry out the audits or did not have a sufficient degree of independence. The results of that have been nothing short of catastrophic for our financial markets. We know that over 60 finance companies have collapsed. Before that I do not think anyone could have named 10 finance companies let alone the 60 that have collapsed. I do not want to say that every single auditor who was responsible for auditing a finance company was negligent incompetent or had a conflict of interest but there is very very clear evidence that many did. That is what we have to prevent. 
As I said the collapses have been catastrophic for our financial markets but not only that; they have been catastrophic for our citizens. Over $4 billion has been wiped from the savings of good hard-working Kiwis. These are Kiwis who put away money for their retirement put away money for their children’s education for their grandchildren’s education. These are New Zealanders who are near the end of their lives. When I say near the end of their lives it is all relative; they have another 20 or 30 years to go. But that money was their nest egg. It was how they were going to be able to retire with dignity and it is gone. I cannot think of anything more heartbreaking or gut-wrenching than knowing that $50000 $100000 or $200000 that people had put away for their retirement was gone. After working and paying taxes for 40 years it was gutted by people ordinary New Zealanders trusted. People such as Richard Long stood up and hawked one of these companies. Colin Meads said one was as safe as houses. Unfortunately Colin Meads was a great All Black but he does not know much about finance companies. The health costs and the costs to our economy have been huge. There have been cases of suicide and depression and I suspect that they are the tip of the iceberg. I suspect we will never know the health effects that this experience has had on a whole lot of people out there. 
Before this bill—and this is why the bill is so important—New Zealand’s self-regulatory model was no longer within the range of acceptable auditor regulation systems. New Zealand needs to change in order to obtain the right to practise in Australasia and other jurisdictions such as the European Union. In the United States a classic case is Arthur Andersen. People used to talk about the “Big Five” accounting companies; now they talk about the “Big Four” or the “Big Three”. Arthur Andersen was the auditor for Enron. When Enron collapsed it brought down one of the largest accountancy companies in the world. At that time the US undertook a complete review of the relationship between auditors and those they audited. We probably should have done that when Enron collapsed. As we all know that work was started under Lianne Dalziel and it has been continued by the Commerce Committee. I am not on that select committee but it has been continued by that committee and it is long overdue. 
As has been mentioned the bill is a complex and detailed piece of legislation. It is over 100 pages. Who would have believed that a bill governing what auditors do would be over 100 pages? There are nearly 100 clauses in the bill. It is very complex legislation. It shows how complex the role of auditing is. It proves how defunct our law is in terms of governing that area. To round up Labour supports any legislation that will improve the confidence of investors in our capital and financial markets. Labour will support any legislation that means foreigners will look at our financial and capital markets and invest with a high degree of confidence. But one thing I would like to say is that the Hon Simon Power the Minister who brought this bill to the House is a very hard-working Minister but he is also the Minister who has introduced the concept of selling State assets. I ask what sort of plan that is—to sell State assets. It is a shame.