Nash Stuart: Auditor Regulation and External Reporting Bill — In Committee 
Nash Stuart: Auditor Regulation and External Reporting Bill — In Committee 
[Volume:672;Page:18306] 
STUART NASH (Labour) 
: 
 The honourable Minister for Courts has given a pretty good overview of what Part 3 of the Auditor Regulation and External Reporting Bill contains. I will make a couple of points. Subpart 2 “Regulations” talks about how the Governor-General by Order in Council can “make regulations for all or any of the following purposes: … (i) prescribing fees and charges that the Registrar or the FMA may require to be paid to him her or it (or the rate at which or the method by which fees and charges are to be calculated)—(i) in connection with the exercise or performance by the Registrar or the FMA”. I just wonder whether the rates have actually been set yet or whether the Financial Markets Authority or the registrar has any idea of what the rates will be—whether the Financial Markets Authority even though it has just been established has come up with a schedule of rates. Again I suppose my ever so slight concern is that I believe that we need to ensure that the regulations are not expensive in any way shape or form—nor should they ever hinder any New Zealander from accessing the register to have a look to see whether an auditor is on the register. 
Before Mr Chair Robertson arrived I was talking about the register which holds the names occupations and a whole lot of details of registered auditors. The Minister Wayne Mapp stood up and said that the register is an online document that of course it is an online document and that the bill states that it must be an online document. Well in fact the bill does not state that at all. The bill states that the register may be an online document. That is where I have a slight concern. I assume that the register will be an online document. We are in the 21st century so it is a reasonable expectation. I am assuming that any person can have a look at that online register. It makes sense I would have thought that if someone is a licensed auditor they would want to be on the register. But I hope that there is no cost to access the register because if there is it may put people off. That is my only concern. I am just wondering whether the fees have been set. 
Clause 75 in subpart 3 “Transitional provisions” is headed “Certain auditors treated as holding licence”. When I first read the clause it set off alarm bells. The clause states: “This section applies to a person who—(a) immediately before the commencement of this section is a chartered accountant who has at any time within the 2-year period before that commencement acted as the auditor in respect of an issuer audit; and (b) satisfies the transitional requirements”. I suppose that has to make sense does it not? A lot of accountants out there have acted as auditors. I suppose we cannot say that a regime is coming into place and at that point if someone has acted as an auditor but is an accountant and does not have a licence then that person can no longer practise business. There has to be a transition period; I understand that. I just hope again that the provision is well policed and that the Financial Markets Authority or an accredited body ensures that the provision is very well policed. I know about this requirement. I have a superannuation fund that is audited as a lot of us do. We talk to a lot of accountants and they say we must go to a licensed auditor. The message is out there; the word is out there. But I just hope that the provision is not taken advantage of and that it is very well policed. 
Going back to clause 72 “Amendments to other Acts” the other thing I will talk about which we have talked about on a couple of occasions is that the legislation is very complex. The name of the bill—the Auditor Regulation and External Reporting Bill—would not suggest that it is complex but it is complex. It basically turns on its head or regulates the whole auditing industry. 
As a consequence a number of Acts have been amended as a result of the bill—for example the Building Societies Act 1965 and the Companies Act as one would imagine. The bill seeks to amend Section 198 of the Companies Act “Appointment of partnership” which we have talked about before and states: “A partnership may be appointed by the firm name to be the auditor of a company if—(a) in the case of a company that is an issuer the partnership is a registered audit firm: (b) in any other case all or some of the partners are persons who are qualified to be appointed as auditors of the company.” That makes sense. It is not in the interest of any company whatsoever to say it is a qualified auditor and then send someone who is not a qualified auditor to do an audit. 
The bill seeks to amend the Friendly Societies and Credit Unions Act 1982 and the Industrial and Provident Societies Act 1908. That is an old Act. I think it is from before Mr Chair entered the House. 
Hon Clayton Cosgrove 
: He’s not that old is he? 
STUART NASH 
: Oh he is not that old actually. 
The CHAIRPERSON (H V Ross Robertson) 
: The member must not refer— 
STUART NASH 
: I apologise Mr Chair. The bill talks about “a registered audit firm by its firm name to be the auditors of the society (in which case all the partners in the firm from time to time who are licensed auditors are deemed to be appointed as the auditors).” I suppose I am trying to highlight here that the process was pretty lax before the bill came into place. I suppose that is one of the reasons why every single member in the House is supporting the bill. 
The process was pretty lax. According to the Acts that will be amended by the provisions in the bill an auditor did not have to be registered. There is no doubt about it: most of the organisations covered under the Industrial and Provident Societies Act acted with competency. The auditors who did the work there were good people but my experience with any of those sorts of organisations is like it is with a lot of others. What happens is that a very well-meaning person says they can do the accounts and everyone else says it is great that there is someone who is prepared to do them. That person can be the treasurer; he or she can do the accounts. [ 
Interruption 
] It is like a lot of the organisations we are members of. We love people but it is hard to find a treasurer. But the bill now states that those accounts have to be audited. That makes sense; it protects the societies the members of the boards and the governing bodies. 
The Public Audit Act changes are quite interesting. The bill states that the “Auditor-General may ask for quality review in respect of audits of issuers (1) The Auditor-General may ask the Financial Markets Authority to arrange for a quality review to be carried out of the systems policies and procedures applying to the employees of the Auditor-General who assist in the carrying out of audits of issuers under this Act.” I hope that because the bill states that the Auditor-General may ask for a review—it does not compel the Auditor-General to do so—the Auditor-General asks for a review with monotonous regularity in the first couple of years. 
The reason I say that as I have said before is that a recurring theme throughout the bill is restoring for everyday New Zealanders confidence in our financial markets. I think that if the Auditor-General carries out a number of these quality audits or asks the Financial Markets Authority to arrange for a quality review it will help in the ongoing process of building up New Zealanders’ confidence in our financial markets and it will get them reinvesting. After we have taken a hit of $6 billion a lot of people have been scared off. We do not need that fear if the economy is to go forward. 
The bill seeks to amend the Securities Act 1978 and states: “For the purposes of this Act qualified auditor means—(a) a licensed auditor; or (b) a registered audit firm; or (c) in the case of an issuer that is a public entity under the Public Audit Act 2001 the Auditor-General or any other person who may act as the auditor under that Act.” I suppose what I am saying again and highlighting is that the Acts being amended really did not meet the requirements of the investing public. 
The bill goes a long way to meeting those requirements. This 100-page legislation goes a long way. It will not do it on its own; we acknowledge that. There is still a lot of work to be done. As members of this House will know legislation that was designed to increase confidence has already gone through the House and been passed. 
Another Act that is being amended by the provisions of the bill is the Superannuation Schemes Act 1989. Again the bill defines an auditor as “(a) a chartered accountant (within the meaning of section 19 of the New Zealand Institute of Chartered Accountants Act 1996); or (b) a licensed auditor”. 
The legislation is good. It is complex. That is one of my concerns—that it is complex—but I hope the complexity does not put people off gaining an understanding of what we are trying to do. I certainly hope it does not put auditors off getting licences or put chartered accountants off becoming licensed auditors because we need licensed auditors and we need them to do a very competent job. The bill goes a long way. Thank you very much.