Shanks Katrina: Auditor Regulation and External Reporting Bill — Second Reading 
Shanks Katrina: Auditor Regulation and External Reporting Bill — Second Reading 
[Volume:671;Page:18006] 
KATRINA SHANKS (National) 
: 
 It is my pleasure to take a call on the second reading of the Auditor Regulation and External Reporting Bill. It was interesting to sit on the Commerce Committee which dealt with this bill. I am a chartered accountant by trade. Also I came up through the Audit Office. That was where I started in my profession. So I had a good understanding of the implications of this bill and what people were talking about. 
We talked about capital markets. This bill will influence capital markets because it is addressed to audits of public issuers. It has a very narrow focus. We have a problem with confidence in our capital markets especially among our mum and dad investors. I know that in the Ohariu electorate a lot of mum and dad investors come into my office and tell me stories about how they lost their money. They are concerned about what they can do in the future. They want to know what the Government can do to help them find somewhere to invest that gives slightly higher returns than a bank does. But of course we know that when we get into that situation we take on additional risk. In effect this measure has been partly brought about by the finance company failures. It is acknowledgment that the role of auditors did play a small part in terms of validating accounts and financial information to people who most probably did not quite understand what they were reading. 
It is interesting that the Greens have raised the issue of social reporting and financial reporting. The more reporting that is put in the more complex it gets because for every report that is produced there is an opinion on it especially if we are talking about a public issuer. If we want to have social reporting and all the other tiers of reporting which are really great to have we should consider that someone has to give an opinion on it on whether it is true and fair. That is where it gets more complex. That is where the accounting standards get more complex. I know that Mr David “Perfect” Parker which is what we call him in our select committee asked why it is getting so complex. It is getting so complex because there are more requirements in relation to those accounts and the more requirements there are the more standards and procedures we need in place to ensure that the reporting is correct. It is never-ending. It gets more and more complex. As the financial vehicles out there get more complex we need more rules in place more standards and procedures to understand what is happening when we invest in financial vehicles that have never been in place before. 
I would like to touch on two areas of this bill during this second reading. One is the liability of partners. There was concern that under the bill as introduced every partner of an audit firm would commit an offence if there was a breach of any restriction or standard. The committee thought that was far too wide so we narrowed it down to say that a partner was liable only if he or she had given his or her authority permission or consent or could reasonably have known that the breach was going to be committed and failed to take reasonable steps to prevent it. We narrowed that provision down significantly; otherwise I think we would find that there were no auditors out there to audit anything at all. 
The other thing I was really passionate about in our committee was the issue of limitations on liability. Currently in New Zealand we have what is known as joint and several liability for auditors. I think it is time we addressed the whole issue of liability and limitations on liability. I pushed very hard at our select committee for this issue to be addressed. We got advice on several occasions—because we kept on pushing it—only to be told it was out of scope. The committee has stated in the bill’s commentary that we would like this matter to be addressed later on and that a broader review of the securities law should be looked at especially in relation to exposure to joint and several liability and the alternative systems of proportionate or capped liability that other countries are using very successfully. 
I am taking just a short call on this bill and I look forward to debating it further in the House. Thank you.