Nash Stuart: Auditor Regulation and External Reporting Bill — In Committee 
Nash Stuart: Auditor Regulation and External Reporting Bill — In Committee 
[Volume:672;Page:18293] 
STUART NASH (Labour) 
: 
 As my learned colleague Clare Curran pointed out Labour supports the Auditor Regulation and External Reporting Bill. The bill is a very important part of returning the confidence of the New Zealand public in our capital markets. 
I point out even though we are talking about Part 1 of the bill that Simon Power brought the bill to the House. Simon Power is a very hard-working Minister. I will quote Simon Bridges who said that Simon Power has been the Minister responsible for bringing over 40 percent of the bills to the House. I do not think it is any coincidence that Simon Power has decided to resign from Parliament. I am not too sure why such a hard-working and enthusiastic Minister would decide to resign from Parliament when he is at his height and is charging ahead but I suspect he is sick and tired of doing all the donkey work for his colleagues. How many people are in Cabinet? I do not know—12 or 14. There are a lot of them. If one Minister is doing 40 percent of the work the question has to be asked what the other Ministers are doing. It appears that there is no plan to do anything. The other Ministers are not doing anything at all. 
I will get back to Part 1 of the bill. As I mentioned Labour supports the Auditor Regulation and External Reporting Bill because as I have talked about in a number of speeches on a number of bills it is absolutely important that the New Zealand public can have confidence in the people who are responsible for looking after and regulating our financial and capital markets. That did not happen. That confidence has disappeared. 
I will take a step back. We all know that about $6 billion has disappeared mainly from the savings of hard-working Kiwis who invested in these firms and who were let down by people who professed a competency in the tasks required to manage a lot of these funds and finance companies. This is where Part 1 comes in. Part 1 outlines the preliminary and key provisions of the bill. I suppose the main gist of the part is that it talks a lot about the fact that auditors and auditing firms must be registered. In the past a lot of the characters who professed competency in this area and who hawked their services were not registered. As a result false confidence was built which has been completely eroded. 
If we go back to a provision that Ms Curran was talking about clause 8 we see that if people breach the law they are liable for a fine of up to $50000. That clause will send out the message that Parliament is very serious about what we are doing here. It is simply not good enough to betray the confidence of ordinary good hard-working New Zealanders who trust the experts who profess a competence and who put their name on a prospectus or any sort of offering and then absolutely let down those New Zealanders to the tune of up to $6 billion. 
A lot of auditors out there are incredibly competent are registered have always been registered have done a fantastic job and will continue to do a good job. In fact the Auditor Regulation and External Reporting Bill is the sort of bill and Part 1 is the sort of part that those auditors require and they salute it. The bill gets out of the industry the cowboys who gave the industry a bad name. 
Part 1 goes up to clause 9A. Not only does Part 1 make people or firms liable for prosecution if they are not registered and they say they are registered but it makes the other partners of the firms liable. Part 1 ensures that all partners in a firm—whether or not they do other tasks aside from auditing—must ensure that everyone who says they are an auditor is registered or they could lose their licence or be liable to a fine not exceeding $50000 which in anyone’s language is quite a lot of money. 
Clause 5 sets out the Financial Markets Authority’s function which again is quite important. A lot of us who have seen the news and the setting up of the new Financial Markets Authority will have seen the chair and the chief executive officer being interviewed. A lot of people are probably wondering what the authority will do and how we can be sure the authority will restore the integrity of our financial and capital markets to a point where people and investors have confidence to jump back in. If one thing is for sure it is that we need New Zealanders to start investing in capital markets and our productive economy. No longer is it good enough to have investors simply putting their money into houses and the unproductive side of our economy. That investment will certainly not drive economic growth for this country. The Financial Markets Authority is a very good step forward. 
If we look at clause 5 and at the functions of the Financial Markets Authority we see that the authority’s function is “to issue licences to overseas auditors and to authorise the registration of overseas audit firms:”. Not only does the clause apply to New Zealand firms but it applies to every single person and firm that wants to say they are an auditor and to operate in New Zealand. That is most important because as I mentioned one of the main tasks of the Financial Markets Authority is to in some way restore a lot of that lost confidence. 
In the interview with the chair and chief executive officer of the new authority those gentlemen stressed the absolute need for their first task to be restoring confidence in our financial markets. There is absolutely no doubt about that. They were very clear about their mandate. If anyone is unclear of the authority’s mandate all they have to do is look at clause 5 to see what the organisation has to do. The Financial Markets Authority has to “monitor the audit regulatory systems of accredited bodies report on the adequacy and effectiveness of those systems and take action in respect of those systems that are inadequate or ineffective:”. 
The authority is not only passive but also active. It is responsible for looking at and keeping an eye on everyone who is working under the guise of a registered auditor. If the authority sees action that is inappropriate inadequate or ineffective then it is responsible for jumping in there and ensuring that that action is nipped in the bud. No longer can we have the sorts of financial disasters that have afflicted New Zealanders over the last 3 or 4 years. Like I said they resulted in the loss of about $6 billion. That is far too much to take out of the savings of good hard-working New Zealanders who thought that their money was safe. 
Clause 5 outlines a couple of other things that the Financial Markets Authority has to do. It has to “perform or exercise any other functions powers and duties conferred or imposed on it by or under Parts 1 to 3.” So the brief is quite wide ranging. No one should be under any illusion that the authority does not have teeth; it has a lot of teeth. It has a mandate to go hard to go strong to be seen to go strong and to be seen to restore confidence in our system. The authority has to monitor the audit regulatory systems. It is not simply a passive body that will sit back and do nothing. 
The authority has a very strong mandate from this Parliament and that mandate is supported by all the parties. That is a little unusual but all the parties agreed that something needed to be done. As a consequence all parties have worked incredibly hard to ensure that we now have legislation that we can go out and be proud of. We can say to the public of New Zealand that we think and we believe we have got it right—but as they say the proof of the pudding is in the eating. Let us hope that the Financial Markets Authority actually does what the law seeks to do. I think it probably will. 
If we look at the interpretation clause we see that “audit firm” means “a partnership or body corporate that carries on the business of providing auditing services (whether or not it provides other services)”. So a general accounting company also has to be audited. I do not know whether people remember the Enron debacle but that brought down one of the largest accounting and auditing companies in the world. The reality was that there was not enough distance between those who were auditing and those who were giving advice. 
This bill ensures that everyone who says they are an auditor is registered. Thank you very much.