Curran Clare: Auditor Regulation and External Reporting Bill — In Committee 
Curran Clare: Auditor Regulation and External Reporting Bill — In Committee 
[Volume:672;Page:18292] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 The Auditor Regulation and External Reporting Bill which we spoke about in the House several weeks ago strengthens the regulation of practitioners who carry out the audits of issuers. It also reconstitutes the Accounting Standards Review Board as the External Reporting Board and requires the Institute of Chartered Accountants to regulate auditors as a specialist profession rather than as chartered accountants. It was introduced on 14 September 2010 and is now passing through its Committee stage. Labour supports this bill and we have spoken about it in depth in the House on a number of occasions because ultimately it is part of a suite of bills that are about restoring confidence in New Zealand’s financial markets. Although this is a very complex and detailed bill we have closely scrutinised both this bill and the legislation that sets up the Financial Markets Authority at the Commerce Committee. There has been considerable debate at the Commerce Committee about this bill and about all the other bills that accompany it. It is important as it is every time we get up to speak on these bills to acknowledge that the work that was done to underpin this bill and the earlier bills that surround it was done by the previous Labour Government. Certainly although the work of the select committee has been very important the work done by the previous Minister of Commerce the Hon Lianne Dalziel is also important and must be acknowledged. 
Just to recap this bill now requires the Institute of Chartered Accountants to regulate the auditors who were formerly regulated as chartered accountants as a specialist profession. The Financial Markets Authority will now be responsible for auditor oversight in monitoring and reporting on the adequacy and effectiveness of the Institute of Chartered Accountants’ regulatory system. 
A number of changes to the bill went through the select committee. We are debating Part 1 and in particular the changes that were made to clause 3. This clause sets out the purpose of the bill which is: “to regulate auditors who carry out audits in respect of issuers and to establish an independent oversight system … to—(a) promote in respect of issuer audits quality expertise and integrity in the profession of auditors; and (b) promote the recognition of the professional status of New Zealand auditors in overseas jurisdictions.” Clause 5 relates to the functions of the Financial Markets Authority under the legislation which will include responsibility for setting the minimum standards for becoming a licensed auditor granting accreditation to persons as accredited bodies monitoring those accredited bodies and carrying out practice reviews. The authority will also have responsibility for regulating overseas qualified auditors which was formally the responsibility of the Registrar of Companies. Clause 8 stipulates that every person who acts as the auditor in respect of an issuer audit must hold a licence. 
There was quite a lot of discussion—particularly in the submissions to the select committee—about licensing. The definition of “issuer” in the Financial Reporting Act 1993 firstly covers those entities that seek funding through debt and equity instruments that are offered to the public and secondly includes banks insurance companies mutual funds and other entities that take deposits. Clause 9 requires audit firms to be registered and for each engagement partner in the firm to be a licensed auditor. Breach of that clause by the firm would translate into every partner or director of the audit firm committing an offence and being liable to a fine not exceeding $50000 if the breach took place under their authority and knowledge. Knowledge will be determined where they reasonably should have known—