Financial Crime World

FMA Cracks Down on Audit Firms: New Regulations and Quality Reviews

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Strengthening Audit Quality and Independence

The Financial Markets Authority (FMA) has announced a range of new regulations to ensure the quality and independence of auditors in New Zealand. The measures, which come into effect immediately, will subject all registered audit firms and individual auditors to regular quality reviews.

Key Requirements

  • Audit firms must maintain robust quality control systems, including policies and procedures for performing compliant Financial Markets Conduct (FMC) audits.
  • Individual file reviews will be conducted by the FMA to ensure that auditors are complying with Auditing and Assurance Standards and exercising reasonable care, diligence, and skill in carrying out their work.

Auditor Oversight Plan

The regulator has committed to publishing an annual auditor regulation and oversight plan, which outlines its intentions for the regulation and oversight of auditors under the Auditor Regulation Act 2011. The plan includes:

  • Objectives: specific outcomes sought by the FMA
  • Impacts or outcomes: how the FMA proposes to monitor accredited bodies

Quality Reviews

All registered audit firms and individual auditors will be subject to a quality review at least once every four years, with larger firms potentially inspected more frequently. The FMA’s quality review methodology assesses an audit firm’s compliance with standards and requirements by reviewing:

  • Overall quality control systems
  • Individual files

Auditor Oversight Committee (AOC)

The AOC is an independent forum for reviewing the consistency and fairness of all quality review reports. The committee comprises a diverse group of professionals, including ex-auditors, company directors, and others with relevant experience who are independent of the audit profession.

Benefits

Industry experts have welcomed the move, citing the need for greater transparency and accountability in the auditing sector. “The new regulations demonstrate a commitment to protecting the integrity of financial markets and ensuring that investors can trust the audits they receive,” said [Name], CEO of [Company].

Transparency and Accountability

The FMA’s annual report on quality reviews will provide transparency around its oversight activities, including:

  • File selection: determined by factors such as the number of licensed auditors at the firm, the number of FMC audits completed, and the results of previous reviews.
  • Review methodology: assessing an audit firm’s compliance with standards and requirements.

Conclusion

The move is seen as a major step forward in enhancing audit quality and protecting investors in New Zealand’s financial markets. The new regulations demonstrate a commitment to transparency and accountability, ensuring that investors can trust the audits they receive.