9 May 2025
I write to draw the ANAO’s attention to concerns regarding ASIC’s application of the term “supervising audits of companies” under Regulation 9.2.01(a)(ii) of the Corporations Regulations 2001 and section 1280 of the Corporations Act 2001. In practice, ASIC appears to interpret “supervision” narrowly to mean direct supervision of audit staff, excluding sole practitioners or small-firm auditors who oversee audits without employees. This interpretation is inconsistent with legislative intent and legal precedent.
The Administrative Appeals Tribunal has confirmed that “supervision” is broader than signing audit opinions or directly managing junior audit staff. In Nicholas Guy Birdseye v Australian Securities and Investments Commission, the Tribunal held that supervising audits includes responsibilities such as:
• Planning the audit
• Managing the engagement
• Reviewing audit findings
• Overseeing audit documentation and risk assessments
(Refer: [1126]–[1129] of the decision)
Importantly, this supervisory role encompasses the strategic and technical oversight required to form audit opinions, irrespective of whether subordinate staff are present.
In Re Higham (1987) 5 ACLC 352, the Queensland Supreme Court clarified that audit supervision extends beyond intensive fieldwork and includes:
• Ongoing review of audit strategy
• Liaison with the client
• Periodic review of the entity’s activities
• Resolution of audit-related issues (e.g. accounting treatment in financial statements)
• Preparation of final review notes
This case also recognised that a person may still satisfy the supervision requirement if only 10% of their time is spent on direct audit tasks, provided they exercise continuous oversight and hold overall responsibility for the audit.
Regulation 9.2.01(a)(ii) requires at least 750 hours supervising audits of companies in the 5 years prior to application. This is in addition to the 3000 hours of audit experience under a Registered Company Auditor (RCA) required under reg 9.2.01(a)(i). The term “supervising” must be interpreted in light of the broader auditing responsibilities described in legislation and case law.
Finally, audits of entities with company-like attributes (e.g. large incorporated associations or charities with ASIC-style reporting obligations) have been recognised as substantively equivalent for supervision purposes.
Therefore, ASIC’s refusal to recognise audit supervision conducted by sole practitioners or non-employer auditors is inconsistent with legislative standards and judicial interpretation. I respectfully submit that the ANAO recommend that ASIC align its assessment framework with the definitions established in Birdseye, Re Higham, and the Corporations Regulations, and recognise the full scope of audit supervision, including planning, engagement oversight, and technical review—even in the absence of subordinate staff.
Posts Tagged ‘ANAO’
Submission to the ANAO – ASIC’s Interpretation of “Supervising Audits of Companies”
Treasury’s ANAO Finally Investigating ASIC’s RCA Licensing – A Small Firm’s Fight for Fairness
After more than two years of battling red tape, industry silence, and outdated licensing processes, the movement to reform ASIC’s Registered Company Auditor (RCA) registration system is finally gaining traction. Treasury, via the Australian National Audit Office (ANAO), has now launched a performance audit into ASIC’s regulation of company auditors — and I couldn’t be more relieved.
This has been a long road.
I began my RCA registration journey nearly two and a half years ago. For the past 12 months, I’ve actively been campaigning to expose the significant barriers faced by small firms trying to enter the audit profession in Australia. My campaign has included hundreds of hours of unpaid advocacy, writing to just about every institution that might listen.
A Letter-Writing Marathon
Since 2023, I’ve sent over 1,000 letters and emails — not a typo — to the following:
ASIC Chair and executive staff
Treasury representatives
Federal and state politicians
The Prime Minister’s Office
Industry regulators including the AASB and FRC
Professional bodies such as CPA Australia, CA ANZ, and IPA
Media outlets like the AFR, Accountants Daily, and Inside Small Business
Think tanks, environment groups, and public policy forums
And that’s just the short list.
Despite this mountain of effort, my applications to become an RCA have repeatedly hit roadblocks. The core issue? An outdated and anti-competitive licensing regime that seems to favor large audit firms and overseas-trained auditors — while making it near impossible for competent small-practice professionals to qualify.
Discrimination by Design?
The system is stacked. ASIC’s registration requirements are structured in such a way that they actively discriminate against sole practitioners and small firms. They rely heavily on traditional, hierarchical firm structures and ignore collaborative, project-based training models that are common in smaller practices. This is not only unfair — it’s economically short-sighted.
Treasury and ASIC appear to accept audit formats provided by large international firms while rejecting perfectly capable Australian applicants with years of practical experience. It’s a system that values form over substance.
Meanwhile, I’ve assisted with articles explaining why the one-on-one training in small firms often results in more robust and rounded auditors compared to conveyor-belt graduates in big firms. Unfortunately, those in charge of licensing have been slow — if not outright unwilling — to engage with these ideas.
ANAO Steps In – At Last
After multiple submissions to the ANAO in late 2024 — and after my articles were published in Accounting Times and Inside Small Business — the ANAO has finally opened its doors to these concerns. Their current review of ASIC’s RCA registration regime is a direct result of industry pressure and grassroots advocacy.
Encouragingly, once I named certain industry bodies in my submissions, some of them began to take the issue more seriously. CPA Australia and CA ANZ, among others, have now lodged submissions of their own to the ANAO — a sign that the tide may finally be turning.
A Ripple Becoming a Wave
In recent months, I’ve been heartened to see more accounting publications and professionals speaking out. The audit industry’s decline — especially among domestic RCAs — is no longer something we can ignore. With new sustainability and environmental reporting standards on the horizon, the need for a strong, sustainable pipeline of local auditors is more critical than ever.
Yet without reform, we risk creating an even greater reliance on imported labour and large firms, which will further sideline small Australian practices.
Where to From Here?
This fight isn’t over. If you’re a small practitioner, an aspiring RCA, or someone who simply believes in fair and open access to the profession, now is the time to speak up.
Make your submission to the ANAO. Contact your professional body. Share your story. The more voices behind this, the stronger our case for lasting change.
Thank you for the support from Accountants Daily.
https://www.accountantsdaily.com.au/regulation/20858-small-firm-accountants-face-major-barriers-to-auditor-registration