Independent Oversight of External Auditors: Is There a Need in New Zealand?

Sue Malthus, Nelson Marlborough Institute of Technology
Kelvin Scoble, Nelson Marlborough Institute of Technology

Abstract: The collapse of major corporations such as Enron in the United States and HIH Insurance in Australia in 2001 was blamed in part on the financial statement auditors and their lack of independence from their audit clients. This has led to a number of significant changes in the regulations surrounding financial statement auditors in the United States, Canada, the United Kingdom and Australia. These corporate collapses seriously undermined investor confidence in the stock market, and one of the major changes introduced to help reassure investors was the formation of independent oversight bodies for auditors, who had previously been primarily self-regulating. Financial statement auditors in New Zealand must be members of the New Zealand Institute of Chartered Accountants or an approved accounting association overseas, and the Institute is granted self-regulatory powers under an Act of Parliament. There is no requirement, nor any intention at this point in time to set up an independent oversight body for auditors in New Zealand. This paper explores the development of independent auditor oversight bodies in the United States, Canada, the United Kingdom, Australia, and the International Federation of Accountants over the last three years and considers the need for such a regulatory body to be introduced in New Zealand.