Auditors are there to protect investors, but policies like Audit Shield exist, because not everything goes perfectly.
According to a report on the quality of audits in New Zealand, conducted by the country’s Financial Markets Authority, noted that, since 2011, auditors in the country have improved on how they carry out their jobs of providing independent verification of companies’ financial statements.
But there have been some hiccups, pointing to some issues that led to the huge losses for investors when financial companies in the country collapsed around the late 90s and early 00s. Investors rely on the accuracy of the financial statements of their companies when they consider their options on risking their money.
Legislative changes that brought in changes in licensing back in 2011 raised the quality of audits in NZ, to the benefit of Audit Shield and everyone else, but the FMA still noted that there were still incidents of auditors failing to notice if they were given inaccurate or incomplete information.
FMA Director of Capital Markets Garth Stanish, says that when an auditor is given poor quality information, then there is a greater chance that the FMA classified the filed audit will be classified as needing significant improvements.
He adds that auditors need to push back, and demand that companies provide them with the information that they need to do their jobs properly. Stanish also says that auditors should openly communicate with directors regarding any issues they encounter with getting information, and to consider the effects of such an issue on their audit opinion. The FMA Director stressed the importance on auditors doing their job right as regulators are as dependent on them as investors are.
Stanish states that issues have been raised across the world with regards to the quality of audits, and that the FMA is keeping an eye on these developments while imploring the audit profession in New Zealand to look into these issues and gleam some lessons from them, especially following the country losing trust in the field following the collapse of several financial companies like South Canterbury Finance and Capital + Merchant.