CORPORATIONS ACT 2001

CHAPTER 2M - FINANCIAL REPORTS AND AUDIT  

PART 2M.4 - APPOINTMENT AND REMOVAL OF AUDITORS  

Division 3 - Auditor independence  

Subdivision B - Specific requirements  

SECTION 324CE   AUDITOR INDEPENDENCE - SPECIFIC REQUIREMENTS FOR INDIVIDUAL AUDITOR  

Specific independence requirements for individual auditor

324CE(1)  
An individual auditor contravenes this subsection if:


(a) the individual auditor engages in audit activity at a particular time; and


(b) a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and


(c) the individual auditor is or becomes aware of the circumstances referred to in paragraph (b); and


(d) the individual auditor does not, as soon as possible after the individual auditor becomes aware of those circumstances, take all reasonable steps to ensure that the individual auditor does not continue to engage in audit activity in those circumstances.

Individual auditor to notify ASIC

324CE(1A)  
An individual auditor contravenes this subsection if:


(a) the individual auditor is the auditor of an audited body; and


(b) a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (5) of this section while the individual auditor is the auditor of the audited body; and


(c) on a particular day (the start day ), the individual auditor becomes aware of the circumstances referred to in paragraph (b); and


(d) at the end of the period of 7 days from the start day:


(i) those circumstances remain in existence; and

(ii) the individual auditor has not informed ASIC in writing of those circumstances.

Note: If the audited body is a public company or a registered scheme, the audit appointment will be terminated at the end of the period of 21 days (or a longer period that has been approved by ASIC) from the day a notice under this subsection is given if the notice is not followed up by a notice under:

  • (a) subsection 327B(2A) (public company); or
  • (b) subsection 328E(3) (public company with crowd-sourced funding); or
  • (c) subsection 331AAA(2A) (registered scheme).
  • 324CE(1B)  
    A person is not excused from informing ASIC under subsection (1A) that the circumstances referred to in paragraph (1A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

    324CE(1C)  
    However:


    (a) the information; and


    (b) the giving of the information;

    are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

    324CE(1D)  
    If the individual auditor gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

    Strict liability contravention of specific independence requirements by individual auditor

    324CE(2)  
    An individual auditor contravenes this subsection if:


    (a) the individual auditor engages in audit activity at a particular time; and


    (b) a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section.

    324CE(3)  
    For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraph (2)(b).

    Note 1: For strict liability , see section 6.1 of the Criminal Code .

    Note 2: Subsection (4) provides a defence.

    324CE(4)  
    An individual auditor does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the individual auditor at a particular time if the individual auditor has reasonable grounds to believe that the individual auditor had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the individual auditor) that the individual auditor and the individual auditor's employees complied with the requirements of this Subdivision.

    Note: A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code .

    People and entities covered

    324CE(5)  


    The following table sets out:


    (a) the persons and entities covered by this subsection in relation to audit activity engaged in by an individual auditor; and


    (b) the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:


    Table for individual auditors
    Table for individual auditors
    Individual auditor
    Item For this person or entity... the relevant items of the table in subsection 324CH(1) are...
    1 the individual auditor 1 to 19
    2 a service company or trust acting for, or on behalf of, the individual auditor, or another entity performing a similar function 1 to 19
    3 a professional member of the audit team conducting the audit of the audited body 1 to 6
    8 to 19
    4 an immediate family member of a professional member of the audit team conducting the audit of the audited body 1 and 2
    10 to 19
    5 a person who is a non-audit services provider and who does not satisfy the maximum hours test in subsection (6) 10 to 12
    6 an immediate family member of a person who is a non-audit services provider and who does not satisfy the maximum hours test in subsection (6) 10 to 12
    7 an entity that the auditor (or a service company or trust acting for, or on behalf of, the individual auditor, or another entity performing a similar function) controls 15
    8 a body corporate in which the auditor (or a service company or trust acting for, or on behalf of, the individual auditor, or another entity performing a similar function) has a substantial holding 15
    9 a person who: 1 and 2
    (a) is a former professional employee of the auditor; and
    (b) does not satisfy the independence test in subsection (7)
    10 an individual who: 1 and 2
    (a) is the former owner of the individual auditor's business; and
    (b) does not satisfy the independence test in subsection (7)

    Maximum hours test

    324CE(6)  
    A non-audit services provider satisfies the maximum hours test in this subsection if:


    (a) the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and


    (b) the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

    In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the non-audit services provider did not satisfy the maximum hours test in this subsection.

    Independence test

    324CE(7)  
    A person satisfies the independence test in this subsection in relation to an individual auditor if the person:


    (a) does not influence the operations or financial policies of the accounting and audit practice conducted by the auditor; and


    (b) does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the auditor; and


    (c) does not have any rights against the auditor in relation to the accounting and audit practice conducted by the auditor in relation to the termination of the person's former employment by the auditor; and


    (d) has no financial arrangements with the auditor in relation to the accounting and audit practice conducted by the auditor, other than:


    (i) an arrangement providing for regular payments of a fixed pre-determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the auditor; or

    (ii) an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the auditor; and


    (e) without limiting paragraph (d), has no financial arrangement with the auditor to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the auditor.

    In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the individual auditor.

    324CE(8)  
    In applying subsection (7), disregard any rights that the person has against the auditor by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was an employee of the auditor or the owner of the auditor's business.


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