Professor Janek Ratnatunga, CEO of the Institute of Certified Management Accountants (ICMA), said that current corporate audit controls have proved ineffective in “reining in bad behaviour”.
In fact, he went further to suggest that “the silence of auditors” is a common problem, with most companies exposed for legal and compliance breaches being given a flawless report card.
“The external audit is supposed to operate as a trust mechanism to persuade the public that capitalist corporations and management are not corrupt and that companies and their directors are held accountable,” he said.
“It’s time for management accountants to further distance themselves from the financial accounting and auditing professions and ensure that they are able to inculcate good strategic governance and strategic audit practices in their organisations.”
Professor Ratnatunga added: “Perhaps it’s best to have a royal commission on the auditing profession to evaluate if auditors have been short-changing their clients, who are the shareholders and not the directors and management.”
A My Business reader separately proposed such a move for liquidators, who were labelled “crooks”.
“The liquidators should be looked at. You think we needed a royal banking commission; we need [a] royal insolvency commission. The crooks are the liquidators – there is plenty of proof in the system but ASIC don’t care and let them go!!!”
During the banking royal commission hearings into SME lending, one director testified that the liquidators acted inappropriately by spending business funds on “refurbishing” a brand new, unoccupied hotel – thus adding to the financial burden of the failed business and further blowing out creditor losses.
It comes amid several regulatory interventions involving liquidators for alleged misconduct.
An ATO probe is investigating whether dozens of clients and associates took up the advice of a discredited pre-insolvency adviser to engage in phoenix activity to avoid paying creditors.
Meanwhile, ASIC has accepted a court-enforceable undertaking from Brisbane liquidator Peter Dinoris, of Artemis Insolvency, who was found in court to have failed to act with due diligence as the liquidator of Asden Developments.
In that ruling, Mr Dinoris was found to have failed to contact the firm’s director regarding a $236,500 withdrawal from the company’s account the day before his appointment as liquidator.
“Based on the courts’ findings, ASIC gave Mr Dinoris a show cause notice under section 40-40(1) of Schedule 2 of the Act to explain why his registration should continue,” ASIC said in a statement.
“Mr Dinoris provided ASIC with information regarding changes in his practices and procedures and ASIC determined [it] required independent corroboration to be satisfied that Mr Dinoris has implemented those systems and procedures.”
As part of the undertaking, Mr Dinoris will be required to engage an independent review to audit four external cases he managed.