Australia's $4.3 trillion superannuation system depends on trust in financial oversight, but ongoing audit failures are casting doubt on the effectiveness of key safeguards. Regulators are uncovering widespread breaches, prompting a push to strengthen audit standards. However, gaps in oversight and conflicts of interest continue to erode confidence.
A recent report from the corporate regulator reveals persistent problems in the auditing sector. Almost one-third of auditors reviewed were likely in breach of fundamental requirements, and five have faced direct regulatory action. These findings follow a series of scandals involving flawed audits by major firms that missed risky exposures. Some of these companies are now connected to collapsed ventures. The message is clear - the quality of audits is falling short and weaknesses in the system could have broader economic consequences.
Previous audit failures at large firms contributed to major collapses overseas, with some directly affecting Australia's economy. In one case, the UK financial regulator fined a global auditing firm $6 million for a botched audit linked to GFG group in 2019. An Australian firm also missed key issues in the same network of companies. These lapses raise questions about whether more rigorous audits could have helped prevent the need for government intervention to support critical local industries.
The corporate regulator has improved audit monitoring with a more targeted approach, but there is still a lack of significant enforcement needed to drive cultural change across the profession. Recognising the challenge, parliamentary oversight groups have recommended random audits to introduce real accountability. This approach is likened to roadside checks, making it harder for poor-quality audits to go unnoticed.
There is growing momentum to reform the regulatory framework. One proposal involves placing auditing firms under full oversight, not just reviewing individual auditors. This shift would follow international examples such as the US Public Company Accounting Oversight Board, which holds entire firms accountable for compliance and performance. At present, Australia's framework appears to let firms operate with limited scrutiny even when individual auditors are licensed and reviewed.
The ongoing audit concerns reflect deeper structural issues in a sector with a critical role in protecting Australia's financial system. In response, the government is indicating stronger action to close regulatory gaps and raise standards across the auditing profession. The stakes are high, as the future of Australians' retirement savings and economic wellbeing depend on trustworthy financial oversight.
