Auditors have reported a 40 percent increase in suspected breaches of the Corporations Act to the Australian Securities & Investments Commission in the last financial year.
Auditors reported 341 suspected breaches of the Corporations Act to ASIC in the last financial year, up from 238 the previous year, The Australian reports. There was only a 14 percent increase in the number of suspected cases of insolvent trading, 37 in the last financial year, up from 32 the year before.
ASIC requires auditors under section 311 of the Corporations Act to tell ASIC when they suspect under ‘reasonable grounds’ that the Corporations Act has been breached, in order to equip ASIC with the information required to prosecute if required.
When looking for reasons behind the increase in suspected breaches of the Corporations Act, some of the 40 percent increase is likely attributable to the wake of the global financial crisis mounting pressure on businesses to stay in business, so corners get cut and breaches of the Corporation Act occur.
The reality, however, may be less alarming than suggested by the 40 percent headline rate. ASIC is increasing the scrutiny on auditors, taking on additional staff to monitor the activity of auditors over the same period, resulting in auditors ratcheting up their reporting out of fear they may be caught out on a minor breach. The reality is more likely the 14 percent increase in suspected insolvent trading is indicative of the increase in suspected breaches of the Corporations Act across the board, and that the 40 percent headline figure is indicative of a trend towards an increased reporting of suspected breaches by auditors.
