Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (103 of 2004)

Schedule 1   Audit Reform

Part 3   Auditor appointment, independence and rotation requirements

Corporations Act 2001

95   Section 324

Repeal the section, substitute:

324AA Individual auditors, audit firms and authorised audit companies

Subject to this Part, the following may be appointed as auditor for a company or a registered scheme for the purposes of this Act:

(a) an individual;

(b) a firm;

(c) a company.

The company or registered scheme may have more than one auditor.

324AB Effect of appointing firm as auditor - general

(1) The appointment of a firm as auditor of a company or registered scheme is taken to be an appointment of all persons who, at the date of the appointment, are:

(a) members of the firm; and

(b) registered company auditors.

This is so whether or not those persons are resident in Australia.

(2) The appointment of the members of a firm as auditors of a company or registered scheme that is taken by subsection (1) to have been made because of the appointment of the firm as auditor of the company or scheme is not affected by the dissolution of the firm. This subsection has effect subject to section 324AC.

(3) A report or notice that purports to be made or given by a firm appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a member of the firm who is a registered company auditor both:

(a) in the firm name; and

(b) in his or her own name.

(4) A notice required or permitted to be given to an audit firm under the Corporations legislation may be given to the firm by giving the notice to a member of the firm.

(5) For the purposes of criminal proceedings under this Act against a member of an audit firm, an act or omission by:

(a) a member of the firm; or

(b) an employee or agent of the audit firm;

acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority, is also to be attributed to the audit firm.

324AC Effect of appointing firm as auditor - reconstitution of firm

Reconstitution of firm

(1) This section deals with the situation in which:

(a) a firm is appointed as auditor of a company or registered scheme; and

(b) the firm is reconstituted because of either or both of the following:

(i) the death, retirement or withdrawal of a member or members; or

(ii) the admission of a new member or new members.

Retiring or withdrawing member

(2) A person who:

(a) is taken under subsection 324AB(1) to be an auditor of the company; and

(b) retires or withdraws from the firm as previously constituted as mentioned in subparagraph (1)(b)(i) of this section;

is taken to resign as auditor of the company as from the day of his or her retirement or withdrawal.

(3) Section 329 does not apply to the resignation that is taken to occur under subsection (2) unless:

(a) the person who is taken to have resigned was the only member of the firm who was a registered company auditor; and

(b) there is no member of the firm who is a registered company auditor after that person retires or withdraws from the firm.

New member

(4) A person who:

(a) is a registered company auditor; and

(b) is admitted to the firm as mentioned in subparagraph (1)(b)(ii);

is taken to have been appointed as an auditor of the company or registered scheme as from the day of his or her admission to the firm.

Appointments of continuing members not affected

(5) The reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors of the company or registered scheme.

(6) Nothing in this section affects the operation of section 324BB.

324AD Effect of appointing company as auditor

(1) A report or notice that purports to be made or given by an audit company appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a director of the audit company (or the lead auditor or review auditor for the audit) both:

(a) in the audit company's name; and

(b) in his or her own name.

(2) For the purposes of criminal proceedings under this Act against a director of an audit company, an act or omission by:

(a) an officer of the audit company; or

(b) an employee or agent of the audit company;

acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority, is also to be attributed to the audit company.

324AE Professional members of the audit team

If an individual auditor, audit firm or audit company conducts an audit of a company or registered scheme, the professional members of the audit team are:

(a) any registered company auditor who participates in the conduct of the audit; and

(b) any other person who participates in the conduct of the audit and, in the course of doing so, exercises professional judgment in relation to the application of or compliance with:

(i) accounting standards; or

(ii) auditing standards; or

(iii) the provisions of this Act dealing with financial reporting and the conduct of audits; and

(c) any other person who is in a position to directly influence the outcome of the audit because of the role they play in the design, planning, management, supervision or oversight of the audit.

324AF Lead and review auditors

Lead auditor

(1) If an audit firm or audit company conducts an audit of a company or registered scheme, the lead auditor for the audit is the registered company auditor who is primarily responsible to the audit firm or the audit company for the conduct of the audit.

Review auditor

(2) If an individual auditor, audit firm or audit company conducts an audit of a company or registered scheme, the review auditor for the audit is the registered company auditor (if any) who is primarily responsible to the individual auditor, the audit firm or the audit company for reviewing the conduct of the audit.

Division 2 - Registration requirements

324BA Registration requirements for appointment of individual as auditor

Subject to section 324BD, an individual contravenes this section if:

(a) the individual:

(i) consents to be appointed as auditor of a company or registered scheme; or

(ii) acts as auditor of a company or registered scheme; or

(iii) prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

(b) the person is not a registered company auditor.

324BB Registration requirements for appointment of firm as auditor

Contraventions by members of firm

(1) A person (the defendant ) contravenes this subsection if:

(a) at a particular time, a firm:

(i) consents to be appointed as auditor of a company or registered scheme; or

(ii) acts as auditor of a company or registered scheme; or

(iii) prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

(b) at that time, the firm:

(i) does not satisfy subsection (5); or

(ii) does not satisfy subsection (6); and

(c) the defendant is a member of the firm at that time; and

(d) the defendant is aware of the circumstances referred to in paragraphs (a) and (b) at that time.

(2) A person (the defendant ) contravenes this subsection if:

(a) at a particular time, a firm:

(i) consents to be appointed as auditor of a company or registered scheme; or

(ii) acts as auditor of a company or registered scheme; or

(iii) prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

(b) at that time, the firm:

(i) does not satisfy subsection (5); or

(ii) does not satisfy subsection (6); and

(c) the defendant is a member of the firm at that time.

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

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

Note 2: Subsection (4) provides a defence.

(4) A member of an audit firm does not commit an offence at a particular time because of a contravention of subsection (2) if the member either:

(a) does not know at that time of the circumstances that constitute the contravention of subsection (2); or

(b) does know of those circumstances at that time but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

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

Registered company auditor requirement

(5) The firm satisfies this subsection if at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia.

Business name or members names requirement

(6) The firm satisfies this subsection if:

(a) the business name under which the firm is carrying on business is registered under a law of a State or Territory relating to the registration of business names; or

(b) a return in the prescribed form has been lodged showing, in relation to each member of the firm, the member's full name and address as at the time when the firm so consents, acts or prepares a report.

324BC Registration requirements for appointment of company as auditor

Contravention by company

(1) A company contravenes this subsection if:

(a) the company:

(i) consents to be appointed as auditor of a company or registered scheme; or

(ii) acts as auditor of a company or registered scheme; or

(iii) prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

(b) the company is not an authorised audit company.

Contraventions by directors of company

(2) A person (the defendant ) contravenes this subsection if:

(a) at a particular time, a company:

(i) consents to be appointed as auditor of a company or registered scheme; or

(ii) acts as auditor of a company or registered scheme; or

(iii) prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

(b) at that time, the company is not an authorised audit company; and

(c) the defendant is a director of the company at that time; and

(d) the defendant is aware of the circumstances referred to in paragraphs (a) and (b) at that time.

(3) A person (the defendant ) contravenes this subsection if:

(a) at a particular time, a company:

(i) consents to be appointed as auditor of a company or registered scheme; or

(ii) acts as auditor of a company or registered scheme; or

(iii) prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

(b) at that time, the company is not an authorised audit company; and

(c) the defendant is a director of the company at that time.

(4) For the purposes of an offence based on subsection (3), strict liability applies to the physical elements of the offence specified in paragraphs (3)(a) and (b).

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

Note 2: Subsection (5) provides a defence.

(5) A director of a company does not commit an offence at a particular time because of a contravention of subsection (3) if the director either:

(a) does not know at that time of the circumstances that constitute the contravention of subsection (3); or

(b) knows of those circumstances at that time but takes all reasonable steps to correct the contravention of subsection (3) as soon as possible after the director becomes aware of those circumstances.

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

324BD Exception from registration requirement for proprietary company

(1) An individual who is not a registered company auditor may be appointed as auditor of a proprietary company if:

(a) ASIC is satisfied that it is impracticable for a proprietary company to obtain the services of:

(i) an individual who could be appointed as auditor consistently with section 324BA; or

(ii) a firm that could be appointed as auditor consistently with section 324BB; or

(iii) a company that could be appointed consistently with section 324BC;

because of the place where the company carries on business; and

(b) ASIC is satisfied that the individual is suitably qualified or experienced; and

(c) ASIC approves the individual for the purposes of this Act in relation to the audit of the company's financial reports.

The appointment is subject to such terms and conditions as are specified in the approval under paragraph (c).

(2) If an individual is appointed in accordance with subsection (1):

(a) the individual is taken to be a registered company auditor in relation to the auditing of any of the company's financial reports; and

(b) the provisions of this Act apply, with the necessary modifications, in relation to the individual accordingly.

Paragraph (a) has effect subject to the terms and conditions of the approval under subsection (1).

(3) If an individual approved by ASIC under subsection (1) is acting as auditor of a company, ASIC may at any time, by notice in writing given to the company:

(a) amend, revoke or vary the terms and conditions of its approval; or

(b) terminate the appointment of that individual as auditor of the company.

(4) A notice under subsection (3) terminating the appointment of an individual as auditor of a company takes effect as if, on the date on which the notice is received by the company, the company had received from the individual notice of the individual's resignation as auditor taking effect from that date.

Division 3 - Auditor independence

Subdivision A - General requirement

324CA General requirement for auditor independence - auditors

Contravention by individual auditor or audit company

(1) An individual auditor or audit company contravenes this subsection if:

(a) the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at that time; and

(c) at that time:

(i) in the case of an individual auditor - the individual auditor is aware that the conflict of interest situation exists; or

(ii) in the case of an audit company - the audit company is aware that the conflict of interest situation exists; and

(d) the individual auditor or audit company does not, as soon as possible after the individual auditor or the audit company becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note: For conflict of interest situation , see section 324CD.

Individual auditor or audit company to notify ASIC

(1A) An individual auditor or audit company contravenes this subsection if:

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

(b) a conflict of interest situation exists in relation to the audited body while the individual auditor or audit company is the auditor of the audited body; and

(c) on a particular day (the start day ):

(i) in the case of an individual auditor - the individual auditor becomes aware that the conflict of interest situation exists; or

(ii) in the case of an audit company - the audit company becomes aware that the conflict of interest situation exists; and

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

(i) the conflict of interest situation remains in existence; and

(ii) the individual auditor or audit company has not informed ASIC in writing that the conflict of interest situation exists.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2A) or (2C) (public company) or 331AAA(2A) or (2C) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(1B) A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

(1C) However, if the person is a natural person:

(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.

(1D) If the individual auditor or audit company 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.

Conflict of interest situation of which individual auditor or audit company is not aware

(2) An individual auditor or audit company contravenes this subsection if:

(a) the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at the time; and

(c) at that time:

(i) in the case of an individual auditor - the individual auditor is not aware that the conflict of interest situation exists; or

(ii) in the case of an audit company - the audit company is not aware that the conflict of interest situation exists; and

(d) the individual auditor or the audit company would have been aware of the existence of the conflict of interest situation at that time if the individual auditor or audit company had had in place a quality control system reasonably capable of making the individual auditor or audit company aware of the existence of such a conflict of interest situation.

Note: For conflict of interest situation , see section 324CD.

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

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

Note 2: Subsections (4) and (5) provide defences.

(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 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.

(5) An audit company does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the audit company at a particular time if the audit company has reasonable grounds to believe that the audit company 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 audit company) that the audit company and the audit company'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.

Relationship between obligations under this section and other obligations

(6) The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

(a) another provision of this Act; or

(b) a code of professional conduct.

Note: Paragraph (a) - see, for example, the specific obligations imposed by Subdivision B.

324CB General requirement for auditor independence - member of audit firm

Contravention by member of audit firm

(1) A person (the defendant ) contravenes this subsection if:

(a) an audit firm engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at that time; and

(c) the defendant is a member of the audit firm at that time; and

(d) the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

(e) the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note: For conflict of interest situation , see section 324CD.

Member of audit firm to notify ASIC

(1A) A person (the defendant ) contravenes this subsection if:

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

(b) a conflict of interest situation exists in relation to the audited body while the audit firm is the auditor of the audited body; and

(c) the defendant is a member of the audit firm at a time when the conflict of interest situation exists; and

(d) on a particular day (the start day ), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

(i) the conflict of interest situation remains in existence; and

(ii) ASIC has not been informed in writing by the defendant, by another member of the audit firm or by someone else on behalf of the audit firm that the conflict of interest situation exists.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2B) (public company) or 331AAA(2B) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(1B) A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

(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.

(1D) If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Conflict of interest situation of which another member of audit firm is aware

(2) A person contravenes this subsection if:

(a) an audit firm engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at the time; and

(c) the person is a member of the audit firm at that time; and

(d) at that time, another member of the audit firm is aware that the conflict of interest situation exists; and

(e) the audit firm does not, as soon as possible after the member referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note: For conflict of interest situation , see section 324CD.

(3) For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b), (d) and (e).

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

Note 2: Subsection (6) provides a defence.

Conflict of interest situation of which members are not aware

(4) A person contravenes this subsection if:

(a) an audit firm engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at the time; and

(c) the person is a member of the audit firm at that time; and

(d) at that time none of the members of the audit firm is aware that the conflict of interest situation exists; and

(e) a member of the audit firm would have been aware of the existence of the conflict of interest situation if the audit firm had in place a quality control system reasonably capable of making the audit firm aware of the existence of such a conflict of interest situation.

Note: For conflict of interest situation , see section 324CD.

(5) For the purposes of an offence based on subsection (4), strict liability applies to the physical elements of the offence specified in paragraphs (4)(a), (b), (d) and (e).

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

Note 2: Subsection (6) provides a defence.

Defence

(6) A person does not commit an offence because of a contravention of subsection (2) or (4) in relation to audit activity engaged in by an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm 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 audit firm) that the audit firm and its 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.

Relationship between obligations under this section and other obligations

(7) The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

(a) another provision of this Act; or

(b) a code of professional conduct.

Note: Paragraph (a) - see, for example, the specific obligations imposed by Subdivision B.

324CC General requirement for auditor independence - director of audit company

Contravention by director of audit company

(1) A person (the defendant ) contravenes this subsection if:

(a) an audit company engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at that time; and

(c) the defendant is a director of the audit company at that time; and

(d) the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

(e) the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: The audit company itself will commit an offence based on the contravention of subsection 324AA(1).

Director of audit company to notify ASIC

(1A) A person (the defendant ) contravenes this subsection if:

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

(b) a conflict of interest situation exists in relation to the audited body while the audit company is the auditor of the audited body; and

(c) the defendant is a director of the audit company at a time when the conflict of interest situation exists; and

(d) on a particular day (the start day ), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

(i) the conflict of interest situation remains in existence; and

(ii) ASIC has not been informed in writing by the defendant, by another director of the audit company or by the audit company that the conflict of interest situation exists.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(1B) A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

(1C) However, if the person is a natural person:

(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.

(1D) If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Conflict of interest situation of which another director of audit company aware

(2) A person contravenes this subsection if:

(a) an audit company engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at the time; and

(c) the person is a director of the audit company at that time; and

(d) at that time, another director of the audit company is aware that the conflict of interest situation exists; and

(e) the audit company does not, as soon as possible after the director referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: The company itself will commit an offence based on the contravention of subsection 324AA(1).

(3) For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b), (d) and (e).

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

Note 2: Subsection (6) provides a defence.

Conflict of interest situation of which directors of audit company not aware

(4) A person contravenes this subsection if:

(a) an audit company engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at the time; and

(c) the person is a director of the audit company at that time; and

(d) at that time none of the directors of the audit company is aware that the conflict of interest situation exists; and

(e) a director of the audit company would have been aware of the existence of the conflict of interest situation if the audit company had in place a quality control system reasonably capable of making the audit company aware of the existence of such a conflict of interest situation.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: The company itself will commit an offence based on the contravention of subsection 324AA(2).

(5) For the purposes of an offence based on subsection (4), strict liability applies to the physical elements of the offence specified in paragraphs (4)(a), (b), (d) and (e).

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

Note 2: Subsection (6) provides a defence.

Defence

(6) A person does not commit an offence because of a contravention of subsection (2) or (4) in relation to audit activity engaged in by an audit company at a particular time if the person has reasonable grounds to believe that the audit company 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 audit company) that the audit company and its 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.

Relationship between obligations under this section and other obligations

(7) The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

(a) another provision of this Act; or

(b) a code of professional conduct.

Note: Paragraph (a) - see, for example, the specific obligations imposed by Subdivision B.

324CD Conflict of interest situation

(1) For the purposes of sections 324CA, 324CB and 324CC, a conflict of interest situation exists in relation to an audited body at a particular time if, because of circumstances that exist at that time:

(a) the auditor, or a professional member of the audit team, is not capable of exercising objective and impartial judgment in relation to the conduct of the audit of the audited body; or

(b) a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the auditor, or a professional member of the audit team, is not capable of exercising objective and impartial judgment in relation to the conduct of the audit of the audited body.

(2) Without limiting subsection (1), have regard to circumstances arising from any relationship that exists, has existed, or is likely to exist, between:

(a) the individual auditor; or

(b) the audit firm or any current or former member of the firm; or

(c) the audit company, any current or former director of the audit company or any person currently or formerly involved in the management of the audit company;

and any of the persons and bodies set out in the following table:

Subdivision B - Specific requirements

324CE Auditor independence - specific requirements for individual auditor

Specific independence requirements for individual auditor

(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

(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 and the notice under this subsection is not followed up by a notice under subsection 327B(2A) (public company) or 331AAA(2A) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(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.

(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.

(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

(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.

(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.

(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

(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:

Maximum hours test

(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

(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.

(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.

324CF Auditor independence - specific requirements for audit firm

Contraventions by members of audit firm

(1) A person (the defendant ) contravenes this subsection if:

(a) an audit firm 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 defendant is a member of the audit firm at that time; and

(d) the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

Member of audit firm to notify ASIC

(1A) A person (the defendant ) contravenes this subsection if:

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

(c) the defendant is a member of the audit firm at a time when the circumstances referred to in paragraph (b) exist; and

(d) on a particular day (the start day ), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

(i) the circumstances referred to in paragraph (b) remain in existence; and

(ii) ASIC has not been informed in writing of those circumstances by the defendant, by another member of the audit firm or by someone else on behalf of the audit firm.

Note: If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2B) (public company) or 331AAA(2B) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(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.

(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.

(1D) If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Contravention of independence requirements by members of audit firm

(2) A person (the defendant ) contravenes this subsection if:

(a) an audit firm 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 defendant is a member of the audit firm at that time.

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

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

Note 2: Subsection (4) provides a defence.

(4) A person does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm 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 audit firm) that the audit firm and its 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

(5) The following table sets out:

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

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

Maximum hours test

(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 provided 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

(7) A person satisfies the independence test in this subsection in relation to a firm if the person:

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

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

(c) does not have any rights against the firm, or the members of the firm, in relation to the accounting and audit practice conducted by the firm in relation to the termination of, or the value of, the person's former partnership interest in the firm; and

(d) has no financial arrangements with the firm in relation to the accounting and audit practice conducted by the firm, 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 firm; 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 firm; and

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

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 firm.

(8) In applying subsection (7), disregard any rights that the person has against the firm, or the members of the firm, by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was a member or employee of the firm.

Meaning of holding by firm in body corporate

(9) For the purposes of item 9 in the table in subsection (5), a firm is taken to have a holding in a body corporate if the holding is one of the firm's partnership assets.

324CG Auditor independence - specific requirements for audit company

Specific independence requirements for audit company

(1) An audit company contravenes this subsection if:

(a) the audit company 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 (9) of this section; and

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

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

Audit company to notify ASIC

(1A) An audit company contravenes this subsection if:

(a) the audit company 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 (9) of this section while the audit company is the auditor of the audited body; and

(c) on a particular day (the start day ), the audit company 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 audit company has not informed ASIC in writing of those circumstances.

Note: If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(1B) If the audit company 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 audit company

(2) An audit company contravenes this subsection if:

(a) the audit company 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 (9) of this section.

(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.

(4) An audit company does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the audit company at a particular time if the audit company has reasonable grounds to believe that the audit company 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 audit company) that the audit company and the audit company'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.

Contraventions by directors of audit company

(5) A person (the defendant ) contravenes this subsection if:

(a) an audit company 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 (9) of this section; and

(c) the defendant is a director of the audit company at that time; and

(d) the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

Director of audit company to notify ASIC

(5A) A person (the defendant ) contravenes this subsection if:

(a) an audit company 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 (9) of this section while the audit company is the auditor of the audited body; and

(c) the defendant is a director of the audit company at a time when the circumstances referred to in paragraph (b) exist; and

(d) on a particular day (the start day ), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

(i) the circumstances referred to in paragraph (b) remain in existence; and

(ii) ASIC has not been informed in writing of those circumstances by the defendant, by another director of the company or by the audit company.

Note: If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

(5B) A person is not excused from informing ASIC under subsection (5A) that the circumstances referred to in paragraph (5A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

(5C) However, if the person is a natural person:

(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.

(5D) If ASIC is given a notice under paragraph (5A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by director of audit company

(6) A person (the defendant ) contravenes this subsection if:

(a) an audit company 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 (9) of this section; and

(c) the defendant is a director of the audit company at that time.

(7) For the purposes of an offence based on subsection (6), strict liability applies to the physical elements of the offence specified in paragraphs (6)(a) and (b).

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

Note 2: Subsection (8) provides a defence.

(8) A person does not commit an offence because of a contravention of subsection (6) in relation to audit activity engaged in by an audit company at a particular time if the person has reasonable grounds to believe that the audit company 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 audit company) that the audit company and its 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

(9) The following table sets out:

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

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

Maximum hours test

(10) 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 provided 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), (2), (5) or (6), the prosecution must prove that the non-audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

(11) A person satisfies the independence test in this subsection in relation to an audit company if the person:

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

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

(c) does not have any rights against the audit company in relation to the accounting and audit practice conducted by the audit company in relation to the termination of the person's former position as an officer of the audit company; and

(d) has no financial arrangements with the audit company in relation to the accounting and audit practice conducted by the audit company, 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 audit company; 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 audit company; and

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

In a prosecution for an offence based on subsection (1), (2), (5) or (6), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the audit company.

(12) In applying subsection (11), disregard any rights that the person has against the audit company by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was an officer or employee of the audit company.

324CH Relevant relationships

Table of relevant relationships

(1) The following table lists the relationships between:

(a) a person or a firm; and

(b) the audited body for an audit;

that are relevant for the purposes of sections 324CE, 324CF and 324CG:

Applying table if audited body is registered scheme

(2) If the audited body is a registered scheme, apply the table in subsection (1) as if:

(a) references to the audited body in items 1 to 9, and items 15 to 19, in the table were references to the responsible entity for the registered scheme; and

(b) references to an interest in the audited body in items 10 to 12 in the table were references to an interest in either:

(i) the registered scheme; or

(ii) the responsible entity for the registered scheme; and

(c) references to an investment in an entity that has a controlling interest in the audited body in items 13 and 14 of the table were references to an investment in an entity that has a controlling interest in the responsible entity for the registered scheme.

Applying table if audited body is listed entity (other than registered scheme)

(3) If the audited body is a listed entity (other than a registered scheme), apply the table in subsection (1) as if references in the table to the audited body included references to an associated entity of the audited body.

Note: See section 50AAA for the definition of associated entity .

Firm assets

(4) For the purpose of applying items 10 to 14 in the table in subsection (1) to an audit firm, the firm is taken to have a particular asset if the asset is one of the firm's partnership assets.

Housing loan exception

(5) For the purposes of item 15 of the table in subsection (1), disregard a debt owed by an individual to a body corporate or entity if:

(a) the body corporate or entity is:

(i) an Australian ADI; or

(ii) a body corporate registered under the Life Insurance Act 1995; and

(b) the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

(c) the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

Loans by immediate family members in ordinary business dealing with client

(6) For the purposes of item 16 of the table in subsection (1), disregard a debt owed to a person by a body corporate or entity if:

(a) the item applies to the person because the person is an immediate family member of:

(i) a professional member of the audit team conducting the audit of the audited body; or

(ii) a non-audit services provider; and

(b) the debt is incurred in the ordinary course of business of the body corporate or entity.

Ordinary commercial loan exception

(7) For the purposes of item 18 of the table in subsection (1), disregard any loan that:

(a) is made or given in the ordinary course of the business of:

(i) the audited body; or

(ii) the related body corporate; or

(iii) the controlled entity; and

(b) is made or given on the terms and conditions that would normally apply to a loan made or given by the audited body, the related body corporate or the controlled entity.

Ordinary commercial guarantee exception

(8) For the purposes of item 19 of the table in subsection (1), disregard any guarantee that:

(a) is made or given in the ordinary course of the business of:

(i) the audited body; or

(ii) the related body corporate; or

(iii) the controlled entity; and

(b) is made or given on the terms and conditions that would normally apply to a guarantee made or given by the audited body, the related body corporate or the controlled entity.

Relevant financial year

(9) In this section:

relevant financial year , in relation to audit activities undertaken in relation to an audit of a financial report for a financial year or an audit or review of a financial report for a half-year in a financial year, means the financial year immediately before that financial year.

324CI Special rule for retiring partners of audit firms and retiring directors of authorised audit companies

A person contravenes this section if:

(a) the person ceases to be:

(i) a member of an audit firm; or

(ii) a director of an audit company;

at a particular time (the departure time) ; and

(b) at any time before the departure time, the audit firm or audit company has engaged in an audit of an audited body; and

(c) the person was a professional member of the audit team for the audit; and

(d) within the period of 2 years starting at the departure time, the person becomes, or continues to be, an officer of the audited body; and

(e) the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraph (d) as if references in that paragraph to the audited body included references to a related body corporate of the audited body.

324CJ Special rule for retiring professional member of audit company

A person contravenes this section if:

(a) the person who is not a director of an audit company ceases to be a professional employee of the audit company at a particular time (the departure time ); and

(b) at any time before the departure time, the audit company has engaged in an audit of an audited body; and

(c) the person was a lead auditor or review auditor for the audit; and

(d) within the period of 2 years starting at the departure time, the person becomes, or continues to be, an officer of the audited body; and

(e) the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraph (d) as if references in that paragraph to the audited body included references to a related body corporate of the audited body.

324CK Multiple former audit firm partners or audit company directors

A person contravenes this section if:

(a) an audit firm, or audit company, is an auditor of an audited body for a financial year; and

(b) the person has at any time been a member of the audit firm or a director of the audit company; and

(c) the person becomes an officer of the audited body; and

(d) at the time when paragraph (c) is satisfied another person who is or who also has at any time been a member of the audit firm, or a director of the audit company, at a time when the audit firm, or audit company, undertook an audit of the audited body is also an officer of the audited body; and

(e) the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraphs (c) and (d) as if references in those paragraphs to the audited body included references to a related body corporate of the audited body.

Subdivision C - Common provisions

324CL People who are regarded as officers of a company for the purposes of this Division

(1) For the purposes of this Division, a person is taken to be an officer of a company if:

(a) the person is an officer of:

(i) a related body corporate; or

(ii) an entity that the company controls; or

(b) the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of:

(i) the company; or

(ii) a related body corporate; or

(iii) an entity that the company controlled at that time.

(2) Paragraph (b) does not apply if ASIC directs that it does not apply in relation to the person in relation to the company. ASIC may give the direction only if ASIC thinks that it is appropriate to do so in the circumstances of the case.

(3) For the purposes of this Division, a person is not taken to be an officer of a company by reason only of being, or having been, the liquidator of:

(a) the company; or

(b) a related body corporate; or

(c) an entity that the company controls or has controlled.

(4) For the purposes of this Division, a person is not taken to be an officer of a company merely because of one or more of the following:

(a) having been appointed as auditor of:

(i) the company; or

(ii) a related body corporate; or

(iii) an entity that the company controls or has controlled;

(b) having been appointed, for any purpose relating to taxation, as public officer of:

(i) a body corporate; or

(ii) an unincorporated body; or

(iii) a trust estate;

(c) being or having been authorised to accept service of process or notices on behalf of:

(i) the company; or

(ii) a related body corporate; or

(iii) an entity that the company controls or has controlled.

Division 4 - Deliberately disqualifying auditor

324CM Deliberately disqualifying auditor

Individual auditor

(1) An individual contravenes this subsection if:

(a) the individual is appointed auditor of a company or registered scheme; and

(b) while the appointment continues, the individual brings about a state of affairs; and

(c) the individual cannot, while that state of affairs continues, act as auditor of the company or scheme without contravening Division 2 or 3.

Audit firm

(2) A member of a firm contravenes this subsection if:

(a) the firm is appointed auditor of a company or a registered scheme; and

(b) while the appointment continues, the member brings about a state of affairs; and

(c) the firm cannot, while that state of affairs continues, act as auditor of the company or scheme without a person contravening Division 2 or 3.

Audit company

(3) A person who is:

(a) a member of a company; or

(b) a director of a company; or

(c) a lead auditor in relation to an audit conducted by a company;

contravenes this subsection if:

(d) the company is appointed auditor of a company or a registered scheme; and

(e) while the appointment continues, the person brings about a state of affairs; and

(f) the company cannot, while that state of affairs continues, act as auditor of the company or scheme without contravening Division 2 or 3.

Division 5 - Auditor rotation for listed companies

324DA Limited term for eligibility to play significant role in audit of a listed company or listed registered scheme

(1) If an individual plays a significant role in the audit of a listed company or listed registered scheme for 5 successive financial years (the extended audit involvement period ), the individual is not eligible to play a significant role in the audit of the company or the scheme for a later financial year (the subsequent financial year ) unless:

(a) the individual has not played a significant role in the audit of the company or the scheme for at least 2 successive financial years (the intervening financial years ); and

(b) the intervening financial years:

(i) commence after the end of the extended audit involvement period; and

(ii) end before the beginning of the subsequent financial year.

Note: Play a significant role in an audit is defined in section 9.

(2) An individual is not eligible to play a significant role in the audit of a listed company or listed registered scheme for a financial year if, were the individual to do so, the individual would play a significant role in the audit of the company or scheme for more than 5 out of 7 successive financial years.

(3) For the purposes of subsection (2), disregard an individual's playing of a significant role in the audit of a company or scheme for a financial year if:

(a) ASIC makes a declaration under paragraph 342A(1)(a) in relation to the individual; and

(b) because of the declaration, subsection (1) of this section does not operate to make the individual not eligible to play a significant role in the audit of the company or scheme for that financial year.

324DB Individual's rotation obligation

An individual contravenes this section if the individual:

(a) plays a significant role in the audit of a listed company or listed registered scheme for a financial year; and

(b) is not eligible to play that role.

324DC Audit firm's rotation obligation

Contraventions by members of audit firm

(1) A person (the defendant ) contravenes this subsection if:

(a) an audit firm consents to act as a listed company's or listed registered scheme's auditor for a financial year; and

(b) an individual acts, on behalf of the firm, as a lead or review auditor in relation to the audit of the company's or scheme's financial report for that financial year; and

(c) the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

(d) the defendant is a member of the firm; and

(e) the defendant is not the individual and is or becomes aware that the individual is not eligible to play that role; and

(f) the defendant fails to take the necessary steps, as soon as possible after the defendant becomes aware that the individual is not eligible to play that role, either:

(i) to ensure that the audit firm resigns as auditor of the company or scheme; or

(ii) to ensure that the individual ceases to act, on behalf of the audit firm, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

(2) A person (the defendant ) contravenes this subsection if:

(a) an audit firm consents to act as a listed company's or listed registered scheme's auditor for a financial year; and

(b) an individual acts, on behalf of the firm, as a lead or review auditor in relation to the audit of the company's or scheme's financial report for that financial year; and

(c) the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

(d) the defendant is a member of the firm.

(3) For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b) and (c).

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

Note 2: Subsection (4) provides a defence.

(4) A person does not commit an offence because of a contravention of subsection (2) in relation to an individual acting as lead or review auditor on behalf of an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm 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 audit firm) that the audit firm and its employees complied with the requirements of this Division.

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

324DD Audit company's rotation obligation

Contravention by audit company

(1) An audit company contravenes this subsection if:

(a) the audit company consents to act as a listed company's or listed registered scheme's auditor for a financial year; and

(b) an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company's or scheme's financial report for that financial year; and

(c) the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

(d) a director of the audit company (other than the individual) is aware that the individual is not eligible to play that role; and

(e) the audit company fails to take the necessary steps, as soon as possible after the director becomes aware that the individual is not eligible to play that role, either:

(i) to resign as auditor of the company or scheme; or

(ii) to ensure that the individual ceases to act, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

Contraventions by directors of audit company

(2) A person (the defendant ) contravenes this subsection if:

(a) an audit company consents to act as a listed company's or listed registered scheme's auditor for a financial year; and

(b) an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company's or scheme's financial report for that financial year; and

(c) the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

(d) the defendant is a director of the audit company; and

(e) the defendant is not the individual and is or becomes aware that the individual is not eligible to play that role; and

(f) the defendant fails to take the necessary steps, as soon as possible after the defendant becomes aware that the individual is not eligible to play that role, either:

(i) to ensure that the audit company resigns as auditor of the company or scheme; or

(ii) to ensure that the individual ceases to act, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

(3) A person (the defendant ) contravenes this subsection if:

(a) an audit company consents to act as a listed company's or listed registered scheme's auditor for a financial year; and

(b) an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company's or scheme's financial report for that financial year; and

(c) the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

(d) the defendant is a director of the audit company.

(4) For the purposes of an offence based on subsection (3), strict liability applies to the physical elements of the offence specified in paragraphs (3)(a), (b) and (c).

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

Note 2: Subsection (5) provides a defence.

(5) A person does not commit an offence because of a contravention of subsection (3) in relation to an individual acting as lead or review auditor on behalf of an audit company at a particular time if the person has reasonable grounds to believe that the audit company 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 audit company) that the audit company and its employees complied with the requirements of this Division.

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

Division 6 - Appointment, removal and fees of auditors for companies

Subdivision A - Appointment of company auditors