AICD submission on the regulation of accounting, auditing and consulting firms in Australia

On 12 August 2026, the AICD submission to Treasury's options paper, the Regulation of accounting, auditing and consulting firms in Australia (Options Paper).

The AICD was supportive in-principle of a number of the proposed reforms aimed at improving governance, firm-level accountability and regulatory oversight of the audit sector. However, we cautioned against proposals for broad structural reforms and a “one size fits all” or blunt application to both firms and reporting entities that could lead to unintended consequences.

The AICD shared particular concerns that certain reform options would impose significant and disproportionate costs on audit firms and, indirectly, reporting entities. These downstream costs would come at a time when Australian businesses are already burdened by significant regulatory costs and where productivity remains a core national priority.

If certain reform options are pursued, the AICD strongly recommended a proportionate application to only large, systemically important audit partnerships and large, systemically important reporting entities, as appropriate.

Our key points included:

• Ensuring accountability within the audit sector:  We supported measures to strengthen firm-level accountability in the audit sector, including appropriately tailored audit firm licensing. We recommended that any licensing requirements be proportionate and apply on a tiered basis to reflect differences in firms’ scale, complexity and risk profile.

• Managing structural conflicts of interest in multidisciplinary firms: We supported in-principle restrictions on large reporting entities engaging their auditor for non-audit services, subject to materiality thresholds and relevant exceptions being provided. We did not support proposals for operational or structural separation of multidisciplinary firms, noting these options would represent disproportionate interventions in the sector that are unlikely to deliver clear audit quality or independence benefits when weighed against their complexity and potential for increased costs for reporting entities.

• Internal governance of audit partnerships: We supported new minimum governance standards for large audit firms, including requirements for an independent chair, a minimum number of independent directors and duties for key personnel. We did not support options to reduce partnership limits or mandate audit firm incorporation, noting concerns that these options could reduce market capacity and audit firm depth.

• Improving audit surveillance: We supported a mandated minimum level of ASIC audit surveillance, including increased audit file reviews selected on both a randomised and risk basis and publication requirements. We also encouraged these measures to be accompanied by increased resourcing to support more comprehensive surveillance by the regulator, given ASIC’s existing broad remit.

• Enhancing disciplinary processes and sanctions: We supported in-principle the introduction of proportionate civil penalties, enhanced administrative powers for ASIC and measures to improve the Companies Auditors Disciplinary Board’s (CADB) disciplinary capability. 

• Enhancing audit market dynamism for reporting entities: We supported additional reporting obligations for large reporting entities regarding auditor tenure. We also supported a periodic tendering requirement for large reporting entities every 10 years and encouraged there to be scope for exceptions (with regulator approval) where specific circumstances make a tender impractical for a reporting entity at the time. However, we did not support a mandatory audit firm rotation requirement every 20 years. We noted our concerns that a prescriptive firm rotation requirement, in addition to a periodic tendering requirement, could undermine the objectives of a competitive tender process and does not adequately reflect the realities of Australia's audit market. On balance, the AICD considered that a combination of existing audit partner rotation requirements and a comprehensive auditor review every 5 years, as well as a periodic tendering requirement every 10 years, are effective mechanisms to incentivise market dynamism.