The corporate regulator has accepted three court enforceable undertakings after uncovering multiple auditor rotation breaches by registered company auditors linked to Hall Chadwick (NSW).
ASIC said auditors Drew Townsend, and former partners Sandeep Kumar and Graham Webb, acted as lead auditor on a combined 14 occasions across eight listed companies between 2019 and 2023 when they were not eligible to do so. Auditors may serve as lead auditor of a listed company for five years, with a possible extension of up to two more years when specific requirements are met. ASIC said the three did not meet those requirements on the occasions in question.
The trio had relied on Hall Chadwick (NSW) having a system of quality management to ensure compliance with independence and rotation obligations. ASIC considered the firm’s system deficient, and the registered company auditor members of Hall Chadwick (NSW) admitted they failed to adequately and properly design, implement and operate a system of quality management to ensure personnel complied with relevant requirements, including those relating to independence.
Under the undertakings, the current registered company auditor members of Hall Chadwick (NSW) will engage an independent expert to review the firm’s system of quality management for compliance with obligations on auditor independence and conflicts of interest, and to test the implementation of any recommendations and remedial actions. In addition, each auditor has undertaken, for a period, to inform ASIC and provide evidence of compliance when seeking to extend any eligibility term beyond five years.
Commissioner Kate O’Rourke said “It is concerning that the system of quality management at Hall Chadwick (NSW) failed to prevent and detect multiple breaches of the auditor rotation requirements by three audit partners. The ability to audit a listed company beyond five years is a privilege governed by strict requirements, designed to preserve independence, address conflicts of interest and uphold audit quality. ASIC will take action where auditor independence is undermined”.
ASIC’s actions follow its proactive auditor independence surveillance focusing on compliance with independence and conflict-of-interest obligations, including rotation, as outlined in its 2023–24 financial reporting and audit report. A report on the overall surveillance findings will be released shortly.
A court enforceable undertaking is an administrative remedy used to improve and enforce compliance with laws administered by ASIC; if not complied with, ASIC may seek to enforce it through the courts. The undertakings are publicly available on ASIC’s court enforceable undertakings register.
