Corporations Act. Australia
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:
Relevant relationships
Item
If the audited body is…
have regard to any relationship with…
1
a company
the company; or
a current or former director of the company; or
a person currently or formerly involved in the management of the company.
2
a disclosing entity
the entity; or
a current or former director of the entity; or
a person currently or formerly involved in the management of the entity.
3
a registered scheme
the responsible entity for the registered scheme; or
a current or former director of the responsible entity; or
a person currently or formerly involved in the management of the scheme; or
a person currently or formerly involved in the management of the responsible entity.
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