Co-Regulation of Fraud — Detection and Reporting by Auditors in Australia: Criminology's Lessons for Non-Compliance

Abstract

All companies (other than exempt proprietary ones) are required by the Corporations Law to have their books audited. For about 150 years there has been a controversy surrounding the auditors' role — whether they should be functioning as a ‘watchdog’ or a ‘bloodhound’. In recent years the auditing profession in Australia has been experiencing a credibility crisis. A spate of much publicised corporate collapses in the late 1980s at a time of economic recession has been instrumental in: (i) the Australian Securities Commission (ASC) adopting more heavy-handed ways of policing auditing standards; (ii) rocketing audit fees; and (iii) the accounting bodies redefining their role and revising auditing standards. This paper focuses on current approaches to regulating the auditing profession, and discusses their effectiveness, drawing on the criminological literature relevant to professional advisers, white collar illegality, and deterrence.