Auditor independence

39. The Corporations Act contains a number of requirements in relation to auditor independence.[17] The auditor independence requirements in this Prudential Standard are substantially consistent with those requirements, and are intended to help ensure the independence of an RSE auditor engaged to perform work of a prudential nature in relation to RSE licensee law.

40. The Board must, to the extent practical, undertake steps to satisfy itself that the RSE auditor is independent of the RSE licensee and the RSE, and that there is no conflict of interest situation that could compromise, or be seen to compromise, the independence of the RSE auditor.[18]

41. As part of the process of ascertaining the independence of the RSE auditor, an RSE licensee must obtain a declaration from the individual RSE auditor or the lead auditor to the effect that:

(a) they are independent, both in appearance and in fact;

(b) they have no conflict of interest situation; and

(c) there is nothing to their knowledge (including in relation to any audit firm or audit company of which the auditor is a member or director) that could compromise that independence.

42. For the purposes of this Prudential Standard, a conflict of interest situation exists in relation to an RSE licensee at a particular time if, because of circumstances that exist at that time:

(a) the individual RSE auditor or lead auditor is not capable of exercising objective and impartial judgement in relation to the conduct of the work that is undertaken for the RSE licensee in relation to RSE licensee law; or

(b) a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the individual RSE auditor or lead auditor is not capable of exercising objective and impartial judgement in relation to undertaking the work for the RSE licensee for the purposes of RSE licensee law.[19]

43. A person, who was a member of an audit firm or a director of an audit company or an individual auditor, and who served in a professional capacity in the audit of an RSE licensee in relation to RSE licensee law, cannot be appointed to the role of director or senior manager of that RSE licensee until at least two years have passed since they served in that professional capacity.

44. A person, who was an employee of an audit company or audit firm, other than a director of that company or member of that firm, and who acted as the lead auditor or review auditor[20] in the audit of an RSE licensee’s business operations in relation to RSE licensee law, cannot be appointed to the role of director or senior manager of that RSE licensee until at least two years have passed since they acted as the lead auditor or review auditor.