This parliamentary inquiry into the regulation of auditing services in Australia investigated the risks to audit quality from auditing firms doing other work for their clients. It found that independent and accurate external auditing is more critical than ever in helping determine efficient and effective capital allocation.

The committee recommended that the Australian Securities and Investment Commission's (ASIC) continually review its audit inspection methodology with the aim of producing reports of greater sophistication and clarity that take into account the contested nature of some of the professional judgments made by both auditors and ASIC inspectors.

With regard to auditor independence, both real and perceived, the committee reiterated its view that auditor independence is a key determinant of a robust audit regulatory framework and crucial in the process of building trust, confidence and stability in capital markets. To this end, the committee made several recommendations directed at ensuring auditor independence:

• Establish defined categories and associated fee disclosure requirements in relation to audit and non-audit services.
• Establish a list of non-audit services that audit firms are explicitly prohibited from providing to an audited entity.
• The auditor's independence declaration be expanded to require the auditor to specifically confirm that no prohibited non-audit services have been provided.
• Consider revising the APES 110 Code of Ethics to include a safeguard that no audit partner can be incentivised, through remuneration advancement or any other means or practice, for selling non-audit services to an audited entity

Some witnesses recommended barring audit firms from doing other work for their clients.