Process for changing auditors in Australia

There are many reasons for changing auditors: independence, conflict of interest, mandatory rotation, dissatisfaction, capability or cost considerations. 

Whatever your reason, changing auditors is not something you should do lightly. This is a significant decision with governance implications that requires due consideration, transparent communication and adherence to specific procedural steps to ensure regulatory compliance. 

The exact process differs depending on the type of entity involved and can be a lengthy process. 

Public companies (listed and unlisted)

Public companies are subject to stringent requirements under the Corporations Act 2001 (Cth). Auditor changes can occur through resignation or removal, both of which require oversight by the Australian Securities and Investments Commission (ASIC).

Resignation process

• The auditor must apply to ASIC for consent to resign under section 329(5) of the Corporations Act. The incumbent auditor can only apply to ASIC once the entity has provided the necessary information to accompany the application. This will usually involve a resolution of the board appointing a new auditor and a letter from the proposed auditor that they are willing to accept appointment, subject to ASIC consent.
• ASIC will assess whether the resignation is in the public interest and whether the company has a replacement auditor ready.
• The incumbent auditor continues to hold office until ASIC has granted consent.

Removal process

• Shareholders must pass a resolution at a general meeting to remove the auditor.
• The company must follow the procedures outlined in sections 329(1)–(4) of the Corporations Act 2001, which involves:
  • Preparation of a Notice of Intention to Remove Auditor.
  • Providing notification to the auditor and ASIC.
  • Allowing the auditor the right to respond to the notice.
  • Holding of a general meeting to allow members to vote on the matter.

Key considerations

• The board and audit committee should document the rationale for the change.
• The change process should be planned and timed to ensure that there is no disruption to the audit process or to jeopardise reporting deadlines.

Large proprietary companies

Large proprietary companies are also governed by the Corporations Act 2001 but face fewer procedural hurdles than public companies.

Change process

• The company can remove the auditor by shareholder resolution.
• ASIC notification is required through lodgement of ASIC Form 315, but consent is not required.

AFSL holders

Entities holding an Australian Financial Services Licence (AFSL) must comply with both the Corporations Act 2001 and ASIC’s licensing conditions.

Change process

• The change process for AFSL holders is similar to that of public companies, with ASIC's consent usually required.

Incorporated associations

Incorporated associations are regulated at the state or territory level, such as by Consumer Affairs Victoria or equivalent bodies.

Change process

• The association’s constitution or governing document typically outlines the process for appointing or removing an auditor.
• A resolution at the annual general meeting (AGM) is usually required.
• Notification to the relevant regulator may be necessary depending on the jurisdiction.

Available resources 

ASIC regulatory guide 26 Resignation, removal and replacement of auditors provides a detailed guide for public companies and AFSL holders to assist in complying with the specific requirements to change auditors.

Strategic considerations across all entity types

Regardless of the entity type, changing auditors should be approached with strategic intent and operational diligence. Some key considerations include:

• Timing: Commence the process early to minimise disruption and to avoid putting statutory reporting timelines at risk.
• Communication: Inform stakeholders, including regulators, shareholders, and employees, with clarity and transparency.
• Documentation: Keep detailed records of board discussions, resolutions, and correspondence with auditors and regulators.
• Due diligence: Vet the incoming auditor for industry experience, independence, and capacity to adequately service your organisation and meet required deadlines.

By understanding the specific requirements for your entity type and engaging proactively with incumbent and proposed auditors, you can ensure a smooth transition that strengthens your financial oversight and stakeholder confidence.

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, don’t hesitate to get in touch with your local RSM auditor today.