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August 7, 2019

Former ASIC chair warns of potential for major corporate failures

Former Australian Securities and Investments Commission (ASIC) chair Greg Medcraft has warned that growing conflicts of interest in auditing could lead to major corporate collapses.

In a television interview with ABC in Australia, Medcraft warned that poor auditing standards could lead to corporate failures on the scale of Enron. Medcraft, who became director of the directorate for financial and enterprise affairs of the OECD in November 2017 was speaking on TV for the first time in Australia since leaving his post at ASIC. He had been with the Australian regulator since 2009, first as commissioner and then as chair.

"The big one is where you have a large corporation, you have a large collapse, and it goes undetected by the auditors," Medcraft told ABC's AM programme. "Auditors are not sceptical enough, they don't challenge enough," he said.

Medcraft also voiced his support for calls in the Australian parliament for an inquiry into the conduct of major auditing firms, adding that: “The policy solution is probably to have something like an audit commission that actually appoints the auditors of large listed companies, but also, most importantly, sets the audit fee…”

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