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Auditor Remuneration in ASX Listed Companies: An Overview of Disclosure Practices

Under Australian law and accounting standards, companies are required to disclose information about the remuneration of auditors in their annual reports. This information is intended to provide transparency to shareholders and other stakeholders about the costs associated with the audit, as well as to ensure auditor's independence.

Disclosure requirements under Corporations Act

Section 300 of the Corporations Act lists the details of auditor remuneration that are required to be disclosed. A listed company must disclose the non-audit fees paid to auditors under the heading ‘Non-Audit Services’ in the director’s report. It must also include a statement by the directors that the provision of non-audit services by the auditor was compatible with the standard of independence imposed by the Act, and their reasons for being satisfied that the services did not compromise the auditor’s independence.

These details needed not be given in the director’s report if they are disclosed in the company’s financial report. In such a case, a reference to the relevant portion of the financial report should be given in the ‘Non-Audit Services’ section of the directors’ report. Section 307C also requires the auditors to provide a declaration of independence.

Disclosure requirements under Accounting Standards

Para 10 of AASB 1054 Australian Additional Disclosures requires a company to disclose fees to each auditor or reviewer, including any network firm, separately for:

  • the audit or review of the financial statements; and

  • all other services performed during the reporting period, including the nature of other services.

Common Services provided by Auditors

Disclosure Practices in Top 100 ASX Listed Companies

In our 2023 Governance Impressions Report, we analysed Top 100 ASX listed companies by market capitalisation and found that

Heterogeneous Disclosure Practices

We observed different methods of disclosing specific aspects of auditor remuneration, including:

  1. Classification of Assurance Services: The fees for assurance services paid to the auditors were classified as either audit fees or non-audit fees. The reasoning behind the classification was not always clear or uniform across companies. Further, it was not always specified which assurance services were statutorily required to be provided by auditors and which weren’t.

  2. Audit of Controlled Entities: Fees paid to the auditors of the controlled entities, when they involved multiple non-network audit firms including overseas firms, were not classified into audit and non-audit fees.

  3. Network Firms: Fees paid to network firms affiliated to the auditors included fees paid for both controlled entities that formed part of the Group audit, and controlled entities outside of the Group audit. Fees paid to network firms were also not always classified into audit and non-audit fees.

Levels of Disclosure of Auditor Remuneration in Notes to Financial Statements

While Australian companies are obligated to include details regarding auditor remuneration in their shareholder reports, the manner in which these fees are presented exhibits significant disparities. Implementing a uniform and standardized disclosure mandate would enhance accountability and transparency in financial reports, enabling more informative and meaningful comparisons.

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