NZSE eases audit requirements

By ELLEN READ

The Stock Exchange has revised its planned audit rotation rules because of the low number of accounting firms in New Zealand.

Under the exchange's final proposal for corporate governance - now being considered by the Securities Commission - listed companies must rotate their audit firm or partner every five years. This differs from earlier proposals by allowing a change of partner rather than the firm concerned.

Exchange head Mark Weldon said market dynamics were behind the revision - there are too few auditors operating for a rotation every five years.

Shareholders' Association chairman Bruce Sheppard - an accountant - said the revision to auditor from audit firm was not material.

"Eighty per cent of the problem with auditors is that the auditor, a person, gets too chummy with the client, so rotating the person deals with that," he said.

The other 20 per cent of the problem was the financial independence of audit firms from their clients.

No firm should be allowed to audit a listed company if it received more than 5 per cent of its total revenue from that client, he said.

Elsewhere, the key corporate governance rules are:

* That independent directors comprise at least one-third of a listed company's board, or in the case of companies with fewer than nine directors, at least two.

* That a director may not act as both chief executive and chairman.

* That new directors must complete an appropriate director certification course within 12 months of appointment.

* That listed companies have an audit committee of at least three directors, a majority of independent directors, and at least one with an accounting or financial background.

* That the external auditor or lead partner be changed every five years.