Rules for auditing firms scrutinised

Rules for auditing firms scrutinised

Amendments likely to patch loopholes

The Securities and Exchange Commission (SEC) is considering amending Article 61 of the Securities and Exchange Act to beef up the regulatory process to supervise and penalise auditing firms and auditors to ensure fairness for capital market stakeholders.

SEC assistant secretary-general Thawatchai Kiatkwankul said the agency and the Thailand Development Research Institute (TDRI) studied the accounting process of SET-listed firms. They found loopholes and a lack of clarity about the market regulator's role in governing auditors, a situation that could cause problems and affect the credibility of the auditing standard.

The SEC mostly agrees with the TDRI's proposals, particularly on the issue of amending Article 61, Mr Thawatchai said.

The amendment would enhance the SEC's authority to increase penalties on auditing firms that are at fault for poor accounting practices or engaging in sub-standard work.

This would mitigate damage incurred among capital market stakeholders and investors, along with ensuring the quality of work done by auditing firms.

"We are considering a proposal to prioritise penalising auditing firms in case of fault [in accounting], similar to the practice adopted by other capital market regulators," Mr Thawatchai said.

The SEC has the authority to ban auditing firms in case of accounting fault. But the penalties are mild because there are insufficient auditing firms to cover SET-listed firms' financial statements.

The market regulator can only impose a penalty on individual auditors upon evidence of accounting fault.

The proposed amendment would require auditing firms to ask for an auditing licence from the SEC. They would be liable for a penalty and annulment of such licence in case of fault.

For other penalties, such as disclosing the name of an auditing firm where an employee has committed a regulatory offence, the SEC plans to beef up this aspect.

The market regulator also plans to propose lifetime licences for auditors from the current extension for every five years for auditors involved with auditing SET-listed firms.

"Amending the regulation related to auditing firms and auditors and the accounting standard is part of the Securities and Exchange Act amendment," Mr Thawatchai said.

There are 260 auditors in total that have received auditing licences from the SEC, working for 30 auditing firms. The "big four" auditing firms have a market share of 92-93% among SET-listed firms.

There have been cases of auditing firms involved with accounting fault, but the SEC has never withdrawn an auditing licence.

The regulatory amendment process will take time, with the SEC proposing a legal draft to the Finance Ministry as the next step.

Once approved, the draft amendment will be forwarded for cabinet consideration, then scrutinised by members of parliament.


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