09 November 2011
Mr MORRIS (Mornington) — I am pleased to rise to make some comments on the report of the Public Accounts and Estimates Committee entitled Termination of the Independent Financial Auditor of the Victorian Auditor-General’s Office Appointed by Parliament under Section 17 of the Audit Act 1994, which I presented to the house this morning.
In many ways this report is unprecedented. It is a report which arises from a request by the financial auditor of the Victorian Auditor-General’s Office (VAGO) to the Public Accounts and Estimates Committee (PAEC) and recommends that the Parliament determine to terminate the services of the financial auditor prior to the expiry of his contract in 2013.
As background to the report, the Audit Act 1994 requires both houses of Parliament to appoint both a financial auditor and a performance auditor for the Victorian Auditor-General’s Office. They take the form of two separate motions and are dealt with as such.
The Public Accounts and Estimates Committee is responsible for making recommendations to both houses on a suitably qualified person to undertake the audits. The maximum period for the contract is usually three years.
On 6 May last year the Public Accounts and Estimates Committee of the 56th Parliament tabled a report recommending the appointment of Mr Peter Sexton to conduct the financial audit of VAGO. The recommendation was that the audit be undertaken at fixed fee levels — $29 750 plus GST for the year to 30 June 2010, $30 600 plus GST for the year to 30 June 2011 and $32 200 plus GST for the year to 30 June 2012.
Motions were moved by leave and agreed to in both houses. The contract paperwork was subsequently executed and Mr Sexton was appointed. Mr Sexton has now completed two of the three audits, for the financial years ended 30 June 2010 and 2011, so essentially what the report relates to is the audit for the year ending 30 June 2012.
There have been some changes in circumstances which have brought about this report. Australian professional and ethical standards 110 code of ethics for professional accountants was reissued on 1 July this year.
That particular section of the code specifically precludes auditors from carrying out what is termed ‘certain other services’ for listed entities, and the reissue broadened that to include public interest entities. It is likely that VAGO would be classified as a public interest entity.
As a consequence, Mr Sexton has written to PAEC and requested that Parliament consider terminating his appointment.
I make it clear that the committee emphasises that the financial auditor was proper in the way he alerted the committee, and the Parliament through the committee, to a potential conflict of interest.
He is required by his contract to do this. Mr Sexton certainly has not contravened any obligations imposed by that contract. Also, the committee considers that its action in submitting this report to the Parliament should not and must not in any way be construed as Mr Sexton having done anything to impair his professional independence, particularly in relation to the last two audits of VAGO that he has carried out on behalf of the Parliament.
It is up to the house to determine the matter, and no doubt a motion will be brought forward in due course. When that time comes I ask members to bear in mind that there has been a change in the circumstances and that is the only matter that needs to be considered in this case.
Legislative Assembly 9 November 2011
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