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Section 324CA (1A) and (2) Corporations Act 2001
General Requirement for Auditor Independence Auditors

Section 324CA (1A) and (2) of the Corporations Act 2001 (Cth) is ‘General Requirement for Auditor Independence Auditors’ and is extracted below.

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The Legislation

Section 324CA (1A) and (2) of the Corporations Act 2001 (Cth) is General Requirement for Auditor Independence Auditors and reads as follows:

General Requirement for Auditor Independence Auditors

(1A) An individual auditor or audit company contravenes this subsection if:

(a) the individual auditor or audit company is the auditor of an audited body; and

(b) a conflict of interest situation exists in relation to the audited body while the individual auditor or audit company is the auditor of the audited body; and

(c) on a particular day (the start day ):

(i) in the case of an individual auditor–the individual auditor becomes aware that the conflict of interest situation exists; or

(ii) in the case of an audit company–the audit company becomes aware that the conflict of interest situation exists; and

(d) at the end of the period of 7 days from the start day:

(i) the conflict of interest situation remains in existence; and

(ii) the individual auditor or audit company has not informed ASIC in writing that the conflict of interest situation exists.

Note 1: For conflict of interest situation , see section 324CD.

Note 2: If the audited body is a public company or a registered scheme, the audit appointment will be terminated at the end of the period of 21 days (or a longer period that has been approved by ASIC) from the day a notice under this subsection is given if the notice is not followed up by a notice under:

(a) subsection 327B(2A) or (2C) (public company); or

(b) subsection 328E(3) or (5) (public company with crowd-sourced funding); or

(c) subsection 331AAA(2A) or (2C) (registered scheme).

(2) An individual auditor or audit company contravenes this subsection if:

(a) the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

(b) a conflict of interest situation exists in relation to the audited body at the time; and

(c) at that time:

(i) in the case of an individual auditor–the individual auditor is not aware that the conflict of interest situation exists; or

(ii) in the case of an audit company–the audit company is not aware that the conflict of interest situation exists; and

(d) the individual auditor or the audit company would have been aware of the existence of the conflict of interest situation at that time if the individual auditor or audit company had had in place a quality control system reasonably capable of making the individual auditor or audit company aware of the existence of such a conflict of interest situation.

Note: For conflict of interest situation , see section 324CD.

The penalties                                                                                                              

The maximum penalty for the offence of General Requirement for Auditor Independence Auditors is:

30 penalty units (a Commonwealth penalty unit is currently $210).

However, it should be kept in mind that maximum penalties are reserved for the most serious cases.

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