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Section 324CC(1A), (2) and (4) Corporations Act 2001
General Requirement for Auditor Independence Director of Audit Company

Section 324CC(1A), (2) and (4) of the Corporations Act 2001 (Cth) is ‘General Requirement for Auditor Independence Director of Audit Company’ and is extracted below.

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The Legislation

Section 324CC(1A), (2) and (4) of the Corporations Act 2001 (Cth) is General Requirement for Auditor Independence Director of Audit Company and reads as follows:

General Requirement for Auditor Independence Director of Audit Company’

Director of audit company to notify ASIC

(1A) A person (the defendant ) contravenes this subsection if:

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

(c) the defendant is a director of the audit company at a time when the conflict of interest situation exists; and

(d) on a particular day (the start day ), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

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

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

(ii) ASIC has not been informed in writing by the defendant, by another director of the audit company or by the audit company 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(2C) (public company); or

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

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

Conflict of interest situation of which another director of audit company aware

(2) A person contravenes this subsection if:

(a) an 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) the person is a director of the audit company at that time; and

(d) at that time, another director of the audit company is aware that the conflict of interest situation exists; and

(e) the audit company does not, as soon as possible after the director referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

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

Note 2:       The company itself will commit an offence based on the contravention of subsection 324AA(1).

Conflict of interest situation of which directors of audit company not aware

(4) A person contravenes this subsection if:

(a) an 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) the person is a director of the audit company at that time; and

(d) at that time none of the directors of the audit company is aware that the conflict of interest situation exists; and

(e) a director of the audit company would have been aware of the existence of the conflict of interest situation if the audit company had in place a quality control system reasonably capable of making the audit company aware of the existence of such a conflict of interest situation.

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

Note 2:       The company itself will commit an offence based on the contravention of subsection 324AA(2).

The penalties                                                                                                              

The maximum penalty for the offence of General Requirement for Auditor Independence Director of Audit Company 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.

Your legal team will be able to advise you of the essential elements the prosecution would need to prove in order to establish the offence, whether those elements are capable of being established in your particular situation, the most effective and efficient way forward and the likely outcome.

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Choosing the right legal team to defend your reputation and interests can be a difficult process. However, it is always important to look at a firm’s experience and results when making this decision.

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Our senior lawyers are highly skilled advocates who have been recognised for their expert knowledge of the criminal law, as well as their ability to obtain excellent results in difficult cases.

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For the best defence in your case, get the experts on your side today.

Call us now on (02) 9261 8881 and book your FREE first conference with our criminal law specialists.

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