Specialist says watchdog needed for NZ auditors

New Zealand needs an independent body overseeing auditors, and could be penalised for the lack of oversight, says accounting specialist Professor David Hay.

"There is wide-ranging opinion on whether it is actually necessary to establish an independent regulator...but I am an advocate of such a move," said Prof Hay, head of Auckland University's department of accounting and finance.

He warned New Zealand could face "alienation" by foreign auditors, and even a down-graded credit rating for some companies, if it did not have a credible local equivalent of the United States' public company accounting oversight board.

"If we don't do something, then it could be that overseas auditors will not recognise work done in New Zealand," he said.

"It could also affect the credit ratings of New Zealand companies as well.

"Those are developments we don't need at this time of economic turmoil, and something has to be done soon so that our auditing systems are respected around the world."

Prof Hay said auditors had traditionally been self-regulating, with professional institutes such as the New Zealand Institute of Chartered Accountants handling standards and discipline.

But other countries had established independent regulators, and there are now 31 countries in the international forum of independent audit regulators.

Pleas from the Securities Commission and the "Big Four" accounting firms for the Government to establish an independent regulator had apparently fallen on deaf ears.