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EY remains a bright spot in ASIC’s audit quality report



While acknowledging the impact of Covid-19, Australia’s national corporate regulator has found little overall improvement in audit quality over the past financial year – although EY continues to be a bright spot.

Professional services firm Ernst & Young has come out ahead of its Big Four rivals in the Australian Securities and Investments Commission’s latest annual inspection into audit quality, having improved its auditing for the third consecutive year. Covering statements for the last financial year to July, ASIC found little overall improvement among Australia’s six largest providers, although did acknowledge the impact of Covid-19.

According to the corporate regulator, its review of 45 risk-targeted audit files found an increase in the percentage of key areas where insufficient effort was made to obtain reasonable assurance that financial reports were free from material misstatement, with a ‘negative finding’ rate of 32 percent all up. Among the six largest auditors, close to a quarter of the 115 key areas reviewed came up short, roughly the same as for ASIC’s previous quality inspection.

While recognising the impediment of adapting to remote working for both auditors and clients, along with other Covid-related impacts such as travel restrictions and staffing issues, ASIC Commissioner Sean Hughes urged the firms to keep focused. “ASIC calls on audit firms to continue to evaluate the effectiveness of their current initiatives and revise them or implement new and improved actions if they are not achieving appropriate outcomes.”

Across the Big Four together with BDO and Grant Thornton, which collectively perform auditing duties for 93 percent of ASX-listed entities based on market cap, EY demonstrated both the most improvement and highest quality, halving its negative finding rate from 14 percent in the last inspection to 7 percent this year. Deloitte was the only other improver, although its percentage of 29 percent, down from 35 percent, still sits behind PwC at 25 percent.

“We are very pleased with the recently announced results for FY21, continuing the downward trend since 2019,” said EY Oceania Assurance Leader Glenn Carmody. “This has been a remarkable achievement and we are extremely grateful for the hard-work and resilience of our audit teams who remained laser focused on quality, despite the very difficult circumstances under which audits needed to be performed during the Covid pandemic.”

Negative audit inspection findings among Australia’s largest auditors

Grant Thornton meanwhile tracked in the other direction, its negative finding rate ballooning from 27 percent to 45 percent. Achieving the second highest quality, BDO remained steady from the last inspection at 20 percent, while PwC and KPMG slipped slightly, the latter to 30 percent. ASIC notes that it purposefully targets a limited number of high-risk audits, and so wouldn’t expect these figures to remain consistent across the larger market.

Still, the regulator remains concerned about the results of its snapshot, and says that the largest number of negative findings continue to relate to the audit of asset values and impairment of non-financial assets and the audit of revenue, the latter growing from 29 percent to 40 percent. The greatest factor contributing to revenue and receivables negative findings was that the procedures performed did not address the level of risk assessed.

Hughes concluded that despite the conditions, the results warranted a continued concerted effort from auditors to improve quality. “The need to properly inform the market and investors through financial reports continues to be important in the context of Covid-19 and requires auditors to respond to potentially more difficult judgements on asset values, liabilities, solvency, going concern and disclosures, as well as challenges from remote working arrangements.”




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BDO welcomes Simon Yoo and Mark Beaumont to partner team



BDO today welcomes two new partners to its leadership team: Simon Yoo and Mark Beaumont.

Simon Yoo brings close to three decades of experience working with organisations to improve their operations by assessing internal processes, risk management, and compliance with policies, and legislation. Yoo was previously at EY where he was Executive Director and the Oceania leader of the ASEAN, India and Korea Business Group.

Before that, he was a Partner and Managing Partner of the Advisory Services division at EY in South Korea. Prior to his two decades at EY (across two spells), Yoo also served Big Four rival KPMG, where he started his career.

Based in Sydney, Yoo is a member of BDO’s Risk Advisory Services practice, focused on financial services clients. Grant Saxon, who leads BDO in Sydney, said: “With a long history working with banks, insurance companies and other financial institutions, in Australia and across Asia, Simon adds further credentials and scale to our growing financial services team.”

Mark Beaumont joins BDO from Deloitte, where he spent eight years, latterly as an Account Director within the firm’s Private Business Advisory practice, providing accounting, taxation and advisory services to privately owned businesses and family groups. Before that, he worked over three years for Moore Stephens and two years for a local accounting firm.

Based in Melbourne, Beaumont is a partner in BDO’s Business Services practice. “Mark brings an impressive track record of providing accounting, taxation, finance function support and advisory services to privately owned businesses and family groups,” said David Garvey, Managing Partner of BDO in Melbourne.




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Tech

Putting zero trust IT security to work in a post-pandemic world



As businesses come to terms with the reality of operating amid the legacy of Covid-19, many are realising their old approach to IT security is no longer up to the task, writes Joanne Wong, Vice President International Marketing APAC and EMEA at LogRhythm.

Traditionally, most organisations have focused on having a secure perimeter in place that protects core applications and data from external attack. Those inside the perimeter are then allowed to access any resources they might require.

In a post-pandemic world, however, this approach no longer works. Many staff are still working from home and this is likely to continue for an extended period. In some cases, it may even become a permanent feature of daily business life.

For this reason, the concept of a perimeter now doesn’t make sense. Another method needs to be implemented that enables efficient access to centralised resources but at the same time keeps those resources secure.

Don’t trust anything, unless…

This change in thinking has significantly increased interest in the concept of ‘zero trust’. This strategy is based on the approach that nothing on a network is trusted until its identity has been verified. It dictates that all networks should be untrusted, least-privilege access is enforced, and everything monitored at all times. Access should only ever be granted based on identity.

In many cases, a zero-trust strategy will enable an organisation to replace its existing virtual private network capabilities. These were designed to support small numbers of remote workers but are challenging to scale to meet a sudden increase in demand.

Putting zero trust to work

When an organisation makes the decision to adopt a zero trust strategy, it’s important to realise that it is not some far-off state that will take an extended period to reach. Rather, as the required steps are undertaken, value can be seen almost immediately.

Early steps that can be taken include identifying the high-value data and workloads on your network that require the best available security. Next, remove redundant access permissions to ensure fewer people can interact with these digital assets.

Deploying a multi-factor authentication system is another step that will deliver quick benefits, as is the implementation of a cloud security gateway. On-device security controls should also be considered.

In many cases, organisations will find they don’t have to start the process from scratch. This is because they are likely to already have in place many of the components that are required. These components include user authentication systems, biometric ID systems, endpoint detection and response capabilities, data encryption, and network segmentation. These can be enhanced with the deployment of additional tools and services that, together, will create a zero-trust environment.

Funding zero trust

Another necessary step is budget allocation. From the outset, it’s important to be clear about how much money will be spent and the areas to which it will be directed.

Typically, organisations working towards achieving zero trust find that around 20% of available funds need to be directed at protecting infrastructure workloads, while 25% is earmarked for device protection.

Another 25% of the budget should be allocated for people, to support ID systems and user training. Also, 10% of funds should be spent on network security while 15% aimed at orchestration and automation. The final 5% of funds should be allocated to visibility and analytics.

It should also be noted that spending on zero trust can be offset by savings in other areas. Many organisations find they are able to reduce the total number of security tools and services they have in place which removed both complexity and cost.

Zero trust has much to offer organisations faced with the prospect of having significant numbers of staff working remotely for an extended period. By embracing the strategy now, they can also be well positioned to cope with new challenges as they emerge in the future.




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Tech

Clare Bradshaw joins market research firm Fiftyfive5 as COO



Market research consultancy Fiftyfive5 has bolstered its leadership team with Clare Bradshaw, who has joined the firm’s board of directors as chief operations officer.

A Chartered Accountant by background, Clare Bradshaw has worked in professional services for close to two decades, with nearly all of that experience gained at EY. After starting with the Big Four giant in the United Kingdom, she moved to Australia in 2008 – mainly for the outdoors lifestyle. “I enjoy being outdoor, nature and yoga, running and hiking.”

Most recently at EY, she was Finance & Operations Director for the Strategy & Transactions division, and before that, she led the firm’s Financial Planning & Analysis practice and worked as a dealmaker in the transactions team.

“Clare combines her love of numbers and analysis with a strong knowledge of business operations to develop strategy, optimise process and deliver profitable growth,” said Fiftyfive5 CEO Mark Sundquist. “Her deep understanding of building strong commercial platforms for fast growing professional services businesses will help us work towards our growth ambition.”

Commenting on her new challenges, Bradshaw (who is based in the Sydney office) said: “With almost 20 years experience in EY, with the bulk of that focussed on running the financial and operational aspects of the Strategy & Transactions business, I’m excited to bring my learnings to the market research industry.”

The appointment comes at a time of rapid growth for Fiftyfive5, a research consultancy with offices in Sydney, Melbourne, Auckland and Singapore. Over the past six months, the firm hired close to 40 new professionals into its ranks, lifting its headcount to almost 200 company members.

“It’s exciting to join Fiftyfive5 at such an exciting stage in their growth journey. I will be focussed on continuing to ensure everyone at Fiftyfive5 is supported to learn and develop, recruiting to support demand and ensuring that we have a commercial platform and strategy to drive our business into the future,” said Bradshaw.

Meanwhile, Fiftyfive5 has added to its list of recognitions this year, having been named market research agency of the year by Research Society and a finalist in two Australian Marketing institute categories; market and consumer research and insight driven marketing.




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Labor’s climate plan trumps the govt’s. But it’s still depressing

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Andrew Blundell joins restructuring boutique Cathro & Partners



Recently established restructuring consultancy Cathro & Partners has picked up its first post-launch hire, with familiar face Andrew Blundell joining the firm as a Principal. 

Andrew Blundell joins the Sydney-based boutique with more than 16 years of corporate advisory and insolvency experience, including most recently as a partner at Worrells, where he was involved in high-profile restructures including Napoleon Perdis, Foodora, Custom Bus Australia and Ability and Children’s Services Education.

At Worrells, Blundell worked together with Simon Cathro (a former partner at Worrells who founded Cathro & Partners in October) and a number of the team members he will now be reunited with.

“I have worked with Andrew extensively in the past and what makes him a standout in this sector is that he is committed to doing the right thing by all stakeholders in all situations,” Cathro said.

“He has extensive experience in handling large trading voluntary administration appointments, property enforcement and dealing with the complexities arising from specialised trust and corporate structures as well as cross border recovery considerations.”

“He is also very client-centric in his strategies and advice, and that’s firmly aligned with what we are building here at Cathro & Partners.”

The company founder added that Blundell’s experience as a corporate advisor and insolvency practitioner would be invaluable assets to the firm’s clients as they navigated their post-pandemic recovery.

Commenting on his career switch, Blundell said he was attracted to Cathro & Partners’ ethos around creating and implementing innovative strategies designed to help clients survive financial difficulty and come out stronger. “The next 18 months will be challenging for many Australian businesses, with the economic effects of the global shocks, both Covid-19 and the lurking inflationary pressures, likely to take that long to be fully realised,” he said.

“Together with the Cathro & Partners team, my priority will be to help clients achieve the right outcome for their businesses, employees and other stakeholders as they navigate this period and beyond.”




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Report reveals spike in buy-now-pay-later debt

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How to avoid costly mistakes in the rush to buy property

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How your relationship and assets affect your age pension payments



Question 1: My partner and I have been together for 20 years. We own a house as ‘tenants in common’, and share expenses. However, our relationship as ‘partners’ is no longer. We have separate bedrooms and I guess we just live together but not as partners.

I believe he has much more assets than I do, so as a couple I do not receive any pension from the government. Will Centrelink consider my case and give me a pension based on only my assets? 

Centrelink will consider your case and it’s worth contacting them, because a single rate of age pension is higher than the partner rate.

Centrelink will try and determine whether you are in a de-facto relationship, and if not, they will consider you single and assess only your share of income and assets.

Factors considered for de facto relationships

Centrelink looks at five factors when considering whether a de facto relationship exists:

  • Financial aspects of the relationship
  • Nature of the household
  • Social aspects of the relationship
  • Presence or absence of a sexual relationship
  • Nature of the commitment.

After collecting evidence for all five factors, Centrelink forms an opinion on whether you are living in a de facto relationship.

All five factors must be considered. No single factor is seen as conclusive, and not all factors need to be present.

For instance, the presence or absence of a sexual relationship is considered but does not, by itself, indicate whether a person is a member of a couple.

Centrelink assesses each case on its merits prior to making a decision.

Question 2: My mother receives a full aged pension and is a resident in an aged-care facility. She purchased a 50 per cent bond to have a private room because she didn’t have sufficient funds until her home is sold.

When I sell her home (and pay the outstanding full bond from the sale), will she be considered a home owner or a non-home owner?

What is the asset threshold for her circumstances once her home is sold? Thank you.

Aged care can be a very complex area. I note that you have used the term ‘bond’ in reference to an accommodation payment. Since July 1, 2014, residents have paid either a ‘Refundable Accommodation Payment’ (RAD), a ‘Daily Accommodation Payment’ (DAP), or a combination of the two.

The RAD is sometimes still referred to as a ‘bond’ even though technically these were for residents who entered aged care prior to July 2014.

If the former home is sold, then the resident will be considered a ‘non-home owner’ by Centrelink.

A single non-home owner can have $487,000 in assets and still receive the full age pension, or up to $809,500 (as at December 2021) and receive a part age pension.

Note that the amount paid under the RAD does not count under the Centrelink asset or income test.

Centrelink or the aged-care facility may be able to provide you with more information, or you could consider seeking personalised financial advice.

Centrelink’s asset test.

Question 3: How long before you retire does Centrelink look at gifting/loaning money to your children?

Centrelink requires you to disclose all loans and gifts you have made in the previous five years.

To clarify, gifting between couples is not an issue; it’s only when you dispose of an asset or income or engage in a course of conduct that destroys, disposes of, or diminishes the value of your assets or income, without receiving adequate financial consideration in exchange for the asset or income.

This includes giving away money to family members, including children, and not receiving any benefit in return. Centrelink call this ‘deprivation’.

If gifts of assets exceed $10,000 in a financial year, or $30,000 over any rolling five-financial-year period, the excess gifts are an assessable asset and subject to deeming for five years from the date each gift was made.

If your age pension age is 67, and you gifted away funds prior to age 62, then this will have no impact on your age pension as the gifts were made outside the five-year period.

If, on the other hand, you gifted funds at age 65, then any amount above $10,000 would be counted until age 70.

But it would only affect you between the ages of 67 and 70, as before age 67 you would be ineligible for the age pension.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives. 

The New Daily is owned by Industry Super Holdings





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Young people bill $200 million a year to Medicare