ASIC accepted auditor Douglas Trood’s deregistration after concerns over independence breaches, long-term client roles, and conflicts of interest under Australian audit rules.
Australian Auditor Douglas Trood Deregistered Amid Independence Concerns
On April 24, 2026, theASICissued a media statement numbered 26-083MR, announcing that it had accepted company auditor Douglas Trood’s application to cancel his registration. The decision followed ASIC’s continuing concerns that Trood may have breached laws and standards relating to auditor independence and conflicts of interest.
ASIC stated that while Trood was the lead auditor and engagement partner for a large proprietary company, there were several circumstances that may have impaired his audit independence. He was suspected of failing to comply with the auditor independence and conflict-of-interest requirements under theCorporations Act 2001and theCode of Ethics for Professional Accountants, including Independence Standards(APES 110).
Details of Trood’s Long-Term Association With the Audit Client
According to information disclosed by ASIC, Trood’s association with the audit client lasted for more than 34 years, during which he also held multiple roles. ASIC considered these circumstances to have created significant self-interest and familiarity threats to auditor independence that were not properly addressed. The specific roles and time periods involved were as follows:
Maintained a long-term relationship with the audit client for more than 34 years while acting as lead auditor and engagement partner.
Served as a non-executive director of the company from 1991 to 2004.
Served as company secretary from 1989 to 2004.
Held the status of non-beneficial shareholder of the company from 1990 to 2016.
| Concurrent Role | Start Year | End Year | Duration |
|---|---|---|---|
| Non-executive director | 1991 | 2004 | Approximately 13 years |
| Company secretary | 1989 | 2004 | Approximately 15 years |
| Non-beneficial shareholder | 1990 | 2016 | Approximately 26 years |
| Audit client relationship | — | — | More than 34 years |
Key Findings on Independence Threats
ASIC considered that the multiple relationships described above existed during the audit engagement period and created two main types of threats:
Self-interest threat: an auditor may be inclined to protect their own interests in audit judgments because of financial or other interests connected to the audited entity.
Familiarity threat: an auditor may become overly trusting of, or sympathetic toward, a client because of a long and close working relationship, thereby weakening professional scepticism.
ASIC emphasized that these threats had not been properly assessed or eliminated. Trood himself made no admissions regarding ASIC’s allegations about his independence.
ASIC’s Proactive Surveillance Program and Report 817
ASIC said the Trood matter arose from its proactive surveillance work on auditor independence and conflicts of interest. The surveillance program used a data-driven risk analysis approach to systematically identify auditors who may have had independence concerns.
On October 7, 2025, ASIC released Report 817,Building Trust: Auditors’ Compliance With Independence and Conflict-of-Interest Obligations(REP 817), setting out the main findings of the surveillance program. The report covered reviews of 48 auditors and 19 audit firms, with key findings including:
Nearly one-third of the auditors reviewed had breached prescriptive independence requirements.
Nine auditors were unable to demonstrate that they had met partner rotation requirements for audits of listed companies.
Five auditors maintained relationships with audit clients that were expressly prohibited under theCorporations Act.
Some auditors provided prohibited non-audit services to audit clients.
Drivers of non-compliance included deficiencies in quality management systems, lack of compliance tracking policies and procedures, careless compliance practices, and insufficient understanding of statutory obligations.
ASIC’s Recent Enforcement Actions on Auditor Independence
The Trood matter was not an isolated case. During and after the REP 817 review, ASIC took enforcement action against several auditors and audit firms:
On September 5, 2025, ASIC accepted auditor Allan William Donald’s application to cancel his registration on similar grounds, according to media statement 25-195MR. Donald served as auditor for two related large proprietary companies from 1992 to 2022, while also acting as secretary of the audited companies and providing prohibited non-audit services.
ASIC issued an infringement notice of AUD 78,250 to Nexia Perth for providing prohibited services to an audit client.
ASIC accepted three court-enforceable undertakings from Hall Chadwick NSW-related auditors and the firm concerning breaches of audit partner rotation requirements.
On December 18, 2025, the Companies Auditors Disciplinary Board (CADB) cancelled the registration of Sydney auditor Sam Danieli following an ASIC application, after finding that he had systematically breached audit standards in 10 audits of ASX-listed companies, according to media statement 25-309MR.
ASIC Commissioner Kate O’Rourke Comments on Auditor Independence
ASIC Commissioner Kate O'Rourke said in the 26-083MR media statement:
"Auditor independence is a cornerstone of trust in Australia’s financial reporting system. Auditors must avoid any circumstances that could impair, or be perceived to impair, their objectivity."
O’Rourke had also emphasized when REP 817 was released in October 2025 that auditor independence is fundamental to audit quality and the integrity of the audit process, and should not be treated as a box-ticking compliance exercise. ASIC said it would expand the scope of audit surveillance in the 2025–2026 financial year, increasing the number of audit file reviews from 15 to 25 and focusing on audit files with potential independence concerns.
Legal Framework for Auditor Independence Regulation in Australia
Core Laws and Standards
Australia’s regulation of auditor independence is built on multiple layers of law and professional standards, mainly including the following:
Subdivision B of Division 3 of Part 2M.4 of theCorporations Act 2001: expressly sets out the types of prohibited relationships between auditors and audit clients, mainly including employment and financial relationships. A breach is treated as a loss of independence.
APES 110, theCode of Ethics for Professional Accountants, including Independence Standards: issued by the Accounting Professional & Ethical Standards Board, it covers the framework for identifying, evaluating, and responding to threats to independence, and has both principles-based and prescriptive requirements.
Australian Standard on Quality Management 1 (ASQM 1): requires audit firms to design, implement, and operate a quality management system to ensure that the firm and its personnel understand and comply with relevant independence-related ethical obligations.
Two Dimensions of Independence
REP 817 emphasized that auditor independence consists of two inseparable dimensions:
Independence of mind: the auditor is able to form objective and impartial judgments without being affected by conflicts of interest, bias, or undue influence.
Independence in appearance: from the perspective of a reasonable third party with knowledge of all relevant facts and circumstances, the auditor appears to be independent.
In the Trood matter, ASIC was particularly concerned that decades of overlapping roles may have impaired auditor independence in both of these dimensions.
