The Auditors Oversight Authority should be fully funded by the audit firms that benefit from regulation, members of the Finance Committee said Wednesday.
North Side MLA Ezzard Millar questioned why the government was not charging sufficient fees to license the auditors, so it did not have to subsidize the authority with $315,000 in this year’s budget.
“Why are we depriving the North Side School of a Spanish teacher when we have to subsidize auditors that are going to make millions?” Mr. Miller said. “I find that difficult to accept because they can afford to pay.”
Wayne Panton, the minister for Financial Services said he agreed in principle that costs associated with the regulatory authority should be met by the firms that are benefitting.
However, Mr. Panton noted the new Trade and Business Licensing Law will increase the fees payable by the audit firms both per firm and per accountant. The law is expected to come into effect in September.
“[By then] the cost to the accounting firms will have gone up and I would not want to be in a position where we have to increase the fees in relation to this particular matter at this point,” Mr. Panton said.
“But it is certainly something that I wish to keep under review because I do think in principle these are costs that should be subsidized or covered fully by the accounting firms that are benefiting from this specific regime.”
The Auditors Oversight Authority regulates and supervises auditors who audit the accounts of market traded companies, in particular those on the Cayman Islands Stock Exchange and in the European Union. Without the AOA, Cayman auditors would be subject to inspection by authorities in the EU.
The Cayman Islands Society of Professional Accountants is responsible for the licensing and regulation of auditors licensed under the Public Accountants Law.
Initially the Audit Oversight Authority was funded by the Cayman Islands Monetary Authority and partly the government, but in the past two budget years the authority only received funding from government.
The authority said in its latest 2013/2014 financial statements that it is likely going to rely on government funding for the foreseeable future but that the authority’s board believes “it is the policy of the present government to continue to provide such funding.”
Mr. Miller said the authority could not be truly independent if it relied on government funding. “I assume that this oversight authority would want to demonstrate internationally that they are formally independent from government,” he said.
Moreover, the government was making funding available where it is not needed to the detriment of more important items, Mr. Miller argued.
“These firms and their partners are making millions of dollars per year and the government is depriving our children of education while we are subsidizing them.
“So why is the government setting up the regulatory authorities and not requiring the people who are going to benefit to pay?”
The minister said he “largely sympathized” with Mr. Miller’s position. The authority was so far not showing any revenue, because it is only now in a position to conduct the necessary inspections to register and certify the firms. The fee set out in the regulations for such an inspection is $1,000 per firm, which will give the authority revenue, but it will not cover the cost associated with the authority. The minister conceded that the regulated firms should be contributing more to the cost of that. “At this point I would not want to impose that on them. Perhaps we can review within a year or so.” Mr. Panton said.
According to the government ownership agreement, the authority aims to launch a program of billing auditing firms subject to AOA oversight to fully recover the costs of oversight by 2017/18.