ASIC has issued a compliance sheet outlining standards for independent auditing.

ASIC has issued a compliance sheet outlining standards for independent auditing. Photo: Jim Rice

Corporate governance groups say there is not enough rotation of auditors at the country's top companies and call for greater transparency in the relationship between boards and their external reviewers.

Under the Corporations Act, companies must change their audit partner every five years, which can be extended to seven, but there are no rules about changing audit firms.

Institutional Shareholder Services executive director Ulysses Chioatto said this could lead to ''musical chairs'' between partners inside accounting firms. ''On the surface it can look like a rotation but … you can have one partner sitting in one cubicle, another in the next cubicle,'' he said.

''Is that really auditor rotation?''

The comments came as the Australian Securities and Investments Commission issued a compliance sheet to company directors outlining the standards for independent auditing.

Martin Lawrence, governance analyst at Ownership Matters, said audit quality could improve with greater transparency.

''Auditor quality is the big black box. Everyone agrees it is very important but we have no way of knowing the state of the accounts [before an auditor reviews them],'' he said.

''The auditor's theoretical job is to put an external eye over the accounts. But if the auditor has been auditing the company for however many years, how close are they to the company?''

Concerns about auditor independence follow the collapse of mining services group Forge, which fell into administration last month after accounting firm KPMG gave it a clean bill of health in August.

A 2012 ASIC report showed a decline in auditor quality and raised concerns about the level of professional scepticism among auditors.

Last year, Lend Lease put its external audit role up for tender for the first time after being served by KPMG for 55 years. KPMG has also been the auditor of ANZ since 1969.

Mr Chioatto said audit firms paid by their clients for additional services, such as consulting work, compromised their independence and made them beholden to lucrative profits.

''The big four [accounting firms] have extensive measures to avoid conflict of interest but the influence can be insidious,'' he said.

But Tom McLeod at McLeod Governance said the system was generally robust. ''So long as there is … a regular set of fresh eyes looking over the information, that should maintain auditor independence,'' he said.