Commerce minister Simon Power announced the new regulation, under which the New Zealand Institute of Chartered Accountants will be required to regulate auditors as a specialist profession rather than as chartered accountants.

The Accounting Standards Review Board will become responsible for monitoring and reporting on the way the institute regulates auditors. The board will be able to instruct the institute to remedy any weaknesses in their regulatory systems and processes.

Currently, any chartered accountant holding a Certificate of Public Practice can carry out an audit as long as they think they are competent to do so, and no audit-related restrictions have been placed on them.

"A recent report by the Register of Companies identified audit failure as a contributing factor to finance company failures over the past three years. This indicates that self-assessment is not working.  We need to make sure that large and complex audits are performed by properly qualified individuals. This change will better protect investors' interests," Power said.

The changes will also bring New Zealand's regime into line with international norms, he said.

"Self-regulation is no longer acceptable internationally. We need to introduce independent oversight to ensure that New Zealand auditors are able to practise overseas.

"However, the new licensing system will only apply to major audits, such as the audits of issuers and large companies. The changes will have no impact on audits of small and medium companies and non-profit entities."

Power is planning to introduce legislation to implement these changes in the middle of next year, with the aim of bringing the new system into effect in 2012.