Wellington, June 11 NZPA - The performance of auditors was not the key factor the "tsunami" of failures at more than 30 of the nation's finance companies, chartered accountants say.

"It's easy to say investors wouldn't have lost their money if auditors had done their job," said Terry McLaughlin, chief executive of the Institute of Chartered Accountants.

"But I think -- to be really honest -- the auditors are sitting at about number 10 in the list of issues," he told NZPA today.

"First and foremost, you've got who these companies were, and who the directors were, and what the role of the Registrar of Companies was in allowing those directors to practice."

More relevant factors were also what other parties were doing in the run-up to the collapses -- including the registrar's monitoring unit, the Securities Commission and the trustee companies to which the finance companies reported.

Mr McLaughlin was responding to an observation by Professor David Hay, head of Auckland University's department of accounting and finance, that companies registrar Neville Harris had reported to Parliament that better auditing could have reduced investors' losses.

Mr Harris told a select committee there was a significant concentration of audit appointments with "second-tier accounting firms such as BDO Spicers, Staples Rodway and Hayes Knight" and issues arose as to whether they had capability to do proper due diligence or ongoing auditing.

But though Mr Harris painted a picture of multiple failures and dodgy practices among directors, management, trustees, receivers and auditors, Mr McLaughlin said some of his views on auditors were not supported by strong evidence.

But he said the institute was making its own probe of the accountants who audited finance companies, and had hired specialist staff for the investigations.

"We're systematically working through that...to see if the work is up to scratch," he said. The work was not to form a view such as the registrar had put forward, but to objectively check the auditors met the institute's standards.

In the event that they did not, there was scope for a complaint to be raised, with potential for disciplinary proceedings.

The institute last year censured two members, Bruce Arnold Mincham and Michael Derek Wood of Auckland firm O'Halloran HMT, and ordered them to pay $133,000 in costs at an ethics hearing.

They signed off the books of National Finance 2000 Ltd, before it failed in 2006, owing investors $25 million.

Mr McLaughlin said the registrar's assertion of a systemic failure was "premature" -- objective evidence was needed to support it.

Mr Harris also told the select committee that though there are five trustee companies, at least 25 of the failed companies had used just two -- Perpetual Trust and Covenant Trustee.

This raised issues over the quality of due diligence, the extent to which the trustees accepted circumscripttion of their powers.

Covenant and Perpetual were also "slow to detect adverse financial issues" and too timid in their response, Mr Harris said.