One in three auditors reviewed by the Financial Markets Authority is failing to meet minimum standards in their reports.
The second Audit Quality Review Report found little improvement from the previous year with 33 percent of the files monitored requiring significant improvements.
The report found some auditors were turning a blind-eye to potential fraud or showed a lack of professional scepticism when dealing with a company's management.
The authority's Director of Compliance Elaine Campbell said the majority of auditors were reaching a good or acceptable standards.
"The report found that the majority of the audit profession did meet minimum standards and here are in New Zealand is consistent with the findings of other international audit regulators."