Page 1 | Proprietary and Copyrighted Information The Australian framework Marisa Orbea IESBA Meeting New York April 2015
Page 2 | Proprietary and Copyrighted Information Regulatory framework Various bodies responsible for regulating the accounting profession in Australia, for example: –Australian Securities & Investments Commission (ASIC) –Australian Prudential Regulation Authority (APRA) –Tax Practitioners Board
Page 3 | Proprietary and Copyrighted Information ASIC & APRA – twin peaks regulatory model Australian Securities & Investments Commission (ASIC) Australian Prudential Regulation Authority (APRA) Market conduct regulator Enforces & regulates company & financial services laws Market integrity and consumer protection Member of IOSCO and IFIAR Prudential regulator Oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies and most of the superannuation industry
Page 4 | Proprietary and Copyrighted Information Three accounting professional bodies in Australia: The “Joint Accounting Bodies” CPA Australia Chartered Accountants Australia and New Zealand –Institute of Chartered Accountants in Australia and the New Zealand Institute of Chartered Accountants –Amalgamation took effect 31 December 2014 The Institute of Public Accountants
Page 5 | Proprietary and Copyrighted Information Regulation of audits In Australia, the independent audit is regulated by: –the Corporations Act (2001) (legislation) –Australian Auditing Standards issued by the Auditing and Assurance Standards Board (AUASB), an independent, statutory agency of the Australian Government –APES 110 Code of Ethics for Professional Accountants and APES 320 Quality Control for Firms issued by the Accounting Professional & Ethical Standards Board (APESB)
Page 6 | Proprietary and Copyrighted Information Ethics: a co-regulatory framework :Corporate law reform introduced legislative independence requirements Post law reform co-regulatory environment: –the regulators –government standard-setting bodies –the Accounting Professional & Ethical Standards Board –the three professional accounting bodies
Page 7 | Proprietary and Copyrighted Information Accounting Professional & Ethical Standards Board (APESB) Established as an independent body in 2006 Jointly funded by the three professional bodies Sets the code of ethics and professional standards with which accounting professionals who are members of the three accounting bodies must comply Issues APES 110 Code of Ethics for Professional Accountants – equivalent to the IESBA Code of Ethics
Page 8 | Proprietary and Copyrighted Information Accounting Professional & Ethical Standards Board (APESB) Also issues accounting professional standards, e.g.: –APES 215: Forensic Accounting Services –APES 220: Taxation Services –APES 225: Valuation Services –APES 230: Financial Planning Services –APES 305: Terms of Engagement –APES 310: Dealing with Client Monies –APES 315: Compilation of Financial Information
Page 9 | Proprietary and Copyrighted Information Standard setting The APESB, wherever possible, uses pronouncements issued by the International Ethics Standards Board for Accountants (IESBA) as a base for its proposed professional and ethical standards Seeks to maintain conformity of standards with those of IESBA Additional Australian requirements in the Code (added as “AUST” paragraphs) that are considered appropriate and in the public interest
Page 10 | Proprietary and Copyrighted Information Standard setting Auditing standards issued by the AUASB are legislative instruments under the Corporations Act 2001 For audits and reviews conducted under the Corporations Act, the requirements of APES 110 have legal enforceability, as Auditing Standard ASA 102 makes reference to compliance with “relevant ethical requirements” relating to audit engagements
Page 11 | Proprietary and Copyrighted Information Standard setting Compliance with APESB standards is monitored by the professional accounting body to which the member belongs Instances of non-compliance are a matter for the disciplinary processes of the applicable professional accounting body
Page 12 | Proprietary and Copyrighted Information APES 110 Code of Ethics 2006: APESB reviewed and issued APES 110 and APES 320 stemming from the introduction of legally enforceable auditing standards from 1 July : Reflected legislative changes in APES : Revision of APES 110 to align with the IESBA Code issued in July Removal of legislative requirements 2011 and 2013: Further amendments to align with IESBA Code changes
Page 13 | Proprietary and Copyrighted Information APES 110 Code of Ethics Legislative requirements removed to achieve a closer alignment to the IESBA Code and to avoid the risk of having incomplete or inaccurate information about the laws in the Code Corporations Act requirements footnoted instead Current version of APES 110 is almost the same as the IESBA Code with some AUST paragraphs
Page 14 | Proprietary and Copyrighted Information AUST paragraphs in APES 110 – some additional requirements Communications required with prior auditors Written disclosure if receiving referral fees and commissions Consider multiple insignificant threats in aggregate Company Secretary is an officer under the law in Australia so not permitted to act in this role for an audit client Consider referral of multiple audit clients to the firm from a single source and look at total fees from that source Emergency bookkeeping exception removed
Page 15 | Proprietary and Copyrighted Information AUST paragraphs in APES 110 – definition of PIEs Entities that will “generally satisfy the conditions in paragraph as having a large number and wide range of stakeholders and thus are likely to be classified as Public Interest Entities” taking into consideration the nature of the business, its size and the number of its employees: –Deposit-taking institutions, banks, insurance companies and superannuation entity licensees regulated by APRA –Disclosing entities regulated by ASIC and other issuers of debt and equity
Page 16 | Proprietary and Copyrighted Information Corporations Act – auditor independence obligations New legal obligations on auditor independence introduced in the law in 2004, effective 2006 (Corporate Law Economic Reform Program) Amendments passed in 2008 after discussions with The Treasury about unintended consequences of some of the laws (e.g. “all partner rule” for financial interests)
Page 17 | Proprietary and Copyrighted Information Corporations Act – some additional requirements Auditors must give the directors of the company a written declaration that the auditor has complied with the auditor independence requirements of the Act and any applicable codes of professional conduct, or set out contraventions. Independence declaration included in Directors Report Disclosure of fees paid for non-audit services Rules on financial and employment relationships (no requirements dealing with non-audit services)
Page 18 | Proprietary and Copyrighted Information Corporations Act – some additional requirements General standard of independence: “conflict of interest” test Rotation: 5 years on / 2 years off for signing partner and EQCR on audits of listed companies 2 year cooling off before audit partner can become officer of an audit client they served Former partner of the firm can’t join an audit client if another former partner joined within previous 5 years
Page 19 | Proprietary and Copyrighted Information Corporations Act – some additional requirements Can’t engage as consultants any individuals who are also officers or audit critical employees of audit clients Can’t admit to the partnership, employ or contract any individual who was an officer of an audit client any time in the prior 12 months
The Ethics Board