Navigation: Previous Page | Contents
Chapter 2 - Annual reports of bodies established under the ASIC Act
Auditing and Assurance Standards Board (AUASB)
About the AUASB
The Office of the AUASB is governed by the FMA Act and provides
technical support and administrative and advisory services to the AUASB. The
AUASB is a statutory committee under the ASIC Act.
The functions of the AUASB are set out in section 227(B) of the ASIC
Act. The AUASB is responsible for the following:
- making auditing standards under section 336 of the Corporations
developing auditing and assurance standards and related guidance
material for other purposes; and
- participating in the development of a single set of auditing
standards for worldwide use.
The Chair of the AUASB is appointed by the Minister for Financial
Services and Superannuation and is accountable to the Minister regarding the
operations of the AUSAB and the Office of the AUSAB. Other Board members are
appointed by the Financial Reporting Council (FRC). The Chair is also the CEO
of the Office of the AUASB.
Annual Report 2009-2010
The AUASB completed its three-year Clarity project, which issued
43 revised and redrafted standards in Clarity format. The project was
characterised in the report as the 'most significant change in auditing in
Australia since the introduction of legally enforceable auditing standards in
The Clarity Australian Auditing Standards became operative for reporting
periods commencing on or after 1 January 2010.
The Clarity standards conform to the equivalent international
standards and are written in a form that facilitates auditors' understanding
and application of the standards.
The committee was satisfied with the Annual Report of the AUASB and will
watch the operation of the revised standards with interest.
Australian Accounting Standards Board (AASB)
About the AASB
The AASB is an independent accounting standard-setter. It is based in
Melbourne. The Board comprises 13 members including the Chair. The Chair is
appointed by the Minister for Financial Services and Superannuation and
members, from a variety of backgrounds, are appointed by the Financial
Under the ASIC Act, the statutory functions of the AASB are:
- to develop a conceptual framework for the purpose of evaluating
- to make accounting standards under section 334 of the Corporations
- to formulate accounting standards for other purposes;
to participate in and contribute to the development of a single
set of accounting standards for worldwide use; and
to advance and promote the main objects of Part 12 of the ASIC
Act, which include reducing the cost of capital, enabling Australian entities to
compete effectively overseas and maintaining investor confidence in the
The Financial Reporting Council provides broad strategic direction and
advice to the AASB.
Annual Report 2009-10
The Annual Report notes that during the 2009-10 year, the AASB
re-focussed its agenda for the future as follows:
'keeping pace with the [International Accounting Standards Board]
IASB as it has dealt with financial reporting issues highlighted during the
global financial crisis and high priority [International Financial Reporting
Standards/US Generally Accepted Accounting Principles] convergence projects
rejuvenating the public-sector work program
improving private-sector not-for-profit reporting
establishing requirements for differential reporting, in both the
private and public sectors
closely monitoring the development of conceptual frameworks by
the IASB, FASB and IPSASB
harmonising Australian and New Zealand reporting requirements
revising selected Australian originated standards
increasing the AASB’s influence internationally
ensuring the AASB’s resources are both adequate and sustainable
and that its processes are open and accessible'.
The Annual report notes that a number of the outputs in the reporting period
are due to the IASB's ongoing response to the global financial crisis. The
majority of the revised standards were issued by the AASB to ensure consistency
with the International Financial Reporting Standards issued by the IASB.
Further, most of the Exposure Drafts that were issued incorporate IASB
The most substantial domestic output in 2009-10 was 'the introduction of
two tiers of general purpose financial reporting requirements'. Tier 2 Australian
Accounting Standards—Reduce Disclosure Requirements—was noted in particular in
the Annual Report.
The committee was satisfied with the AASB's Annual Report.
Companies Auditors and Liquidators Disciplinary Board (CALDB)
About the CALDB
The CALDB was established in 1990 to replace similar state-based boards
at the time of the implementation of the Corporations Act 1989 and the Australian
Securities and Investments Commission Act 1989. It is an independent
statutory body established under Part II of the Australian Securities and
Investments Commission Act 2001 (ASIC Act).
CALDB members are appointed by the Treasurer on the basis of their
knowledge and experience in the fields of law, accounting and business.
The Board's powers and functions are provided for in the Corporations
Act 2001 (in particular sections 1292 to 1298) and the Australian
Securities and Investments Commission Act 2001 (in particular sections 203
The Board is required by the Corporations Act 2001 to determine
whether a registered auditor or liquidator should be dealt with under section
1292 of the Act. Applications are made to the Board by either the Australian
Securities and Investments Commission (ASIC) or the Australian Prudential
Regulation Authority (APRA).
The Board categorises applications made to it by ASIC or APRA as either
administrative matters or conduct matters.
The functions and powers of the Board in relation to an application are
performed and exercised by a Panel of the Board. The Panel conducts Hearings to
determine whether a registered auditor or liquidator (Respondent):
'has failed to carry out their duties and functions adequately
is not a fit and proper person to remain registered;
is subject to disqualification; or
is otherwise ineligible to remain registered'.
The Panel, if it is satisfied that some or all of the relevant
contentions in an application have been established under the Act, may make the
'cancel or suspend the Respondent's registration; and/or
admonish or reprimand the Respondent; and/or
require the Respondent to give an undertaking.'
Annual report 2009-10
The Board experienced a significant decrease in expenditure compared to
the previous year (2009/10 total: $645 476 and 2008/09 total: $1 074 486).
This decrease was attributed to:
Reduction in legal costs
Decrease in hearing days (therefore decrease in salaries, travel and
accommodation and transcription costs)
The Annual Report notes that the Board had not received an application
to deal with a conduct matter since 16 December 2008 and has not received an
application concerning an administrative matter since 4 February 2009.
Between 1 July and 14 December 2010 the Board did not receive any
The low number of applications by ASIC and APRA to the Board was raised
by witnesses within the context of the recent Senate Economics Committee
inquiry into liquidators and administrators.
In particular, the Institute of Chartered Accountants of Australia (ICCA)
observed that 'the disciplinary process is "not operating
effectively"', and noted that 'ASIC and practitioners are increasingly
defaulting to enforceable undertakings to resolve matters, which lack the
transparency and accountability of the CALDB'.
The Senate Economics Committee made a series of recommendations that
would transfer the regulation of insolvency practitioners from ASIC to the Insolvency
and Trustee Service Australia (ITSA):
The committee recommends that the corporate insolvency arm of
ASIC be transferred to ITSA to form the Australian Insolvency Practitioners
Authority (AIPA). The agency should be governed by the Financial Management and
Accountability Act under the Attorney General's portfolio.
The Senate Economics Committee noted that the CALDB should be retained
in its current form
but, like the ICCA, it was critical of CALDB's lack of transparency, saying:
the CALDB's investigative and adjudicative processes lack
transparency. [The Economics Committee] believes that the Board's deliberations
and findings should be given in open unless there is a ruling otherwise. Past
hearings and evidence of the CALDB should also be open to inspection by any
In its Annual Report, CALDB responded by noting:
At present, the legislation under which the Board operates
requires hearings to take place in private unless, in effect, the auditor or
liquidator who is the subject of the hearing before the Board requests
otherwise. In addition the legislation imposes a general obligation of
confidentiality on the Board in relation to all information given to the Board.
Since 1 January 2008 the legislation has given the Board specific power to
publicise any decision it makes to exercise its disciplinary powers and the
reasons for that decision.
It is not appropriate for the Board to take any particular
stance in relation to the changes proposed by the Senate Committee, but the
Board looks forward to the opportunity to participate appropriately in any future
discussions concerning these matters.
The committee is concerned about the low number of applications being
made to the CALDB and notes the related issues raised in the Senate Economics
Committee inquiry as discussed above. The committee will revisit this matter
after the government has formally responded to the recommendations of the
Senate Economics Committee Inquiry into Liquidators and Administrators.
Corporations and Markets Advisory Committee (CAMAC)
The Corporations and Markets Advisory Committee was set up in 1989 to
provide a source of independent advice to the Australian Government on issues
that arise in corporations and financial markets law and practice.
CAMAC is a body corporate. Its part-time members are appointed by the
Treasurer on the basis of knowledge and expertise in business, financial
markets, law, economics or accounting. The Chairman of the Australian
Securities and Investments Commission is a member of the Committee by virtue of
section 147 of the ASIC Act. Members are supported by a full-time executive.
The Committee's functions are set out under section 148(1) of the ASIC
Act as follows: to, 'on its own initiative or when requested by the Minister,
to advise the Minister, and to make such recommendations as the Committee
thinks fit, about any matter connected with:
a) a proposal to make corporations legislation or to amend that
the operation or administration of that legislation;
law reform in relation to that legislation;
companies or a segment of the financial products and financial services
a proposal for improving the efficiency of the financial markets'.
Annual Report 2009-10
CAMAC completed two reports during the 2009-10 year: one on members'
schemes of arrangements, and one on guidance for directors. It also commenced
work on a report on executive remuneration.
In November 2010 (after the annual report was finalised), two further
references were made to CAMAC on: the definition of a derivative, particularly
in relation to physically settled forward contracts; and the regulation of
managed investment schemes.
CAMAC noted that an increase in penalties provided for in the Corporations
Amendment (No 1) Bill 2010 was consistent with CAMAC's Aspects of Market
Integrity report, and that the ASX had responded to two earlier CAMAC
reports, with changes to its Corporate Governance Principles and
The committee was satisfied with the Annual Report of CAMAC.
Financial Reporting Council (FRC)
About the FRC
The Financial Reporting Council is a statutory body under the Australian
Securities and Investments Commission Act 2001 (ASIC Act), as amended by
the Corporate Law Economic Reform Program (Audit Reform and Corporate
Disclosure) Act 2004. Secretariat support is provided by the Australian
The FRC is responsible for providing broad oversight of the process for
setting accounting and auditing standards as well as monitoring the
effectiveness of auditor independence requirements in Australia and giving the
Minister reports and advice on these matters. The ASIC Act limits the FRC's
capacity to become involved in the technical deliberations of the AASB and the
AUASB (see above), including directing these two agencies in relation to the
development or vetoing of a standard.
Annual Report 2009-2010
The first of January 2010 marked the 10th anniversary of the
During 2009-10 the FRC achieved the following:
Continued in its oversight function of the processes for setting
accounting and auditing standards. This included:
approving re-appointments to the AASB and AUASB
monitoring the strategic directions, priorities, business plans,
procedures, budgets and staffing arrangements of the AASB and the AUASB
monitoring international developments regarding accounting and
monitoring the operation of Australian accounting and auditing
Continued its function of monitoring the effectiveness of auditor
independence requirements. The FRC concluded that the independence framework
continues to operated effectively; and
Participated in and/or hosted a number of forums and meeting with
In 2009-10 the ASIC Act was amended to release the FRC from the
following obligations with respect to funding of the AASB and AUASB:
'Seeking contributions towards the costs of the Australian
accounting and auditing standards setting processes; and
Monitoring the level of funding, and the funding arrangements,
for those processes.'
The Annual Report notes that in the 2010-11 year it is expected there
will be significant developments at a domestic and international level in the
area of financial reporting.
The committee notes the FRC's forecast that substantial financial
reporting-related changes will occur both domestically and internationally in
2010-11 and that these changes, while positive, may present short-term
transitional issues. The committee was satisfied with the FRC's Annual Report.
Financial Reporting Panel (FRP)
About the FRP
The FRP was established under the Corporate Law Economic Reform
Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9 Act). It
commenced its operations in July 2006. The FRP is a statutory authority. Its principal
function is to 'resolve disputes between the Australian Securities and
Investments Commission and a company, disclosing entity or registered scheme
over the application of accounting standards in its financial reports'.
The FRP enables disputes to be resolved without the cost of court proceedings.
Either party—ASIC or the company—may lodge referrals to the FRP. As
outlined by the FRP, 'a company must acquire ASIC's consent to the referral
before lodging an application with FRP. Referrals must be made in the form
prescribed by the Corporations Act 2001, subsections 323EF(2) or
Panel members are appointed by the Minister (section 239AB of the ASIC
Act) and the Chairperson (section 239AC of the ASIC Act). Members have
experience/expertise in accounting, auditing, business, administration of
companies and law. There must be a minimum of five members.
Annual Report 2009-2010
No matters were referred to the FRP by ASIC in 2009-10 (see discussion
In the 2008-09 Annual Report, the FRP noted it received no referrals
during that period. It indicated that it had considered 'expanding its
functions from the resolution of disputes to the surveillance of financial reporting
practices in the market'.
However, it concluded that this would present a risk of duplication of activity
with ASIC, and did not go down that path. The same year, the Chairman Mr Paul
In June 2010 the committee's attention was drawn to the fact that the
Panel had received no references in the four years since it had commenced
operation (there had been one reference in 2007-08, but that matter was
resolved prior to the Panel making a determination).
In the 2009-10 Annual Report the FRP noted that, despite the financial
crisis, there had still been no referrals of matters by ASIC. It commented:
The FRP met twice during 2009-10 to discuss why matters were
not proceeding to the Panel for consideration. Following these meetings, the
FRP met with ASIC to reinforce the importance of ASIC promoting the
independence of the panel when discussing the referral process with lodging
It appears that this may have had the intended effect. Shortly before
the end of that financial year, the FRP heard that there were four disputes
between ASIC and companies, and these matters were subsequently formally
referred to the FRP in August 2010. The FRP reported on all of them in October
2010. Two of the four matters were determined in favour of ASIC, and two in
favour of the company concerned.
It is possible that the FRP was under-utilised in its initial years of
operation, and some of the comments in recent annual reports suggest that FRP
members were concerned about this. However, recent activity suggests that the
issue may have been resolved. The committee will seek a briefing from ASIC on
the issue and will raise it at a future ASIC oversight public hearing.
About the Takeovers panel
The primary objective of the Panel is 'to improve the certainty,
efficiency and fairness of Australia's takeovers market'.
The appointment and proceedings for the Takeovers Panel are provided for
under sections 172-201A of the ASIC Act. The role of the Takeovers Panel is outlined
in the Corporations Act 2001 and is to deal with issues that arise
during a takeover bid. More specifically, the Panel has two roles:
Making declarations of unacceptable circumstances under section
657A, and orders under section 657D to remedy those circumstances; and
- Reviewing decisions of ASIC under section 656A (modifications of,
or exemptions from, Chapter 6) and, during a takeover bid, section 673
(modifications of, or exemptions from, Chapter 6C).
The panel issues guidance notes to support these roles.
As at 30 June 2010 the Panel had a total of 54 members. Members are
nominated by the Minister and appointed by the Governor-General. Nominations
are considered on the basis of achieving a mix of expertise,
geographical representation and gender.
Annual Report 2009-2010
The Takeovers Panel annual report summarises the Panel's recent
Unacceptable circumstances - In the reporting period the
panel received 25 applications for declarations of unacceptable circumstances.
The report noted that this is a little under the approximately 30 applications
received in recent years.
Review of ASIC decisions - There were two reviews of ASIC
decisions brought to the Panel in 2009-2010.
Referrals from the court – There were no referrals from
the Court for review.
Updated guidance notes – the Panel updated four guidance notes.
Rules – the Panel released a consultation draft of the Procedural
rules in late 2009. New procedural rules came into effect on 1 June 2010.
Consultation paper – at the close of the reporting period the
Panel was reviewing submissions on its consultation on its updated Guidance
Note 1, which concerns 'Unacceptable Circumstances'.
The tenth anniversary of the Takeovers Panel has been the occasion for
discussion in the financial press of possible reforms to its operation. Concern
has been expressed about the limited transparency of its operations, both in
relation to preventing disclosure of its proceedings, and the increasing
brevity of its published reasons for decisions.
The Panel's annual report notes that 'Commercial sensitivity and time pressures
under the legislation mean that proceedings are generally conducted in private'.
There have also been policy issues raised about the laws it implements,
on matters such as creeping acquisitions, with journalist Martin Collins
suggesting that it may be timely for CAMAC to undertake a review of the
The committee notes the matters raised in the press and may give further
consideration to these issues at a later stage.
Mr Bernie Ripoll MP
Navigation: Previous Page | Contents
Back to top