The Australian framework
Marisa Orbea
IESBA Meeting
New York
April 2015
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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
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ASIC & APRA – twin peaks regulatory model
Australian Securities &
Investments Commission (ASIC)
Australian Prudential Regulation
Authority (APRA)
• Market conduct regulator
• Prudential regulator
• Enforces & regulates company & • Oversees banks, credit unions,
financial services laws
building societies, general
• Market integrity and consumer
insurance and reinsurance
protection
companies, life insurance,
• Member of IOSCO and IFIAR
friendly societies and most of the
superannuation industry
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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
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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)
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Ethics: a co-regulatory framework
• 2004-2006: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
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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
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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
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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
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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
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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
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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 2006
• 2008: Reflected legislative changes in APES 110
• 2010: Revision of APES 110 to align with the IESBA Code
issued in July 2009. Removal of legislative requirements
• 2011 and 2013: Further amendments to align with IESBA
Code changes
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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
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AUST paragraphs in APES 110 – some additional
requirements
•
•
•
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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
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AUST paragraphs in APES 110 – definition of PIEs
• Entities that will “generally satisfy the conditions in paragraph 290.26
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
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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)
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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)
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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
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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
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The Ethics Board
www.ethicsboard.org