In Australia the information in published accounts is highly regulated according to comprehensive legislative and professional bodies that issue standards and guidance. In addition the ASX (Australian Stock Exchange) provides rules for listed entities which come under the provisions of contact law. Whilst the ASX also issues a number of non- binding suggestions, nevertheless they have been unanimously adopted. Hence the format of Reports for most publically listed entities is very similar.
From my experience the Australian approach which tends to favour descriptive principles rather than a prescriptive approach favoured by the US is far more effective. People tend to respond more ethically if one is required to use one’s imagination. In other words applying a broadly based principled approach as opposed to being prescriptive which risks dissolving into a purely box ticking compliance approach.
The principal legislative requirements are contained in the Corporations Act 2001 whose provisions are enforced by ASIC. (Australian Securities & Investment Commission) is involved in surveillance, investigation and enforcement of the financial reporting requirements.
The Act gives legal effect to auditing standards requiring auditors to adhere to the ethical standards laid down by the Accounting Professional and Ethical Standards Board (APESB).
Input by professional bodies.
In turn professional accounting bodies also enforce expected professional standards and integrity from their members.
For instance, our largest accounting body, namely CPA Australia, for the last year reported 94% of members met all professional standards and requirements or had minor non-compliance issues which were resolved before the review was finalised; and that 6 per cent of members reviewed showed a level on non-compliance where follow-up action was required. All such matters were resolved after follow-up action. These results were similar to the previous year.
Advocacy & research- Governance Institute of Australia.
The Institute champion’s ethics in business and for its members who mainly comprise governance professionals or legal counsels employed in house by larger organizations. The institute provides consultative services pertaining to governance strategies and solutions aimed at not only ensuring a company conducts its affairs ethically, but also can evolve, grow and succeed by adopting enhanced risk management practices.
The institute engages with government on any proposed legislative and regulatory reform.
Financial Reporting Council.
The FRC appoints members to the Accounting Standards Board in Australia, and has listed its aims to reduce the cost of capital and ensure Australian entities can compete effectively overseas. Its principal thrust is to maintain investor confidence and to ensure accounts are clearly stated and easy to understand. Its annual report is presented to the Federal Treasurer.
The ASIC Act however limits the FRC’s ability to act directly in relation to setting accounting standards which becomes the responsibility of the Australian Standards Board.
Rather the role of the FRC is to monitor Australian accounting, auditing and assurance standards to ensure their relevance to capital markets and reporting by the private and public sectors.
Its principal role is to oversee auditing and assurance standards for world-wide use, whilst ensuring it continues to be best practice in Australia. However the technical know-how in achieving that aim is delegated to the standards Board.
Accounting Standards Board in Australia.
Hence the actual drafting of accounting standards in Australia is governed by the Australian Accounting Standards Board. The process involves continual review and commences with discussion papers for both internal and external consultative reviews with the various professional bodies.
The Board has 11 members including the Chair. The Chair is appointed by the Minister for Superannuation and Corporate Law. Members, are appointed by the Financial Reporting Council (FRC).
According to its latest report accounting standards have increasingly become internationalised to ensure consistency in the presentation of accounts. Currently the International Financial Reporting Standards (IFRS) has been adopted in over 100 countries, including China, European Union, India, Korea and New Zealand.