FRC highlights for 2008-09
- The FRC played an active role in Australia's response to the GFC, acting as a lead domestic agency in responding to the accounting standards recommendations of the G-20 Leaders Summit in November 2008.
- As part of Australia's response to the GFC, the FRC sponsored the preparation of a report on accounting issues emerging from the crisis, with the report being presented to the IASB/FASB Tokyo Round Table on GFC in December 2008. The most pressing need for review identified in the report related to the difference between the prudential and accounting models for provisioning of loans held at amortised cost, although changing the accounting rules for hedging was also identified as an urgent need. The report was influential in guiding the debate on these issues.
- The FRC was actively involved in the creation of the AOSSG, a forum intended to undertake a range of activities including promoting the adoption of, or convergence with, IFRS in the region and supporting the IASB's effort to establish a single set of high-quality global accounting standards.
- The FRC also participated in the third IFRS Regional Policy Forum in Beijing in April, while the FRC Chairman presented a paper at a seminar on International Trends in Financial Sector Supervision and Regulatory Regimes arranged by Indonesia in conjunction with the 42nd annual meeting of the Board of Governors of the ADB.
- The FRC considered a wide range of issues during the year, including:
- the role of the Accounting Professional and Ethical Standards Board (APESB);
- the Government's proposals for auditing under the National Greenhouse and Energy Reporting Act 2007 and the Carbon Pollution Reduction Scheme;
- progress towards implementing Standard Business Reporting in Australia;
- current financial reporting issues facing the public sector; and
- the current work by the IASB and the International Public Sector Accounting Standards Board (IPSASB) in developing their respective conceptual frameworks.
- During the year, the FRC arranged two workshops on issues of relevance to stakeholder groups. The FRC and the G100 jointly sponsored a workshop on the Australian IFRS experience, while the FRC joined with the Department of Finance and Deregulation and the AASB to consider public sector accounting issues.
- The FRC Chairman made two visits during the year to overseas regulatory and professional bodies that perform functions of direct relevance to the FRC's own functions. The first was to China and Japan in October 2008, while the second was to North America, Europe and China in March and April 2009. In each case, the Chairman undertook the visits in conjunction with his attendance at meetings of the International Accounting Standards Committee (IASC) Foundation and international or regional conferences.
- The FRC Chairman met with a range of stakeholder organisations, including accounting firms, professional accounting bodies, industry groups and regulatory bodies in Australia for discussions about accounting and auditing issues of relevance to the Council and its stakeholders.
Oversight of Australian standards setting
- With the transfer of the governance arrangements for the AASB and AUASB from the CAC Act framework to the FMA Act framework from 1 July 2008, the FRC's role in respect of the Boards (and their Offices) changed from one of approving their budgets, staffing arrangements, priorities and business plans to one of providing advice or feedback about these matters. From the same time, the FRC members ceased to be directors of the Boards.
- In November 2008, the FRC approved the appointment of two new members and the re-appointment of two existing members to the AASB. At the same time, one new appointment and five re-appointments were made to the AUASB.
- In keeping with its statutory responsibility of promoting the adoption of international best practice in Australia, during May 2009 the FRC endorsed Australia's adoption of the International Auditing and Assurance Standards Board's (IAASB's) clarity standards in accordance with the 1 January 2010 timeline previously proposed by the AUASB.
- In light of the uncertainties arising out of the GFC, the FRC concluded that there was a need for updated guidance on the use of the going concern assumption and encouraged relevant stakeholder bodies to satisfy that need. Subsequently, the AUASB issued a bulletin providing guidance on this subject and, in conjunction with the Australian Institute of Company Directors (AICD), released a publication on the responsibility of directors to perform a going concern assessment and for auditors to review and consider that assessment when forming their opinion on the financial statements.
Monitoring auditor independence
- During 2008-09, the FRC monitored the nature and overall adequacy of the systems and processes used by audit firms to ensure compliance with auditor independence requirements by gathering information from ASIC, by reviewing reports published by the Audit Quality Review Board (AQRB) and the Institute of Chartered Accountants in Australia (ICAA) and by obtaining and analysing information from the professional accounting bodies. Based on this work, the FRC formed the view that the systems and processes used by audit firms were acceptable, although it noted that there is scope for improvement to the systems and processes of some firms.
- On the basis of information provided by the professional accounting bodies, the FRC did not become aware of any deficiencies in either the systems or processes used by the bodies for planning and performing quality reviews of audit work, or in the overall adequacy of the professional accounting bodies investigation and disciplinary procedures.
- With the GFC creating significant pressures for both the business community and the wider Australian economy during 2008-09, the FRC sought and obtained the assistance of the professional accounting bodies in reminding those members of the bodies who are involved in the preparation and audit of financial statements about the importance of the profession's ethical standards and the need for compliance with them.
Governance and administration
- As at 30 June 2009, the FRC had 18 members. During the year four members retired while seven new members were appointed. The appointments made to the Council during the period resulted in the Chairs of the AASB and AUASB and a nominee of the Australian Prudential Regulation Authority (APRA) being formally represented on the FRC for the first time. In addition, the stakeholder base of the Council was expanded through the appointment of a nominee of the Association of Superannuation Funds of Australia.
- Six meetings of the FRC were held during the year. In addition, the FRC, in conjunction with stakeholders, held workshops on IFRS and public sector accounting.
© Commonwealth of Australia 2005