Functional requirement |
Section |
Point |
How addressed |
1. General functions |
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Providing broad oversight of the process for
setting accounting and auditing standards and ministerial reports. |
s225 (1) (a)(b) |
1.1 |
Broad oversight of the process for setting
auditing standards is a new function of the FRC from 1 July 2004 under
the Corporate Law Economic Reform Program (Audit Reform and Corporate
Disclosure) Act 2004 (CLERP 9 Act).
The FRC has overseen the accounting and auditing standard setting arrangements
by appointing members (other than the Chairmen, who are appointed by the
Treasurer) to the Australian Accounting Standards Board (AASB) and the
Australian Auditing and Assurance Standards Board (AUASB); approving and
monitoring AASB and AUASB priorities, business plans, budget and staffing
arrangements; determining the broad strategic directions of the AASB and
the AUASB; providing directions, advice or feedback on matters of general
policy and its procedures to the AASB and the AUASB; and monitoring the
effectiveness of the AASB and the AUASB consultative arrangements. |
Monitoring the effectiveness of auditor independence
requirements in Australia |
s225(1)(c) |
1.2
1.2a
1.2b |
To facilitate the performance of its auditor
independence functions, the FRC established an Auditor Independence Subcommittee
(under the Chairmanship of Ms Elizabeth Alexander AM) which met on eight
occasions during 2004-05. In addition, the FRC appointed a consultant
(Mr William Bartlett) to assist it perform the function.
At the start of 2004-05, the FRC signed MOUs with the three professional
accounting bodies, ASX, APRA and ASIC and exchanged letters of understanding
with the CALDB (collectively, the MOU bodies) for the purpose of facilitating
the exchange of information between the MOU bodies and the FRC.
During the second half of 2004-05, the consultant and representatives
of the Subcommittee met with the MOU bodies, the big 4 accounting firms
and one mid-tier firm, to obtain information about the manner in which
they are regulating, or ensuring compliance with, the requirements of
the Corporations Act. |
Required reports |
s225(1)(d) |
1.3
1.4 |
The FRC and AASB Annual Reports for 2003-04,
including the relevant accounts, were forwarded to the responsible minister
(the Treasurer) in October 2004 and tabled in accordance with requirements.
For 2004-05, the Annual Report publication will incorporate reports for
the FRC, the AASB, the AUASB and the FRC auditor independence oversight
function.
The draft Annual Report will be presented to the FRC meeting on 16 September
2005, to facilitate finalisation in accordance with the legislative requirements.
The FRC consultant on auditor independence has been closely involved with
production of the report on the FRC’s auditor independence oversight
function. |
Establishing appropriate consultative mechanisms |
s225(1)(f) |
1.5
1.6
1.7
1.8
1.9
1.10
1.11 |
During 2004-05 the FRC Chairman has had an
active role in conveying to the public key FRC decisions, including by
approving Bulletins for publication and speaking at various fora including
conferences and meetings. The FRC Chairman met with the professional accounting
bodies, regulatory bodies including ASIC and APRA, and other stakeholders
including the Group of 100. In March 2005 the Chairman spoke at the Third
New Zealand IFRS Summit in Auckland.
For all FRC meetings, members receive advanced copies of all FRC agenda
papers, which are sent one week prior to the meeting. Members of the FRC
have been able to provide the meeting with an update of issues of interest
of their respective stakeholders via a standing agenda item.
As indicated under item 1.5, the FRC Chairman met with various stakeholders
during the year and conveyed the results of those meetings to the Council.
Bulletins reporting on the main outcomes of each of the four FRC meetings
held in 2004-05 were posted on the FRC website within a few days of the
meeting. Simultaneously, the FRC minutes from the previous FRC meeting
were posted on the FRC website.
FRC meetings are restricted to FRC members and invited guests only, as
agreed by the FRC. During 2004-05, the FRC undertook a review of operations
which considered the appropriateness of opening meetings to the public.
The FRC decided to maintain the current policy of meeting in closed session..
Guests invited to FRC meetings included representatives from the IASB,
APRA, and the New Zealand ASRB and FRSB.
Mr Bill Bartlett was engaged by the FRC to assist it in carrying out
its auditor independence functions. Mr Bartlett, who is a former partner
of accounting firm Ernst & Young, has spent 35 years working in the
accounting field, including as auditor of a number of firms in the financial
services industry. In carrying out his duties, Mr Bartlett attended meetings
with a range of stakeholders with whom the FRC had signed memoranda of
understanding on the respective roles in monitoring auditor independence.
The FRC also decided to appoint a consultant to advise it on the international
use of sector neutral accounting standards. The appointment was progressed
but not finalised in 2004-05.
On the recommendation of the Trans-Tasman Accounting
Standards Advisory Group, the FRC appointed the Chair of New Zealand’s
FRSB, Ms Joanna Perry, to the AASB. Also on the recommendation of the
Trans-Tasman Accounting Standards Advisory Group, the FRC agreed to provide
funds to assist with the running of a regional policy forum on IFRS, to
be held in October 2005. |
Report for ministerial direction |
s225(1)(h) |
1.12 |
On 9 December 2004 the FRC Chairman wrote
to the Treasurer updating him on the implementation of International Financial
Reporting Standards (IFRS) in Australia, including emerging issues of
which the Council had become aware. |
2. Specific accounting
standards functions |
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|
|
Appointing AASB members |
s225(2)(a) |
2.1
2.2 |
The FRC Nominations
Committee met five times during 2004-05 and recommended the appointment
and/or reappointment of six members to the AASB. Five of the appointments
arose directly from public advertisements placed in the major newspapers
in October 2004, while the sixth one arose from an unexpected vacancy
and was filled following expressions of interest gathered from relevant
stakeholders. A further appointment was made to the AASB on the advice
of the Trans-Tasman Accounting Standards Advisory Group. The Nominations
Committee reported on the performance review of the AASB at the FRC meeting
held on 6 December 2004.
The FRC agreed to all the nominations to the AASB recommended by the
Nominations Committee. |
Approving and monitor AASB priorities, business
plan, budget and staffing arrangements. |
s225(2)(b) |
2.3
2.4
2.5 |
One meeting of the FRC Audit Committee was
held in August 2004. Subsequently, following the consideration of legal
advice from the Australian Government Solicitor, the FRC agreed to reconstitute
its Audit Committee as the FRC Finance Committee and, to meet the requirements
of the Commonwealth Authorities and Companies Act, to establish a separate
audit committee for the AASB. The FRC Finance Committee and the AASB Audit
Committee, which have common membership and meet concurrently, held four
meetings during 2004-05.
The Committees reviewed the 2004-05 budgets of the FRC and AASB in November
2004 and March 2005, with the revised budgets being approved by the FRC
in December 2004 and April 2005 respectively.
The Committees considered the draft 2005-06 budget of the FRC and the
priorities, business plan, budget and staffing arrangements of the AASB
during May and June 2005, with the documents subsequently being approved
by the FRC at its meeting on 1 July 2005. |
|
|
2.6 |
The AASB Chairman
provided an update on the progress of AASB activities and work priorities
at each FRC meeting. |
|
|
2.7 |
Formal reports by
the AASB were forwarded to the FRC Finance Committee, and reported to
the FRC via the FRC Finance Committee Chairman’s report. |
|
|
2.8
2.9 |
The 2003-04 annual
report, approved by the FRC at its meeting on 20 September 2004, outlined
progress on the AASB’s work programme in 2003-04, and set out its
work programme for 2004-05. Feedback on accounting standards and related
policy issues was sought by the AASB through the regular reports to FRC
meetings by the AASB Chairman.
The AASB business plan for 2005-06 describes how the AASB intends to
address set priorities with a detailed work programme. |
|
|
2.10
2.11 |
The FRC Finance Committee reviewed the AASB’s
annual business plan for 2005-06 prior to its consideration by the Council.
The 2005-06 AASB business plan was considered and approved by the FRC
at its meeting on 1 July 2005. |
|
|
2.12 |
The 2005-06 AASB business plan outlines the
number and composition of AASB staff and secondments.
The FRC is satisfied that the AASB has adopted responsible commercial
business techniques in preparing the Board’s budget and staffing
arrangements. |
Determining the AASB’s broad strategic
direction |
s225(2)(c) |
2.13
2.14
2.15 |
On 28 June 2002, the FRC issued a strategic
direction that formally endorsed the planned adoption of IASB standards
(ie IFRS) and IFRIC interpretations from 1 January 2005. The direction
was re-affirmed in 2003-04. During 2004-05, FRC members brought forward
the views of their stakeholders on issues relating to the implementation
of the strategic direction.
The FRC Chairman held meetings with a number of stakeholders and reported
on these meetings to the FRC. The FRC Secretariat provided background
papers on IFRS implementation to assist discussions on the implementation
of the strategic direction. For each meeting the Secretariat produced
an agenda paper containing relevant international financial reporting
developments.
At its meeting on 12 December 2002, the FRC agreed to issue a broad strategic
direction to the AASB to pursue, as an urgent priority, the harmonisation
of Government Finance Statistics (GFS) and Generally Accepted Accounting
Principles (GAAP) reporting. During 2004-05, the AASB made substantial
progress in implementing this direction. |
Giving the AASB direction or feedback on general
policy or procedures |
s225(2)(d) |
2.16
2.17 |
The AASB annual business plan and forward
work programmes reflect the strategic policy directions set by the FRC.
The AASB Chairman provided reports at each FRC meeting, allowing the FRC
to provide feedback on general policy and procedures. At its meeting in
February 2005, the Council noted and provided feedback on amendments to
the AASB’s Governance Guidelines, which were made necessary by the
increased size of the AASB. Changes made by the Board as a consequence
of Council’s feedback were brought back to the Council in April
for noting and endorsement.
The FRC monitored the AASB’s procedures for transparency, appropriate
consultation and due process for developing accounting standards. |
Monitoring international accounting standards,
further a single set of international standards, promote best practice
in Australia |
s225(2) (e)(f)(g) |
2.18
2.19
2.20
2.21 |
The resource allocation for the adoption of
the Australian equivalents of IFRS is outlined in the AASB business plan
and budget for 2005-06, which was reviewed and approved by the FRC on
1 July 2005. Significant projects which the AASB is running on behalf
of the IASB, or participating in, are indicated in the business plan.
The FRC encouraged the AASB to continue to influence the development internationally
of a single set of accounting standards. The FRC Chairman spoke at the
Third New Zealand IFRS Summit in Auckland in March 2005. The FRC agreed
to provide funds for a regional policy forum on IFRS being organised under
the auspices of the Trans-Tasman Accounting Standards Advisory Group.
At its meeting on 6 December 2004, the FRC agreed to allocate extra funds
to enable the FRC to meet the costs of overseas travel by FRC representatives
attending official international meetings and other Australians
attending IASB or IAASB related activities where their travel costs are
not met by stakeholder groups. A protocol outlining the eligibility criteria
for applicants attending IASB or IAASB related activities, the costs which
may be claimed, and the information required to be submitted in order
for funding to be provided was agreed and is available on the FRC web
site. The Australian representative on the IASB, Mr Warren McGregor, has
a standing invitation to all FRC meetings. He attended the FRC meeting
held on 4 April 2005.
The FRC Chairman led two sets of international visits for discussions
with a range of standard setting, regulatory and professional accounting
bodies. The first visit was to New York, Toronto, Washington, London,
Brussels and Paris in November 2004. The second visit was to London and
Brussels in June 2005.
The FRC Secretariat provided a regular mailout on international developments
to FRC members and an agenda paper on international developments at each
FRC meeting. |
Monitoring the operation and effectiveness
of Australian accounting standards and consultative arrangements |
s225(2) (h)(i)(ii) |
2.22
2.23
2.24 |
The AASB Chairman
reported on this issue at FRC meetings, and in his report as part of the
2003-04 AASB Annual Report.
The FRC Secretariat reported to the FRC on communications received from
the business community, public sector and not-for-profit sector about
the impact and effectiveness of accounting standards in meeting the objectives
of Part 12 of the ASIC Act. The major issue reported was implementation
of the Australian standards based on IFRS.
The FRC Chairman and members consulted with their constituent bodies
on this matter, and a standing item for FRC meetings, ‘stakeholder
issues’, provided an opportunity to convey the information gained
from these consultations to other FRC members.
The FRC encourages the AASB to have extensive
consultation and communication processes with stakeholders. The AASB reports
on its consultation measures and due process on its website and in its
annual report. |
Seeking contributions for the cost of Australian
accounting standard setting |
s225(2)(i) |
2.25
2.26 |
For a number of years, the FRC has employed
a tri-partite funding model which has included contributions from the
Commonwealth, State and Territory Governments, the professional accounting
bodies, and the corporate sector. As a result of the extra responsibilities
endowed to the FRC under CLERP 9, the Commonwealth announced substantial
extra funding for the FRC and standard setting activities in the 2004-05
Budget. A firm commitment from the professional accounting bodies and
from the States and Territories has also been secured for 2005-06. In
view of the additional funding provided by the Commonwealth, there was
no need to directly appeal for voluntary contributions from the corporate
sector.
The contributions from the Commonwealth Government have ensured that
there is no shortfall in the sources of funding which would undermine
the objective of strengthening domestic accounting and auditing standards
and their oversight arrangements. |
Monitoring and reviewing the level of funding
and funding arrangements for the AASB |
s225(2)(j) |
2.27 |
The AASB budget and business plan was prepared
by the AASB Chairman and Administration Director and reviewed by both
the AASB Audit Committee and the FRC Finance Committee. At its meeting
on 1 July 2005 the FRC approved the AASB budget and business plan for
2005-06. |
3. Specific auditing standards functions |
|
|
|
Appointing of AUASB members |
s225(2A)(a) |
3.1
3.2 |
The FRC Nominations Committee met five times
during 2004-05. It initially recommended the appointment of ten members
of the former AuASB to the AUASB for short terms to allow for a comprehensive
selection exercise to take place in the second half of 2004. Seven appointments
and re-appointments to the AUASB arose directly from this selection exercise,
which followed public advertisements placed in the major newspapers in
October 2004. The Nominations Committee reported on the performance review
of the AUASB at the FRC meeting held on 6 December 2004.
The FRC agreed to all the nominations to the AUASB recommended by the
Nominations Committee. |
Approving and monitor AUASB priorities, business
plan, budget and staffing arrangements. |
s225(2A)(b) |
3.3
3.4
3.5 |
One meeting of the FRC Audit Committee was
held in August 2004. Subsequently, following the consideration of legal
advice from the Australian Government Solicitor, the FRC agreed to reconstitute
its Audit Committee as the FRC Finance Committee and, to meet the requirements
of the Commonwealth Authorities and Companies Act, to establish a separate
audit committee for the AUASB. The FRC Finance Committee and the AUASB
Audit Committee, which have common membership and meet concurrently, held
four meetings during 2004-05.
The Committees reviewed the 2004-05 budget of the AUASB in November 2004
and March 2005, with the revised budget being approved by the FRC in December
2004 and April 2005 respectively.
The Committees considered the draft 2005-06 priorities, business plan,
budget and staffing arrangements of the AUASB during May and June 2005,
with the documents subsequently being approved by the FRC at its meeting
on 1 July 2005. |
- Standing FRC item on AUASB |
|
3.6 |
The AUASB Chairman provided an update on the
progress of AUASB activities and work priorities at each FRC meeting. |
- Half-yearly report from AUASB |
|
3.7 |
Formal reports by the AUASB were forwarded
to the FRC Finance Committee, and reported to the FRC via the FRC Finance
Committee Chairman’s report. |
- Priority setting and feedback |
|
3.8
3.9 |
As part of the process leading up to the issuing
of an FRC strategic direction to the AUASB on the setting of auditing
standards, the AUASB Chairman sought feedback from the FRC.
The AUASB business plan for 2005-06 describes how the AUASB intends to
address set priorities with a detailed work programme. There was no annual
report for the AUASB as it did not exist as a Commonwealth entity in 2003-04. |
- Required business plan content |
|
3.10
3.11 |
The FRC Finance Committee reviewed the AUASB’s
annual business plan for 2005-06.
The business plan was considered by, and approved by the FRC at its meeting
on 1 July 2005. |
- Budget and staffing process |
|
3.12 |
The AUASB business plan outlines the number
and composition of AUASB staff.
The FRC is satisfied that the AUASB has adopted responsible commercial
business techniques in preparing the Board’s budget and staffing
arrangements. |
Determining AUASB’s broad strategic
direction |
s225(2A)(c) |
3.13
3.14
3.15 |
The FRC issued a strategic direction to the
AUASB at its meeting on 4 April 2005. The AUASB was directed to develop
standards that have primarily a clear public interest focus. The AUASB
should use as a base the International Standards on Auditing developed
by the International Auditing and Assurance Standards
Board.
The strategic direction was agreed following extensive public consultation,
including the publication of a discussion paper for comment on the FRC
web site, and consideration of the issues by the AUASB.
The strategic direction issued to the AUASB by the FRC is consistent
with the legislation. |
Giving AUASB direction or feedback on general
policy or procedures |
s225(2A)(d) |
3.16
3.17 |
The AUASB annual business plan and forward
work programme reflects the strategic direction set by the FRC in April.
The AUASB Chairman reported on general policy and procedures at each FRC
meeting in 2004-05.
The FRC monitored the AUASB’s approach to consultation and due
process in the development of auditing standards. |
Monitoring international auditing standards,
further a single set of international standards, promote best practice
in Australia |
s225(2A)(e) (f)(g) |
3.18
3.19
3.20
3.21 |
The resource allocation for the development
of Australian auditing standards is outlined in the AUASB business plan
and budget for 2005-06, which was reviewed and approved by the FRC on
1 July 2005. The AUASB budget allows it to actively liaise with the International
Auditing and Assurance Standards Board (IAASB), to assist in adopting
international best practice. The FRC encouraged the AUASB to continue
to influence the development internationally of a single set of auditing
standards.
At its meeting on 6 December 2004, the FRC agreed to allocate extra funds
to enable the FRC to meet the costs of overseas travel by FRC representatives
attending official international meetings and other Australians attending
IASB or IAASB related activities where their travel costs are not met
by stakeholder groups. A protocol outlining the eligibility criteria for
applicants attending IASB or IAASB related activities, the costs which
may be claimed, and the information required to be submitted in order
for funding to be provided was agreed and is available on the FRC web
site.
The FRC Chairman led two sets of international visits for discussions
with a range of standard setting, regulatory and professional accounting
bodies. The first visit was to New York, Toronto, Washington, London,
Brussels and Paris in November 2004. The second visit was to London and
Brussels in June 2005.
The FRC Secretariat provided a regular mailout on international developments
to FRC members and an agenda paper on international developments at each
FRC meeting.
|
Monitoring the operation and effectiveness
of Australian auditing standards and consultative arrangements |
s225(2A)(h) (i)(ii) |
3.22
3.23
3.24 |
The AUASB Chairman reported on progress in
re-making Australian auditing standards at FRC meetings. A comprehensive
‘stocktake’ of progress made will be included in the AUASB
annual report for 2004-05.
The FRC Chairman and members consulted with their constituent bodies
on this matter, and a standing item for FRC meetings, ‘stakeholder
issues’, provided an opportunity to convey the information gained
from these consultations to other FRC members.
The FRC encourages the AUASB to have extensive consultation and communication
processes with stakeholders. The AUASB uses its website for consultation
on exposure drafts, and will report on its consultation arrangements in
its annual report for 2004-05. |
Seeking contributions to cost of Australian
audit standard setting |
s225(2A)(i) |
3.25
3.26 |
For a number of years, the FRC has employed
a tri-partite funding model which has included contributions from the
Commonwealth, State and Territory Governments, the professional accounting
bodies, and the corporate sector. As a result of the extra responsibilities
endowed to the FRC under CLERP 9, the Commonwealth announced substantial
extra funding for the FRC and standard setting activities in the 2004-05
Budget. A firm commitment from the professional accounting bodies and
from the States and Territories has also been secured for 2005-06. In
view of the additional funding provided by the Commonwealth, there was
no need to directly appeal for voluntary contributions from the corporate
sector.
The contributions from the Commonwealth Government have ensured that
there is no shortfall in the sources of funding which would undermine
the objective of strengthening domestic accounting and auditing standards
and their oversight arrangements. |
Monitoring and review the level of funding
and funding arrangements for the AUASB |
s225(2A)(j) |
3.27 |
The AUASB budget and business plan was prepared
by the AUASB Chairman and Principal Executive and reviewed by both the
AUASB Audit Committee and the FRC Finance Committee. At its meeting on
1 July 2005 the FRC approved the AUASB budget and business plan for 2005-06. |
4. Specific auditor independence functions
|
|
|
|
Monitoring and assessing the nature and overall
adequacy of:
- the systems and processes used by Australian auditors to ensure compliance
with auditor independence requirements;
- the systems and processes used by professional accounting bodies for
planning and performing quality assurance reviews of audit work undertaken
by Australian auditors to the extent to which those reviews relate to
auditor independence requirements;
- the action that Australian auditors who have been subject to such quality
assurance reviews have taken in response to the reports prepared as a
result of those reviews;
- the action taken by professional accounting bodies ensure that Australian
auditors who have been subject to such quality assurance reviews respond
appropriately to the reports prepared as a result of those reviews.
- the investigation and disciplinary procedures of professional accounting
bodies as those procedures apply to Australian auditors; |
s225(2B)(a) |
4.1
4.2
4.3
4.4
4.5
4.6 |
To facilitate the performance of its auditor
independence functions, the FRC established an Auditor Independence Subcommittee
(under the Chairmanship of Ms Elizabeth Alexander AM) which met on eight
occasions during 2004-05. In addition, the FRC appointed a consultant
(Mr William Bartlett) to assist it perform the function.
At the start of 2004-05, the FRC signed MOUs with the three professional
accounting bodies, ASX, APRA and ASIC and exchanged letters of understanding
with the CALDB (collectively, the MOU bodies) for the purpose of facilitating
the exchange of information between the MOU bodies and the FRC. Meetings
were held with, and information obtained from, all MOU bodies during the
year.
On 18 June 2004, the FRC decided that it would perform its auditor independence
functions by obtaining high level information from the parties with which
its has entered into MOUs and by conducting tests through selective contacts
with individual accounting firms.
In keeping with this decision, information was obtained from ASIC about
the systems and processes used by Australian auditors. In addition, representatives
of the FRC met with the four major accounting firms and one of the mid-tier
firms about the manner in which the firms operated and the systems and
processes they had in place to ensure compliance with the auditor independence
requirements.
For the purpose of monitoring and assessing the nature and overall adequacy
of the systems and processes of Australia’s professional accounting
bodies, representatives of the FRC met with the three bodies for the purpose
of obtaining information about the bodies’ quality review and disciplinary
processes, as well as other matters (eg the teaching of ethics) coming
within the scope of the FRC’s auditor independence functions. Subsequently,
the bodies provided the FRC with written material documenting their quality
review and disciplinary procedures.
The FRC’s assessment of the systems and processes used by Australian
auditors and the professional accounting bodies will be included in the
audit independence reporting being prepared pursuant to section 235BA
of the ASIC Act. |
Monitoring the overall compliance by companies,
registered schemes and disclosing entities with the audit-related disclosure
requirements of the Corporations Act and the accounting standards; |
s225(2B)(b) |
4.7
4.8 |
The FRC’s MOU with ASIC provides for
ASIC to give the FRC regular reports identifying matters arising from
its financial reporting or auditor surveillance activities in relation
to compliance by companies and auditors with the independence disclosure
requirements in Part 2M.3 of the Corporations Act.
A draft report from ASIC to the FRC, prepared pursuant to its MOU undertakings
and covering its 2004-05 activities, was provided to the FRC Chairman
in mid August 2005. The final report was scheduled to be provided to the
FRC in late August 2005. |
Giving the Minister reports and advice about
the matters referred to in paragraphs (a) and (b) of section 225(2B) of
the ASIC Act; and |
s225(2B)(c) |
4.9 |
For 2004-05, the FRC’s reports and advice
to the Minister are contained in the audit independence report prepared
under section 235BA. The FRC did not note any independence issues requiring
the preparation of supplementary reports or advice. |
Giving professional accounting bodies reports
and advice about the matters referred to in subparagraphs (a)(ii)(iii)(iv)
and (v). |
s225(2B)(d) |
4.10 |
The FRC did not give any formal reports to
the professional accounting bodies during 2004-05. However, as a result
of the MOU meetings with the bodies and following consideration of information
provided by the bodies, the FRC provided advice to the bodies concerning
aspects of their quality review programs and disciplinary processes. |
Monitoring international developments in auditor
independence, assessing the adequacy of the Australian auditor independence
requirements provided for in:
- codes of professional conduct;
in the light of those developments and giving the Minister, and professional
accounting bodies, reports and advice on any additional measures needed
to enhance the independence of Australian auditors; |
s225(2B)(e) |
4.11
4.12
4.13 |
The FRC monitored international developments
through consideration of publicly-available inspection reports issued
by overseas oversight bodies, other material placed on the internet websites
of these bodies and general media reports about audit independence issues.
In September 2004, the FRC Chairman attended a meeting in Washington
of heads of audit oversight bodies convened by the Financial Stability
Forum. In addition, he met with representatives of other audit oversight
bodies during the course of overseas visits in November 2004 and June
2005.
During the year, the FRC did not become aware of any international developments
in the area of audit independence that suggested Australia’s new
requirements are in need of revision or further enhancement. |
Promoting, and monitoring the adequacy of,
the teaching of professional and business ethics by, or on behalf of,
professional accounting bodies to the extent to which the teaching of
those subjects relates to auditor independence. |
s225(2B)(f) |
4.14
4.15 |
During 2004-05, the three professional accounting
bodies provided the FRC with detailed information about their courses
on business and professional ethics. The FRC plans to undertake an in-depth
examination of this information during 2005-06.
During the course of its meetings with accounting firms, the FRC was
informed that the in-house training courses conducted by the firms also
contain information about business and professional ethics. |
FRC’s information gathering powers |
S225A |
4.16
4.17 |
The Corporate Law Economic Reform Program
(Audit Reform and Corporate Disclosure) Act 2004 amended the ASIC
Act to enable the FRC Chairman, acting on behalf of the FRC, to give a
professional accounting body a written notice requiring the body to provide
the FRC with information concerning its professional codes of conduct,
quality assurance reviews, or investigation and disciplinary procedures.
Information can also be sought from an Australian auditor with respect
to auditor independence matters.
The FRC’s formal information gathering powers were not used during
2004-05. However, the FRC did gather information from the MOU bodies in
accordance with the terms of the respective MOUs. |
5. Annual reports |
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|
|
As soon as practicable after 30 June in each
year, and in any event before 31 October, the FRC must give the Minister
a report on:
- the operations of: the FRC and its committees and advisory groups;
the AASB and AUASB and its committees, advisory panels, and consultative
groups.
- the achievement of the objects set out in section 224; during the year
that ended on 30 June in that year. |
s235B(1)(a) (i)(ii)(iii)(b) |
5.1
5.2
5.3 |
The FRC/AASB annual report for 2003-04 contained
a comprehensive overview of the main operations and achievements of the
FRC and AASB.
The FRC approved the FRC/AASB annual report, incorporating the financial
accounts, for 2003-04 at its meeting on 20 September 2004.
In accordance with the requirements under subsection 9(1) of the Commonwealth
Authorities and Companies Act 1997 (CAC Act) the directors of the
AASB provided the 2003-04 annual report to the Minister by 15 October
2004. |
The annual report must include details of
any changes to the AASB’s or AUASB’s priorities or business
plans that were made as a result of action taken by the FRC. |
s235B(2) and (2A) |
5.4 |
The FRC/AASB annual report for 2003-04 included
an up-to-date work programme for the AASB that outlined amendments to
AASB priorities. |
As soon as practicable after 30 June in each
year, and in any event before 31 October, the FRC must give the Minister
a report on:
- the performance by the FRC, during the year that ended on 30 June in
that year, of its functions under subsection 225(2B) of the ASIC Act (the
auditor independence functions);
- the findings and conclusions that the FRC reached in performing those
functions; and
- the actions (if any) that were taken by the FRC in respect of those
findings and conclusions.
The report may be given to the Minister separately or included in the
report given to the Minister under section 235B. |
s235BA(1) |
5.5 |
The FRC’s auditor independence functions
did not come into force until 1 July 2004. Therefore, there was no report
on this matter for 2003-04.
The first report on the FRC’s auditor independence functions has
been drafted and will be forwarded to the Minister in conjunction with
the annual reports for the FRC, AASB and AUASB in accordance with the
required timetable under the legislation. In doing so, the FRC will report
on:
a) the operations of:
i) FRC and its committees and advisory groups;
ii) the AASB and its committees, advisory panels and consultative groups;
and
iii) the AUASB and its committees, advisory panels and consultative groups;
and the achievement of the objectives as set out in section 224.
b) monitoring accounting, auditing and auditor independence issues as
determined appropriate by the FRC Chairman. These reports may consider
contentious stakeholder issues and/or an update on sectoral and systemic
issues. |
6. Confidentiality |
|
|
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FRC, AASB and AUASB to protect confidential
information |
s237 |
6.1
6.2 |
The FRC complied with the confidentiality
requirements in its Rules of Procedure. The FRC Secretariat was bound
by the Commonwealth Department of Treasury security guidelines, which
requires the evoking of security classifications for all sensitive material.
The FRC encouraged the AASB and AUASB to maintain confidentiality guidelines
for participants in its Project Advisory Panels and Consultative Groups. |
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