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Tuesday, 24 June 2008
Page: 5805

Mr NEUMANN (8:03 PM) —I rise to speak in support of Governance Review Implementation (AASB and AUASB) Bill 2008. The bill seeks to amend the Australian Securities and Investments Commission Act 2001. The bill will improve the governance framework and financial arrangements of the Australian Accounting Standards Board, known as the AASB, and the Auditing and Assurance Standards Board—I will get this right; the acronyms are strange—known as the AUASB. I will call them the boards.

Mr Keenan —That’s one of your favourite statutory authorities.

Mr NEUMANN —That is right. The AASB is responsible for developing and issuing accounting standards and for the ‘care and maintenance’ of the body of standards. The board’s functions and powers are set out in the Australian Securities and Investments Commission Act 2001. Since 2002, the board has been implementing the strategic direction from the Financial Reporting Council to adopt international accounting standards for periods beginning on or after 1 January 2005.

Many entities regulated under the Corporations Act 2001 are required to apply accounting standards in preparing their financial reports. Some public sector entities are required to apply those standards by state or territory legislation as well as Commonwealth legislation, through specific instructions to preparers or reporting frameworks set out in guidelines or regulations. Various members of accounting bodies are also involved and have professional obligation to take reasonable steps within their power to ensure that entities with which they are involved comply with accounting standards in preparing their general purpose financial reports—and so they should.

The AUASB is an independent statutory body. As the national auditing and assurance standards setter, the AUASB has an important role in developing high-quality standards and related guidance for auditors and providers of assurance services. At its meeting on 4 April 2005, the Financial Reporting Council considered in detail an appropriate strategic direction for this board in relation to its work program and, in particular, its approach to setting auditing standards for the future. This bill does not seek to change current statutory functions performed by these two boards with respect to the development of accounting and auditing standards. It really seeks to enhance the financial and administrative arrangements of the boards. It is quite technical in nature.

The bill simply transfers the boards from the Commonwealth Authorities and Companies Act 1997, known as the CAC Act, to the Financial Management and Accountability Act 1997, known as the FMA Act. The bill makes other changes to the Financial Reporting Council. It goes about improving the financial management and governance of the boards. The transfer of the boards between the acts is being done as the boards do not serve any commercial purpose. The purpose of these boards relates to enhancing, as I said, accounting and auditing standards for private and public sectors in our economy. Good accounting and auditing standards are crucial to business and government. As someone who was in business for about 21 years before I was elected, it is extremely important in my experience.

The Financial Reporting Council is responsible for various administrative functions relating to both boards. The FMA Act, not the CAC Act, is the appropriate governing act, as the Minister for Agriculture, Fisheries and Forestry said in his second reading speech. This will provide a rigorous framework for the management and expenditure of public money. The FRC is responsible, of course, for broad oversight of the process and for setting accounting and auditing standards, as well as for monitoring the effectiveness of auditor independence requirements in Australia and for giving the minister reports and advice on these matters. There are some changes to the role of the FRC concerning some matters—affording the FRC the opportunity to concentrate on the overall direction of the various boards.

I have to say that this is a particularly uninteresting and non-sexy bill—if I can put it like that. It really lines up the improvements we have made in other areas in relation to the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. We have already passed the Commonwealth Authorities and Companies Amendment Bill 2008—and that will improve transparencies, efficiencies, controls and practices of Commonwealth companies and Commonwealth authorities. The CAC Act lines up those bodies, of course, with the Corporations Law relating to directors’ duties, responsibilities and obligations. Under the CAC Act, financial statements and audit reports must be provided to the responsible minister. There has to be a base level of annual reporting to the responsible minister who tables the report in the parliament.

Australia needs Commonwealth companies, Commonwealth authorities and Commonwealth boards to act with probity and to engage in best practice in governance and financial management. This bill will not seek to augment the number of agencies in operation; it will merely transfer two existing CAC boards to FMA agencies. It will not seek to change the legal functions in relation to either board. The FRC will maintain its strategic oversight of the boards. There are, in the bill, various schedules which help in the transition arrangements as well. It arises out of a review that has been going on for quite some time, and comes about as a result of the Treasury’s 2007 recommendations concerning the board’s functions. That review identified a number of concerns with respect to governance of the two boards, including their status. There are two agencies created in this bill: the Office of the Australian Accounting Standards Board and the Office of the Auditing and Assurance Standards Board. The agencies comprise the chair of the board, other members of the board and the staff thereof. The respective chairs of the board will each hold positions as chief executives in their respective agencies.

I have to say that, despite the fact that the bill is short and pretty uninteresting, it really is part of the Rudd government’s reform agenda concerning corporate governance. The legislative shift ensures that those bodies which do not have a commercial purpose are transferred to another act. Those with commercial purpose should be governed by the CAC Act. It is about improving the board. It is about best practice. It is about good governance. It is about good federal government. It is about responding appropriately in the circumstances, and in a timely fashion, to recommendations. It is about ensuring better administration and better use of public funds and is quite necessary in seeking a more propitious legislative framework for these two important boards. In such circumstances, and in such a short time, I recommend the bill to the House.