Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants have now written to the Prime Minister’s office, calling for a new, co-ordinated plan to reform and standardise reporting and audit requirements in the private sector.
The peak accounting bodies believe Australia’s current legislative financial reporting framework is characterised by a myriad of different, and often unclear, reporting requirements, driving up the complexity and compliance burden for businesses across all sectors, particularly small and medium enterprises.
The submission points to research by the Australian Accounting Standards Board which highlighted the “complexity and lack of uniformity” in 11 different categories of legislative and regulatory requirements.
A study by CA ANZ and the University of Adelaide also identified 136 unique terms to describe the information subject to audit, and 101 unique descriptions of the auditor and his or her qualification in Australian legislation.
“The resulting complexity makes it very difficult for financial reporting processes to cost-effectively serve the needs of its myriad of users,” the joint accounting bodies said.
“The current default use of our internationally based accounting standards framework, designed primarily for the reporting needs of listed and other publicly accountable entities, can place a significant compliance burden on other much smaller entities who lack both the skills to implement the resulting form of reporting, and users who need, and understand, its level of complexity and detail.
“Similarly, the legislative default to a ‘registered company auditor’ (RCAs) when an audit provision has been inserted into law fails to acknowledge that there are a range of professional assurance services, and adequately qualified personnel (such as the ‘Qualified accountant’ designation in section 88B of the Corporations Act 2001) that could provide the accountability being sought without placing undue burden on the country’s limited supply of the necessarily highly qualified and experienced RCA designation.”
The joint bodies believe a solution will require a concerted effort by all levels of government, legislators, regulators and standard setters to develop a simpler national legislative financial reporting and auditing framework for both the for-profit and not-for-profit sectors.
“This framework needs to clear up inconsistent reporting obligations and be easy to understand while still ensuring appropriate levels of accountability are applied,” the bodies said.
“We appreciate that reform in our current federal structure is challenging, given the different regulatory structures in each state and competing legislative priorities that exist at all levels of government.
“However… a fit-for-purpose financial reporting framework is of critical importance to the effective operation of Australian businesses, and the complexities of the current system present those businesses and the accounting profession that serves them with significant resource challenges that do not effectively balance preparer and auditor costs with necessary accountability to regulators, investors and the general public.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.