Oversight body must ‘stand the test of time’, says CPA Australia

CPA Australia has voiced its perspective on the proposed oversight body, saying that the consultation paper has not addressed all areas that warrant consideration.

The professional body said it was crucial that the design of the new oversight body would take responsibility for the standards central to the Australian financial reporting system to maintain its integrity.

In a submission to the Treasury, CPA Australia chief of policy Elinor Kasapidis provided several high-level recommendations on behalf of the body’s members and in public interest.

“We support the proposals that will provide the opportunity to establish a new body that can better serve the needs of the Australian economy through an efficient and flexible structure that is underpinned by legislative rigour, strategic coherence and a well-designed framework,” she said.

“A consultation of this magnitude warrants intellectual depth and rigour to ensure stakeholders have a clear vision of what is being proposed and allow for suitable responses that can contribute to further development of the proposals.”

In the submission, CPA Australia called for protection of public interest, audit quality, international influence, sustainability reporting standards, and comparison to standard setting in other jurisdictions.

The submission also called for legislation underpinning the new structure to be comprehensive and supported by a due process/governance framework.

CPA was concerned that the flexible design allowing the ability to establish new standard-setting functions vested powers that were too broad for the proposed board.

It was suggested rigour within the legislation that underpinned the framework, supported by a suitable and comprehensive due process/governance framework, be established instead to avoid undue influence from a particular stakeholder or stakeholder group.

Kasapidis said this would have the effect of providing a basis for a standard-setting structure that would stand “the test of time”.

The submission also welcomed the proposal to establish a dedicated technical committee to set standards for sustainability reporting, with CPA having long advocated a separate standing setting board with a focused remit on setting sustainability reporting standards.

Kasapidis said CPA Australia commended the Treasury for taking this important, positive step.

“There is clear interaction and synergies in the standards and standard setting activities across financial reporting, sustainability reporting and audit and assurance. This is something we have long advocated for,” Kasapidis said.

CPA also urged Treasury to reconsider the allocation of the audit quality oversight function.

“We believe that this responsibility would be better placed with an independent body to enhance public confidence in audit quality regulation,” the professional body said.

“Additionally, we support retaining ASIC’s role in audit quality enforcement, with all relevant bodies working collaboratively to strengthen audit quality and uphold trust in Australia’s financial markets.”

CPA said the body would also need to make an effort to protect public interest, monitor the development of international standards, and consider a broader range of frameworks besides New Zealand and the UK.

“CPA Australia supports the proposal to establish a new standard setting body that can more efficiently serve the long-term and diverse needs of Australia’s financial reporting system and the Australian economy,” Kasapidis said.

“Given the complex and sophisticated nature of the professional services industry, we stress that the new body must avoid any unintended consequences that could compromise the integrity of future standard setting in Australia.”