The FRC has the following specific responsibilities in respect of Australian accounting and auditing standards:
- promoting the continued adoption of international best practice in the Australian accounting and auditing standard setting processes if doing so would be in the best interests of both the private and public sectors in the Australian economy; and
- monitoring the operation of accounting and auditing standards to assess their continued relevance and their effectiveness in achieving their objectives in respect of both the private and public sectors of the Australian economy and monitoring the effectiveness of the consultative arrangements used by the AASB and AUASB.
In addition to the reports presented by the Chairmen of the Boards at FRC meetings, the FRC also monitored the operation of accounting and auditing standards through regular stakeholder reports presented at FRC meetings by FRC members and through an ongoing program of visits by the FRC Chairman with stakeholders.
2.2 Domestic stakeholder engagement
Over the past year, the FRC has engaged with domestic stakeholders through a variety of means, including:
- regular meetings and other involvement with stakeholders and interest groups;
- consideration of financial reporting issues in the public and private sectors; and
- consultation with stakeholders - including targeted surveys - on key strategic issues through the work of the FRC Task Forces.
Based on the importance of issues tackled and the quality of responses the FRC Task Forces received during its consultations, the work performed by the FRC has been of significant interest to the financial reporting community in Australia.
The FRC Chairman has regularly met with key stakeholders to discuss financial reporting matters of general interest, obtain feedback on the work of the FRC, explain the activities of the FRC, and discuss matters of particular interest to the stakeholder. In addition she has attended a number of public fora where issues of relevance to the FRC have been discussed.
The FRC Chairman and Secretary both attended AASB and AUASB meetings in July 2011, to present and discuss the FRC Strategic Plan.
The FRC Chairman and Secretary met the then Parliamentary Secretary to the Treasurer, the Hon. David Bradbury MP, in October 2011, to discuss FRC activities including integrated reporting. She also met the Parliamentary Secretary to the Treasurer, the Hon. Bernie Ripoll MP, in April 2012, to discuss the FRC Strategic Plan, oversight of the AASB and AUASB and to invite him to an FRC meeting.
In January 2012 the FRC Chairman met with officials at the Treasury and the Department of Finance and Deregulation to discuss a variety of FRC issues, including the FRC budget and Strategic Plan. In April 2012 she met, along with the Chairmen of the AASB, AUASB and representatives of ASIC, with assessors from the International Monetary Fund (IMF) in connection with Australia's Financial Sector Assessment Program (FSAP). In May 2012, the FRC Chairman met the new General Manager of the Corporations and Capital Markets Division, Treasury, to discuss Treasury's support for the FRC.
In November 2011 the FRC Chairman gave the opening address at the annual meeting of the Asian-Oceanian Standard-Setters Group (AOSSG) in Melbourne, which focused on the adoption of IFRS. In April 2012 the FRC Chairman presented a luncheon address to the Committee for Economic Development of Australia (CEDA). The subject of the address was Financial Reporting - current and future issues.
The FRC Chairman attended a meeting of the Business Reporting Leaders Forum (BRLF) in May 2012 to discuss the FRC submission on integrated reporting to the International Integrated Reporting Council (IIRC), and an Institute of Chartered Accountants in Australia (ICAA) event in February 2012 ‘The Audit Committee - Evolution and Challenges'.
She also met a variety of individual stakeholders during 2011-12, including Ms Jan McCahey (PwC), Mr Warren McGregor (AASB), stakeholders from the Business Council of Australia, Group of 100 and the Association of Superannuation Funds of Australia, Ms Nicola Steele from the Australian Institute of Company Directors and Mr Doug Niven of ASIC.
Ken Spencer Memorial Lecture
The 2011 and 2012 Ken Spencer Memorial Lectures were held during the reporting year.
The guest speaker for the 2011 lecture, held in Sydney on 6 September 2011, was the Hon. David M. Walker, Founder and CEO of the Comeback America Initiative and the Former Comptroller General of the United States. The topic of his lecture was Fiscal Responsibility and Accountability for Sovereign Governments. The FRC Chairman and Secretary accompanied Mr Walker to Canberra, during his visit to Australia, to discuss matters including international sovereign debt issues, with officials from the Australian Treasury and Department of Finance and Deregulation.
The guest speaker for the 2012 lecture, held in Melbourne on 29 May 2012, was Mr Warren McGregor, former member of the International Accounting Standard Board. The topic of his lecture was Setting Accounting Standards: Politics, Processes, Philosophies and Personalities - the experience of the IASB.
2.3 Integrated reporting
While much of the focus on integrated reporting is global in nature, following the work of the IIRC, the FRC's Integrated Reporting Task Force has consulted broadly with domestic stakeholders regarding the development of integrated reporting. In particular the Task Force and other FRC members have worked with, and held discussions with: the Minister; other relevant accounting and auditing stakeholders; and other bodies in this space including the BRLF and the Global Reporting Initiative (GRI). The Task Force made a submission to the IIRC's discussion paper Towards Integrated Reporting: Communicating Value in the 21st Century in December 2011, and has also been in contact with the Australian participants of the pilot being run by the IIRC.
Mr John Stanhope, the then Chairman of the Task Force presented on the topic of integrated reporting at the first Australian GRI conference held in Melbourne in March 2012.
2.4 Managing complexity
On 29 May 2012, the Managing Complexity Task Force released a report, which included input from FRC members, and called for submissions from domestic stakeholders by 31 July 2012.
2.5 Promoting board education
The Board Education Task Force conducted a survey of directors and financial reporting professionals in April and May 2012, working with them to identify if there are any issues in terms of the financial literacy of directors and, if so, how to address them.
2.6 Audit quality
The Audit Quality Task Force discussed the implications for the Australian audit framework of a number of international audit developments, including the release of a legislative proposal by the European Commission (EC) responding to consultation on the EC Green Paper Audit Reform: Lessons from the Crisis and the development of the IAASB Invitation to Comment Improving the Auditor's Report. The Audit Quality Task Force also developed a survey for members of the Australian Shareholders' Association in order to better inform an FRC response to the IAASB paper.
The Task Force had an important role in discussing issues with the Treasury in the development of the Audit Enhancement Act, taking into consideration the implications of recent corporate collapses on the perception and regulation of Australian auditors. The Audit Enhancement Act adds a responsibility for the FRC on these matters.
2.7 Public sector financial reporting
The Public Sector Task Force has continued to play an important role in consulting with domestic stakeholders on whether the FRC Strategic Direction relating to public sector accounting (GAAP/GFS harmonisation) is working successfully. The AASB has the responsibility for implementing this strategic direction.
2.8 Other matters
A variety of stakeholders have contacted the FRC on financial reporting matters over 2011-12.
The FRC has continued to monitor the work of the AASB surrounding the accounting standards which apply to Small and Medium Sized Entities (SMEs). The AASB introduced a Reduced Disclosure Regime (RDR) for many of these in 2010-11, and it is important that the FRC and AASB continue to verify that this is the most appropriate arrangement for such domestic enterprises.