Australia

Companies operating in Australia are required by the Corporations Act 2001 (‘the Act’) to prepare and submit annual financial reports to the Australian Securities and Investments Commission (ASIC) which is the country’s corporate, financial markets, and financial services regulator. Companies limited by guarantee that are also charities registered with the Australian Charities and Not-for-profits Commission (ACNC) are required to lodge their financial reports with the ACNC.

The Act requires the following entities to prepare financial reports: (i) all disclosing entities; (ii) public companies; (iii) companies limited by guarantee (except small companies limited by guarantee); (iv) all large proprietary companies that are not disclosing entities; (v) all registered managed investment schemes; and (vi) small proprietary companies that are foreign controlled (subject to some exemptions). Financial reports lodged under the Act are required to be prepared in accordance with Australian accounting standards and give a ‘true and fair view’.

The Australian Accounting Standards Board (AASB), an independent Australian Government agency, sets Australian Accounting Standards (AAS) to be applied in the jurisdiction through an extensive standard-setting process, which includes identifying technical issues related to the Australian context, research and consultation with stakeholders, and then issuing the standard. There are two tiers of reporting requirements for preparing general purpose financial statements: (i) Tier 1: AAS and (ii) Tier 2: Australian Accounting Standards—Simplified Disclosures.

International Financial Reporting Standards (IFRS) are incorporated into Tier 1 of AAS such that it enables companies complying with Tier 1 AAS to also state compliance with IFRS. The following entities must apply Tier 1 requirements: (i) for-profit entities in the private sector that have public accountability (including pension funds); and (ii) Australian Government and state, territory, and local governments.

All other companies who lodge may apply the Tier 2 requirements which comprise the recognition, measurement, and presentation requirements of Tier 1 (and therefore, IFRS) while substantially reducing disclosures related to those requirements. The principles for determining the reduced disclosures are based on the principles used for determining the disclosures prescribed in the IFRS for Small and Medium-sized Entities (IFRS for SMEs).

The Act also requires lodged annual financial reports to be audited. ASIC requires audits to be undertaken in accordance with auditing standards issued by the Auditing and Assurance Standards Board (AUASB), an independent, statutory agency of the Australian Government, responsible for developing, issuing and maintaining auditing and assurance standards.

Since April 2006, the AUASB has released Australian Auditing Standards (ASA) based on the International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB), in line with strategic direction from the Financial Reporting Council (FRC). The degree to which the AUASB may make amendments to IAASB standards varies issue-by-issue and only where there is a ‘compelling reason’ such as to meet local legislative requirements.

The FRC is a statutory body under the Australian Securities and Investments Commission Act 2001 (ASIC Act 2001) and is responsible for overseeing the effectiveness of the financial reporting framework in Australia. Its key functions include the oversight of the accounting and auditing standards setting processes for the public and private sectors, providing strategic advice in relation to the quality of audits conducted by Australian auditors, and advising the government on these and related matters to the extent that they affect the financial reporting framework in Australia.

The audit profession in Australia (as it relates to the audit of financial reports prepared under the Corporations Act 2001) is regulated by the Corporations Act 2001 and the Australian Securities and Investment Commission (ASIC) Act 2001. The Corporations Act 2001 specifies the two pathways for auditor registration—Registered Company Auditor (RCA) and Authorized Audit Company (AAC)—as well as the three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia and New Zealand (CA ANZ), and the Institute of Public Accountants (IPA)—that monitor their members who are part of the audit profession subject to the oversight and regulation of the ASIC. Australian auditors who are members of the three PAOs also must follow the Australian Accounting Professional and Ethical Standards developed and issued by the Accounting Professional and Ethical Standards Board.

Registered Company Auditor

The ASIC Act 2001 empowers ASIC to: (i) register RCAs who meet the initial professional development requirements outlined in the Corporations Act 2001; (ii) set continuing professional development requirements (CPD) for RCAs; (iii) conduct quality assurance (QA) reviews for all audits to monitor compliance with auditing standards set by the Australian Auditing and Assurance Standards Board (AUASB); and (iv) investigate breaches of law and issue related sanctions. Additionally, regarding the investigation and discipline of RCAs, ASIC may refer a disciplinary matter to the Companies Auditors Disciplinary Board (CADB). The CADB was established by the ASIC Act 2001 as an independent statutory body with the primary role of serving as a disciplinary tribunal. The CADB considers applications for the cancellation or suspension of the registration of auditors put forth by the ASIC after its investigation or, in the case of auditors of prudentially supervised entities, by the Australian Prudential Regulation Authority. The CADB itself has no authority to initiate an investigation into the conduct of RCAs.

RCAs may audit the financial statements of companies that are required to have an audit under the Corporations Act 2001. ASIC is responsible for registering RCAs who meet the requirements as outlined in Section 1280 of the Corporations Act 2001, which are to: (i) hold a prescribed tertiary accounting qualification of at least three years that includes an audit component and two years of commercial law; OR (ii) have at least 3000 hours work in auditing in the five years immediately before the date of application, including at least 750 hours supervising audits of companies; (iii) meet a fit and proper person test; and (iv) prepare a capability report. In addition, ASIC has the discretion to allow individuals to register if they do not meet the prescribed practical experience requirements but have the equivalent of the prescribed qualifications and practical experience.

In addition to registering RCAs, ASIC also registers Authorized Audit Companies (AAC) under the Corporations Act 2001. In addition to the requirement for each director of the AAC to be an RCA, there is also a requirement for AAC to hold appropriate professional indemnity insurance.

According to the Act, the following designations from the PAOs meet the tertiary accounting qualification requirement to become an RCA:

• Chartered Accountant (CA) and Fellow CA (FCA) from CA ANZ;
• Certified Public Accountant (CPA) and Fellow CPA (FCPA) from CPA Australia; and
• Member Institute of Public Accountants (MIPA) and Fellow IPA (FIPA) from IPA.

Alternatively, individuals can apply for registration based on their qualifications and demonstration of the audit skills contained in the Auditing Competency Standard for Registered Company Auditors (2015), which was jointly developed by PAO and ASIC representatives and then approved by ASIC. The standard incorporates requirements, tasks, and activities from the revised International Education Standards (IES). ASIC requires RCAs to complete at least 120 hours of CPD activities over each three-year period.

Qualified Accountants

Qualified accountants may certify that an individual (either a natural person or a legal person) has a prescribed net asset or gross income level whereby the individual is exempt from receiving a regulated disclosure document such as a prospectus or product disclosure statement when buying securities or other financial products. For these purposes, a qualified accountant is defined in the Act as a person meeting the criteria in ASIC’s Regulatory Guide 154. According to ASIC, an individual is a qualified accountant if they belong to one of the following PAOs at the declared membership classification and complies with the PAO’s CPD requirements:

• Associate Chartered Accountant (ACA), CA and FCA from CA ANZ;
• CPA and FCPA from CPA Australia; and
• Associate Institute of Public Accountants (AIPA), MIPA and FIPA from IPA.

Finally, in addition to ASIC educational requirements described above, as members of the Australian PAOs, RCAs are subject to their educational requirements leading to their respective designations and subsequent continuous professional development obligations. All the PAOs require their members to adhere to the Accounting Professional & Ethical Standard (APES) 110 Code of Ethics for Professional Accountants, which is based on the International Code of Ethics for Professional Accountants. APES 110 is set by the Accounting Professional & Ethical Standards Board, an independent body that was established in 2006 through a joint initiative by CPA Australia and CA ANZ. Finally, all PAOs also maintain quality assurance and investigative and disciplinary systems for their members.

Regulation of the Australian Tax Agency Profession

In Australia, tax practitioners are regulated by the Tax Practitioners Board (TPB). The TPB is responsible for registration and regulation of tax agents and Business Activity Statement (BAS) agents. The TPB is also responsible for ensuring the Tax Agent Services Act 2009 (TASA) is complied with as well as the Code of Professional Conduct established by the TASA.

To provide tax agent or BAS agent services in Australia for a fee, a provider must be a tax agent or BAS agent, registered with the TPB. Tax agent services and BAS agent services are defined in the TASA.

The TASA provides for individuals, partnerships, and companies to apply for registration as a registered tax agent (RTA) and/or BAS agent.

The Tax Agent Services Regulations 2022 provides a system for the TPB to accredit professional associations for the purposes of recognizing relevant professional qualifications and experience.

CA ANZ, CPA Australia and the IPA are accredited by the TPB as both an RBAA and an RTAA. Accreditation as a recognized professional association (either RBAA or RTAA or both) provides for the recognition by the TPB of professional qualifications and experience relevant to the registration of individuals as registered tax agents (RTAs) and BAS agents. The Tax Practitioners Board (TPB) recognizes both CA ANZ and CPA Australia as a Tax and BAS professional association and recognizes the both the CA and CPA designation and has approved specific CA ANZ and CPA Australia courses which enables CA ANZ and CPA Australia members to register as Tax and BAS agents.

The Australian Securities and Investment Commission (ASIC) is both the securities regulator and audit oversight body in Australia. Under the ASIC Act 2001, ASIC is responsible for promoting confident and informed markets and investors. ASIC’s authority for audit regulation is encompassed within its general authority and powers as a securities regulator under that legislation. In particular, ASIC’s functions are to: (i) register Registered Company Auditors (RCAs) who meet the initial professional development requirements outlined in the Corporations Act 2001; (ii) set continuing professional development requirements for RCAs; (iii) conduct quality assurance (QA) reviews (referred to as an inspection and surveillance program) for all audits to monitor compliance with auditing standards set by the Australian Auditing and Assurance Standards Board (AUASB); and (iv) investigate breaches of law and issue related sanctions. ASIC is a member of the International Forum of Independent Audit Regulators (IFIAR).

Additionally, regarding the investigation and discipline of RCAs, ASIC may refer a disciplinary matter to the Companies Auditors Disciplinary Board (CADB). The CADB was established by ASIC Act 2001 as an independent statutory body with the primary role of serving as a disciplinary tribunal. The CADB considers applications for the cancellation or suspension of the registration of auditors put forth by ASIC after its investigation or in the case of registered auditors of prudentially supervised entities, by the Australian Prudential Regulation Authority. The CADB has no authority to investigate the conduct of RCAs.

Australia has three professional accountancy organizations (PAOs) recognized in legislation.

All three PAOs set educational requirements that individuals must meet to earn and maintain their respective designations that lead to legally protected accountancy titles; require members to adhere to professional standards set by the Accounting Professional & Ethical Standards Board, the Australian Accounting Standards Board, and the Australian Auditing and Assurance Standards Board; maintain quality assurance review systems; and investigate and discipline members for misconduct and breach of standards. All three bodies in Australia are members of IFAC and the Confederation of Asian and Pacific Accountants (CAPA). CPA Australia and CA ANZ are Associate Members of the ASEAN Federation of Accountants (AFA).

Chartered Accountants Australia and New Zealand (CA ANZ)

The Institute of Chartered Accountants in Australia (ICAA) (founded in 1928) and the New Zealand Institute of Chartered Accountants (NZICA) (founded in 1978) amalgamated to become one body—Chartered Accountants Australia and New Zealand (CA ANZ)—effective December 31, 2014. CA ANZ has members in Australia, New Zealand and around the world, and its vision is to empower members to become leaders and shapers of finance and business, principally in Australia and New Zealand. CA ANZ’s key strategic objectives are to support its members and the profession to maintain their relevance and skills at a global level.

CPA Australia

Founded in 1886, CPA Australia aims to provide members with education, training, technical support, and advocacy as a part of its core services. CPA Australia also works with its members, and local and international bodies to represent the views and concerns of the profession to government, regulators, industries, academia, and the public. CPA Australia offers three levels of membership including Associate (ASA), CPA, and Fellow (FCPA).

Institute of Public Accountants (IPA)

Founded in 1923, the Institute of Public Accountants (IPA) represents more than 35,000 members and students working in industry, commerce, government, academia, and professional practice. The IPA supports and advocates for its members and the profession, especially those operating in the small and medium-sized entities sector of the economy.

Under the Australian Securities and Investments Commission Act 2001, the Australian Securities and Investments Commission (ASIC) is authorized to carry out quality assurance (QA) reviews for all audits of all entities that prepare financial reports under the Corporations Act 2001. The ASIC reports that audit firms are inspected on a continuous basis. One audit engagement file is inspected at each Big 4 firm each month. Mid-tier firm audit files may be reviewed every quarter. Small firms that only audit one or two small, listed companies, may be reviewed once every 12 years. Overall, the ASIC’s review system appears to align with SMO 1 components.

Additionally, there are three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia & New Zealand (CAANZ), and the Institute of Public Accountants (IPA)—that operate QA review systems for their respective members.

CPA Australia implements a Best Practice Program to ensure that its members in public practice maintain high professional standards. CAANZ has a Quality and Practice Review Program operating under its Australian Quality Review Committee while IPA members in public practice are subject to a Professional Practice Quality Assurance Review.

All PAOs report that their respective systems are aligned with SMO 1 benchmark, including that relevant standards (ISQM 1, 2, and ISA 220 (revised)) are adopted.

Current Status: Adopted

Educational requirements for the two protected professional accountancy titles in Australia are governed by the Corporations Act 2001 and the Australian Securities and Investment Commission (ASIC) Act 2001. The ASIC and three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia & New Zealand (CA ANZ), and the Institute of Public Accountants (IPA)—also have a role in setting and implementing initial professional development (IPD) and continuing professional development (CPD) requirements.

Section 1280 of the Corporations Act 2001 prescribes the entry requirements for a registered company auditor (RCA) which include: holding a recognized tertiary accounting qualification from one of the PAOs; practical experience; and passing a competency test.

According to the Corporations Act 2001, the following designations from the PAOs meet the tertiary accounting qualification requirement to become an RCA:

• Chartered Accountant (CA) and Fellow CA (FCA) from CA ANZ;
• Certified Public Accountant (CPA) and Fellow CPA (FCPA) from CPA Australia; and
• Member Institute of Public Accountants (MIPA) and Fellow IPA (FIPA) from IPA.

To earn and use any of the above qualifications, individuals must:

• Have an approved university degree;
• Complete the CPA; CA ANZ; or IPA Program, respectively;
• Complete three years’ practical experience under conditions approved by the respective institutes; and
• Fulfill CPD requirements which are set at 120 hours over a three-year period.

The ASIC regulations also require RCAs to complete 120 hours of CPD over a three-year period.

A qualified accountant—the second protected title—is defined by the Corporations Act as a person covered by ASIC’s declaration made for this purpose: persons meeting the criteria in the ASIC’s Regulatory Guide 154 are taken to be qualified accountants. According to ASIC, an individual may become a qualified accountant if they belong to one of the abovementioned PAOs at the declared membership classification and complies with the PAO’s continuing professional education requirements. The membership classifications are the same as an RCA with the addition of Associate Chartered Accountant (ACA) from CA ANZ and Associate Institute of Public Accountants (AIPA) from IPA. These are the institutes’ foundational level qualifications and require a university degree to commence their postgraduate qualification program.

All three PAOs educational systems align with the IES.

Current Status: Adopted

The Corporations Act 2001 requires annual financial reports to be audited. The Australian Securities and Investments Commission requires the application of standards issued by the Auditing and Assurance Standards Board (AUASB), an independent, statutory agency of the Australian Government, responsible for developing, issuing and maintaining auditing and assurance standards.

Since April 2006, the AUASB has released Australian Auditing Standards (ASA) based on the ISAs as issued by the International Auditing and Assurance Standards Board (IAASB), in line with strategic direction from the Financial Reporting Council. The degree to which the AUASB may make amendments to IAASB standards varies issue-by-issue and only where there is a ‘compelling reason’ such as to meet local legislative requirements. The latest ISAs are in effect.

Current Status: Adopted

The Accounting Professional & Ethical Standard Board (APESB), an independent body that was established in 2006, sets the ethical requirements with which all professional accountants who are members of CPA Australia, Chartered Accountants Australia & New Zealand, and/or the Institute of Public Accountants must comply.

The APESB has issued the APES 110 Code of Ethics for Professional Accountants (including Independence Standards) which is based on the latest International Code of Ethics for Professional Accountants.

Current Status: Adopted

Financial reporting for public sector entities in Australia is based on the Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB)—an independent Australia government agency. The AASB operates a sector neutral policy where possible and so the public sector generally applies the AASB’s IFRS based standards. However, these may be modified for application to the public sector where required and Australia also has some domestic public sector standards to meet the specific needs of the sector.

The professional accountancy organizations in the jurisdiction advise that AASB has contemplated a proposed revised policy. That investigation sets out the conditions necessary for the AASB to recommend moving from IFRS to IPSAS as the basis for not-for-profit public sector accounting in Australia. It is expected that if the preconditions for IPSAS are met as per the AASB paper, the AASB will reconsider IPSAS as a viable alternative to the current framework and undertake appropriate consultation in this regard.

Current Status: Partially Adopted

Investigative and disciplinary (I&D) procedures for professional accountants in Australia are carried out by the Australian Securities and Investment Commission (ASIC) and three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia & New Zealand (CA ANZ), and the Institute of Public Accountants (IPA)—in the jurisdiction.

The ASIC is responsible for the surveillance, investigation and enforcement of registered company auditors (RCAs) and overall its I&D mechanism seems to align with SMO 6 best practices. The ASIC conducts regular audit inspections and surveillances and if auditor’s conduct is found to be deficient, the ASIC may impose conditions on an RCA’s registration or other sanction or may refer the matter to the Companies Auditors Disciplinary Board (CADB).

The CADB was established by the ASIC Act 2001 as an independent statutory body with the primary role of serving as a disciplinary tribunal. The CADB considers applications for the cancellation or suspension of the registration of auditors put forth by the ASIC after its investigation. The CADB has no authority to investigate the conduct of auditors.

CPA Australia, CA ANZ, and IPA have all established I&D processes for their respective members, which include RCAs as well as qualified accountants.

CPA Australia’s I&D Process is outlined in its bylaws.

CA ANZ’s I&D process is outlined here.

IPA’s I&D procedures is outlined here.

All PAOs report that their I&D systems are aligned with SMO 6.

Current Status: Adopted

The Australian Accounting Standards Board (AASB), an independent Australian Government agency, sets Australian Accounting Standards (AAS) to be applied in the jurisdiction through an extensive standard-setting process, which includes identifying technical issues related to the Australian context, research and consultation with stakeholders, and then issuing the standard.

There are two tiers of reporting requirements for preparing general purpose financial statements: (i) Tier 1: AAS and (ii) Tier 2: Australian Accounting Standards—Simplified Disclosures.

Tier 1 standards apply to the general-purpose financial reports of entities that have public accountability. All other entities who prepare general purpose financial reports may apply the Tier 2 requirements which comprise the recognition, measurement, and presentation requirements of Tier 1 (and therefore, IFRS) while substantially reducing disclosures related to those requirements. The principles for determining the reduced disclosures are based on the principles used for determining the disclosures prescribed in the IFRS for Small and Medium-sized Entities (IFRS for SMEs).

Current Status: Adopted

Relevant Organizations

• Accounting Professional & Ethical Standards Board (APESB)
• Auditing and Assurance Standards Board (AUASB)
• Australian Trade and Investment Commission, Australian Government
• Australian Securities and Investments Commission (ASIC)
• Australian Securities Exchange (ASX)
• Australian Accounting Standards Board (AASB)
• Chartered Accountants Australia and New Zealand (CA ANZ)
• Companies Auditors Disciplinary Board
• CPA Australia (CPA A)
• Financial Reporting Council (FRC)
• Institute of Public Accountants (IPA)

Relevant Legislation

• Australian Securities and Investments Commission Act 2001
• Auditing Competency Standard for Registered Company Auditors, 2015
• HYPERLINK "https://www.legislation.gov.au/Details/C2017C00210" Corporations Act 2001
• Membership designations (Act s 324BE) of the Corporations Act 2001

Relevant Publications

• APESB, Compiled APES 110 Code of Ethics for Professional Accountants, September 2017
• AUASB, Australian Auditing Standards, n.d.
• CA ANZ, SMO Action Plan, November 2018.
• CPA Australia, SMO Action Plan, March 2014.
• IFRS Foundation, “IFRS Application Around the World?Jurisdictional Profile: Australia,” 23 July 2017.
• International Forum of Independent Audit Regulators (IFIAR), IFIAR 2017 Member Profile—ASIC, 2017.
• IPA, SMO Action Plan, March 2014.