Second Reading SpeechMr Pearce (Parliamentary Secretary to the Treasurer)
That this bill be now read a second time.
Today I introduce a bill which will amend the Australian Securities and Investments Commission Act 2001 (the ASIC Act) to provide a legislative framework to empower the Australian Securities and Investments Commission, otherwise known as ASIC, to enter into cooperative audit agreements or arrangements with foreign regulatory bodies. The bill will also enhance ASIC's current audit inspection powers.
At the outset, the government would like to express its appreciation to key stakeholders for their constructive participation in the consultative process which has assisted the government in shaping the measures contained in the bill. I am pleased to inform the House that as a result of this consultative process, all the key of stakeholders, including the major audit firms and the professional accounting bodies, support the proposals contained in the bill. The bill will facilitate ASIC entering into a cooperative arrangement with the US Public Company Accounting Oversight Board, otherwise known as the PCAOB, which was established under the Sarbanes-Oxley Act of 2002 (the SOX Act).
Australian auditors that audit Australian companies registered with the US Securities and Exchange Commission, or that are indirectly involved in the preparation of audits for US capital market participants, are required to register with the PCAOB and to comply with US audit requirements including PCAOB audit inspection processes.
In light of the global nature of capital markets, the PCAOB has adopted a policy of seeking to cooperate with non-US regulators, like ASIC, to facilitate the conduct of joint audit inspections with the local regulator.
In addition to the public interest in fostering the close cooperation between Australian and US regulators, the streamlining of the information-gathering process under the proposed joint inspection arrangement by ASIC and the PCAOB will result in significant cost savings for audit firms in that they would have to accommodate only one joint inspection rather than two separate inspections, one by ASIC and the other by the PCAOB.
The bill will also enhance ASIC's audit inspection powers to facilitate the proposed joint audit inspection arrangement between ASIC and the PCAOB. The enhancement of ASIC's audit inspection powers are also designed to reduce compliance costs and clarify uncertainty about the scope of ASIC's existing powers to review audit firms which the Financial Reporting Council identified in its 2004-05 auditor independence report.
Important legislative and other safeguards will apply to the proposed arrangement between ASIC and the PCAOB, such as existing privileges protected by law and in relation to confidentiality of information.
The ultimate safeguard is that an agreement or arrangement between ASIC and a foreign regulator will be subject to ministerial consent which the minister could vary or revoke.
The government has also decided that the operation of the proposed arrangement between ASIC and the PCAOB should be reviewed after the completion of the first round of triennial PCAOB inspections in Australia. This has been put in place to assess whether the expectations in relation to the objectives of the joint inspection process have been met.
This is a valuable initiative because, with the globalisation of capital markets and the cross-border operations by many corporations, there is a trend towards greater consistency in global regulatory standards and a recognition of the need for closer international cooperation by regulators.
Auditing Standards Amendment
The bill also contains a technical amendment to a transitional provision relating to auditing standards in the Corporations Act 2001 (Corporations Act).
The purpose of the technical amendment is to ensure that the current immunity against criminal liability under subsection 1455(5) of the Corporations Act is extended to cover all financial reports for periods ending on or before 29 June 2007 that are audited using auditing standards made by the professional bodies.
This bill is another step towards the government achieving a simpler regulatory system, and I once again commend all stakeholders for their valuable input into this process. I present the explanatory memorandum to the bill and commend the bill to the House.
Debate (on motion by Mr Gavan O'Connor) adjourned.