Regulatory and Political In?uence on Accounting Practice

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egulatory and Political Influence
on Accounting Practice

Learning Objectives
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Critically discuss the regulatory environme
concerning Australian external financ
reporting.

Describe the main regulatory bodies th
encompass the Australian reporti
environment.

Review some of the arguments proposed f
and against regulation of the accounti
profession.

Outline the relevance of potential econom
political and social impacts to the account

Introduction


Financial Accounting
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A process involving the collection and processing of
financial information to meet the decision-making
needs of parties external to an organisation.

The information rights of outsiders, who are not
involved in the day-to-day operations of the
organisation, must be protected.
How?

What is Regulation?
• Definition:
• 

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The Oxford Dictionary defines regulation in terms of a
prescribed rule or authoritative direction
The Macquarie Dictionary defines regulation as a rule
of order, as for conduct, prescribed by authority; a
governing direction or law

• On

the basis of these definitions we can say that
regulation is designed to control or govern conduct

• Hence

regulations relate to the rules that have been
developed by an independent authoritative body that has
been given the power to govern how we prepare financial
statements, and the actions of the authoritative body will

Regulators




Change in the development of accounting standards and regulation wi enhanced emphasis being placed on government rather than accou profession — reducing ability of accounting profession to ‘self-regulate’.

There are four main bodies that create and/or enforce accounting regulat Australia
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The Australian Securities and Investments Commission (ASIC)

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The Australian Accounting Standards Board (AASB)

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The Financial Reporting Council (FRC)

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The Australian Securities Exchange (ASX)

Regulators

2000

Currently

Australian Accounting Standard Setting

Financial Reporting Council
Broad membership
(www.frc.gov.au).

base



18

members

Oversees activities of AASB – provides direction.
Advises Govt. on standard setting.

Responsible for decision that Australian reporting
entities would adopt accounting standards issued
by IASB.

N ow also oversees Auditing and Assurance
Standards Board (AUASB).

Functions (under s. 227 of ASIC Act) to include:
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developing a conceptual framework

• 

making accounting standards under s. 334 of the Corporations Act

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formulating accounting standards for other purposes relating to organisations governed by the Corporations Law.

participating in and contributing to the development of a single set of accoun standards for worldwide use

Majority of standards underwent change in 2003–0
Reports to the Financial Reporting Council (FRC)

Has one full-time chairperson and the balance a

Formerly the Australian Securities Commission (ASC
Name changed to reflect increased responsibility fo
regulating investment products
Regulatory Watchdog - Responsible for
administering corporation legislation

Independent of state ministers or state parliament
Reports to the Commonwealth Parliament and
Treasurer

Investigates companies suspected of non-compliance
with the Act or accounting standards

Australian Securities Exchange (ASX)

ne nationally operated securities exchange with a set of listing rules fo rading floors in each capital city

ets out the listing and trading rules that apply to nationally listed secur ailure to comply may lead to removal from the Board.

ules help ensure that information is disseminated in an efficient and t anner.

SX Listing Rules divided into 20 chapters—key chapters are Chapt ontinuous disclosure) and Chapter 4 (periodic disclosure).
or example, Listing Rule 3.1
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Once an entity is or becomes aware of any...
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