The Financial Reporting Council (FRC) is a statutory body under the Australian Securities and Investments Commission (ASIC) Act 2001 and its purpose is to oversee the process of setting accounting & auditing standards. One of the many key roles of FRC includes the maintenance of independence functions of auditor by monitoring and assessing the overall adequacy of the procedures followed by the auditors and their compliance with auditor independence requirements (FRC 2011). It also monitors the effectiveness of the Financial Reporting structure and in light of the possible developments; advising the Ministers and professional accounting bodies by providing reports and other additional measures needed to enhance on those matters. Another key role includes monitoring of the procedures taken by the professional accounting bodies for planning and performing quality assurance reviews of audit work. FRC, whenever necessary, advises or gives feedback to Australian Accounting Standards Board (AASB) on their priorities, proposals, budgets and even appoint members or arrange the structure of members (other than the Chairs). It also has an effective hand in determining the broad strategic directions of AASB (FRC 2011). Moreover, it stretches its hands to monitor the development of single-set of accounting and auditing standards in regards to the international accounting for the best interests of both the private and public sectors in the Australian economy (Bowrey 2007). 1a. Reason for the FRC Decision
On 2005 FRC decided that Australia would adopt as much as it can from International Financial Reporting Standards (IFRS), only to the extent where the culture or other factors would not impede the decision. It brought about a swirl of changes in Australia where accounting standards were unparalleled in Australian financial reporting history. As FRC sets strategic directions for AASB, whole Australian reporting entities were required to prepare the financial statements in accordance with IFRS after 1 Jan 2005. FRC adopted IASB with an intention to harmonise the accounting standards which was then adopted by over 100 countries. IASB is set on a path to standardise the accounting standards by taking the first step: harmonising all accounting standards. Since many countries were practicing similar accounting principles, FRC wanted AASB to remain consistent with IASB: to reduce the cost of producing different formats of Financial Reports for different purpose for different countries and hence increasing the chances of attracting the potential international investors in Australia. It can be said that more number of international investors plus the already existing local investors increases the size of capital that can be accessible by any entities involved in any trades. Such influx of international resources is only possible if the international investors know what the company is up to. With such extensive amount of globalisation injected inside the entities, a competition prevails. That in turn helps every entity to be in toes and remain up to date of the development of world economy (Ashbaugh & Pincus 2002). That amount of consciousness and exposure of the world economy to smallest of entities would make the market more consistent and less biased. Lastly FRC shares the morale of the IASB which believes that the solution to the inconsistency in accounting principles can be set aside if all the countries follow the same set of accounting standards. This meant Australia abandoning the domestic accounting frameworks to an extent only where the new standards were not implausible for the society. One of the factors that prove that standardisation is implausible is the culture. A culture is a broad concept harboured inside a society that has direct and indirect impacts on the various branches of accounting practices like Organisation Structure, Taxation, interests and lots of other branches (Deegan 2009). For example: a...
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