Auditor Regulation and External Reporting Bill

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Explanatory note

General policy statement

This Bill strengthens the regulation of practitioners who carry out audits of issuers. It also reconstitutes the Accounting Standards Review Board (ASRB) as the External Reporting Board and consolidates financial reporting and audit and assurance standards-setting within the new Board.

Auditor regulation

The purpose of carrying out an audit is to provide a high level of assurance that a set of financial statements is free from material error. Users can be confident that they can rely on the financial statements to provide information that will help them make sound business and economic decisions if audits are consistently carried out to a high standard. The need for audit firms to have a strong reputation makes a significant contribution to promoting audit quality. However, regulation is needed in some form or other to provide users with the necessary degree of confidence.

The aim of Parts 1 to 3 of the Bill is to maintain and promote audit quality by strengthening the regulatory system relating to issuer audits. The statutory definition of issuer covers 2 broad categories. First, it includes entities that seek funding through debt and equity instruments that are offered to the public. Secondly, it includes banks, insurance companies, mutual funds, and other entities that take deposits from the public or hold assets in a fiduciary capacity for broad groups of outsiders. Issuer audits are targeted in this Bill because this is the class of audits where investors are most at risk of losing substantial amounts of money in the event of audit failure.

At present, audits of financial statements prepared by issuers must be carried out by—

  • chartered accountants as defined in the Institute of Chartered Accountants of New Zealand Act 1996 (the ICANZ Act); or

  • persons appointed by the Auditor-General under the Public Audit Act 2001; or

  • accountants who are members of overseas professional accounting organisations that have been approved by the Registrar of Companies; or

  • overseas qualified persons approved by the Registrar of Companies.

Thus, the New Zealand system has the following features:

  • it recognises 1 domestic professional accounting body; and

  • self-regulation by that professional body; and

  • there is an assumption that other countries also have self-regulation; and

  • there is an expectation that auditors can be effectively regulated as part of the broader system for regulating chartered accountants.

The Bill will strengthen the regulation of practitioners who carry out issuer audits in 2 main ways. First, the New Zealand Institute of Chartered Accountants (NZICA) and any other professional body accredited by the proposed Financial Markets Authority (FMA) will be required to license issuer auditors as a specialist profession. Secondly, the FMA will be responsible for monitoring and reporting on the adequacy and effectiveness of NZICA’s regulatory systems and processes.

The FMA is to be established under the Financial Markets (Regulators and KiwiSaver) Bill.

The FMA will also be responsible for setting the minimum standards for becoming a licensed auditor, and for carrying out practice reviews. The FMA will also take over responsibility for regulating overseas-qualified auditors from the Registrar of Companies. Any accredited professional bodies other than NZICA would be subject to the same requirements placed on NZICA. The Registrar will be responsible for operating the register of licensed auditors.

The changes are needed for 2 main reasons. The first relates to concerns about the current regulatory system, which places a significant degree of reliance on chartered accountants with practising certificates to self-assess whether they have the competence and the necessary level of independence to carry out issuer audits. The finance company experience indicates that some practitioners did not make sound self-assessments.

Secondly, self-regulation is no longer within the range of international acceptability. Consequently, New Zealand practitioners are unable to obtain registration in some jurisdictions and are at risk of losing recognition in other jurisdictions. New Zealand practitioners cannot obtain registration from the Australian Securities and Investments Commission. This means that New Zealand practitioners cannot be the engagement partner for Australian company audits. Without regulatory change, New Zealand is also at risk of losing recognition from the European Union. This would mean that New Zealand practitioners would not be able to audit financial statements prepared by New Zealand entities listed on European exchanges. To summarise, self-regulation needs to be replaced for Single Economic Market, international recognition, and international credibility reasons.

Standards setting

At present, the responsibility for standards setting is divided between NZICA and the ASRB as follows:

  • NZICA recommends draft financial reporting standards for approval to the ASRB:

  • the ASRB decides whether to approve financial reporting standards submitted to it by NZICA or any other person or body:

  • it is unclear which body is responsible for financial reporting standards strategy. In practice, NZICA and the ASRB have both made strategic decisions, usually together:

  • no legislation, other than audits carried out under the Public Audit Act 2001, explicitly authorises any person or body to set auditing and assurance standards. However, it is implicit that NZICA has this responsibility in relation to its members because the ICANZ Act requires it to regulate auditors.

Part 4 of the Bill proposes that all financial reporting and auditing and assurance standards setting be consolidated within a reconstituted ASRB, to be called the External Reporting Board. These changes are needed for the following reasons:

  • to promote strategic policy coherence and co-ordinated service delivery:

  • to make New Zealand’s system consistent with the international norm that standards setting should be seen to be independent of the interests of the profession:

  • to meet the concern expressed by NZICA that it is finding it increasingly difficult to discharge its standards-related responsibilities, mainly due to resource constraints:

  • to deal with uncertainty about whether the auditing and assurance standards approved by NZICA apply to overseas-qualified auditors who are not members of NZICA.

It is intended that the Bill will be divided at the committee of the whole House stage into separate Bills as follows:

  • Parts 1 to 3 and Schedule 1 will become the Auditors Bill:

  • Part 4 and Schedule 2 will become a Financial Reporting Amendment Bill.

Regulatory impact statement

The Ministry of Economic Development produced regulatory impact statements dated 5 October 2009, 3 March 2010, April 2010, and 9 July 2010 to help inform the main policy decisions taken by the government relating to the contents of this Bill.

Copies of these regulatory impact statements can be found at—

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 relates to commencement. The preliminary provisions and the regulation-making powers come into force on the day after the Bill receives the Royal assent. The rest of the Bill comes into force (not later than 1 July 2012) by Order in Council. These provisions will come into force after arrangements have been made to prepare for the new system for regulating auditors, after arrangements have been made to prepare for the new standard-setting process under the Financial Reporting Act 1993, and after regulations have been made to give effect to some parts of the Bill.

Part 1
Preliminary and key provisions

Preliminary provisions

Clause 3 is the purpose clause. The purpose of Parts 1 to 3 is to regulate auditors who carry out audits in respect of issuers and to establish an independent oversight system in order to—

  • promote, in respect of issuer audits, quality, expertise, and integrity in the profession of auditors; and

  • promote the recognition of the professional status of New Zealand auditors in overseas jurisdictions.

Clause 4 contains an overview of Parts 1 to 3.

Clause 5 relates to the Financial Markets Authority's functions under Parts 1 to 3, including—

  • to issue licences to overseas auditors:

  • to prescribe certain licensing matters:

  • to grant accreditation to persons as accredited bodies and to monitor those accredited bodies:

  • to conduct quality reviews and investigations.

The Financial Markets Authority (FMA) is to be established under a separate Bill. Clause 6(2) provides that until the FMA is established, references to the FMA must be read as references to Securities Commission.

Clause 6 relates to interpretation.

Clause 7 provides that Parts 1 to 3 bind the Crown.

Key provisions

Clause 8 contains the fundamental requirement for a person that acts as an auditor in respect of an issuer audit to hold a licence that authorises the person to act (being a licence that is recorded in the register of licensed auditors (the register)). A person who breaches this requirement commits an offence and is liable to a fine not exceeding $50,000.

The clause also clarifies the application of the requirement in circumstances where an audit firm is acting.

Clause 9 prohibits a person from holding out that the person is entitled, qualified, able, or willing to act as the auditor in respect of an issuer audit unless the person is authorised by a licence or otherwise to do so. A person who breaches this requirement commits an offence and is liable to a fine not exceeding $50,000.

Part 2
Licences, registration, accreditation, and role of FMA

Subpart 1Licences

Issue of licences by accredited bodies

Clause 10 provides for accredited bodies (for example, the Institute of Chartered Accountants of New Zealand (the Institute)) to issue a licence to a person if the person—

  • meets the minimum standards for the issue of a licence that are prescribed by the FMA; and

  • is otherwise a fit and proper person to hold a licence.

Issue of licences by FMA to overseas auditors

Clause 11 provides for the FMA to issue a licence to an overseas auditor if—

  • the auditor meets the minimum standards for the issue of a licence that are prescribed by the FMA; and

  • the auditor is required to comply with overseas ongoing competence requirements and overseas professional and ethical standards that are equivalent to, or as satisfactory as, the New Zealand requirements and standards; and

  • the auditor's practice is subject to quality review arrangements; and

  • the auditor is otherwise a fit and proper person to hold a licence.

Clause 12 requires an overseas auditor to notify the FMA of certain relevant changes (for example, a change in the circumstances of the person that results in the person no longer meeting the prescribed minimum standards).

Licence details to be sent to Registrar

Clause 13 requires an accredited body or the FMA to send to the Registrar of Companies (who will maintain the register) notification of the issue of licences.

Conditions

Clauses 14 and 15 provide for an accredited body or the FMA to issue a licence subject to conditions (being conditions prescribed under subpart 2 as conditions that may, or must, be imposed, and conditions that specify the kinds of issuer audits in respect of which the person is authorised to act).

Duration of licence

Clause 16 provides that a licence must specify the date of its expiry (being not later than 5 years after the date of the issue of the licence).

Ongoing competence requirements

Clauses 17 and 18 provide for—

  • persons issued with a licence to complete competence programmes to maintain their ongoing competence; and

  • the consequences of failing to satisfy the requirements of the competence programme (for example, changing the conditions of the licence or suspension of the licence).

Cancellation and suspension of licences

Clauses 19 and 20 provide for the cancellation or suspension of the licence of a person in various circumstances (for example, if the person no longer satisfies the prescribed minimum standards for the issue of a licence, the person has failed to comply with a condition of the licence, or the person has failed to comply with various obligations under the Bill).

Clause 21 provides for a licensed auditor to have an opportunity to make submissions to the relevant body before his or her licence is suspended or cancelled.

Clause 22 allows the FMA to authorise a person to continue to act in respect of an issuer audit despite the cancellation or suspension of their licence.

Appeals in respect of licensing and related matters

Clause 23 provides for appeals to a District Court in respect of licensing and certain other decisions of an accredited body or the FMA.

Subpart 2FMA may prescribe licensing and other matters

This subpart provides for the FMA to prescribe the following matters in respect of the licensing system established by the Bill:

  • the minimum standards for licensing:

  • the conditions to which licences must, or may, be subject:

  • the requirements for ongoing competence:

  • the minimum standards for accreditation that a person must meet in order to be granted accreditation by the FMA under subpart 4:

  • the procedure that accredited bodies must follow when performing regulatory functions:

  • various transitional arrangements.

Clause 26 requires the FMA to be guided by the following principles when prescribing matters:

  • the matters must be necessary or desirable to promote quality, expertise, and integrity in the profession of auditors or to promote the recognition of the professional status of New Zealand auditors in overseas jurisdictions (or for incidental or consequential matters); and

  • the matters should not unnecessarily restrict the licensing of auditors; and

  • the matters should not impose undue costs on auditors or on issuers.

Clause 27 requires the FMA to consult on proposed notices promulgated under the subpart.

Clause 28 provides that each notice published under the subpart is a regulation for the purposes of the Regulations (Disallowance) Act 1989 but is not a regulation for the purposes of the Acts and Regulations Publication Act 1989.

The FMA must publish notices on its Internet site, make copies of them available for inspection, and allow copies to be obtained for a reasonable fee. This is considered more appropriate than publication in the Statutory Regulations series, given that the notices contain technical matters relevant to auditors, rather than matters that are of general application or interest to the public. Publication of the notices on the FMA's Internet site, in particular, will ensure that the notices are readily available to all persons that are affected by the notices and to the public.

Subpart 3Register of licensed auditors

This subpart provides for a register of licensed auditors that will be maintained by the Registrar of Companies. The register will contain various information about licensed auditors and the status and relevant history of their licences.

The purpose of the register is—

  • to enable any person to—

    • determine whether a person is a licensed auditor and, if so, the status and relevant history of the person's licence; and

    • choose a suitable person to carry out an issuer audit; and

    • know which licensed auditors have been disciplined within the last 7 years; and

  • to assist any person in the exercise of the person’s powers or the performance of the person’s functions under the Bill or any other enactment.

The subpart—

  • requires licensed auditors, accredited bodies, and the FMA to notify the Registrar of certain relevant changes within 10 working days of the licensed auditor, the accredited body, or the FMA (as the case may be) first becoming aware of the change (for example, a change in the status or relevant history of a licence):

  • requires accredited bodies and the FMA to send an annual confirmation to the Registrar that either confirms that the information supplied to the Registrar in respect of the licences issued by the accredited body or the FMA is correct or contains updated information.

The subpart provides for searches of the register (including search criteria and search purposes).

Subpart 4Accreditation

This subpart provides for the accreditation of accredited bodies. Accredited bodies may issue licences and carry out various other regulatory functions for the purposes of the Bill.

Clause 39 provides that the FMA may grant accreditation to a person if the FMA is satisfied that the person—

  • will implement and maintain audit regulatory systems that are adequate and effective; and

  • meets the minimum standards for the grant of accreditation prescribed under subpart 2; and

  • is a fit and proper person to perform regulatory functions for the purposes of the Bill.

Clause 40 provides that accreditation may be granted subject to conditions, including—

  • conditions relating to the procedure that an accredited body must follow when performing regulatory functions:

  • conditions to ensure that the accredited body's audit regulatory systems are adequate and effective.

Clause 41 provides that the Institute must be treated as having been granted accreditation. This does not prevent the FMA from imposing any conditions of accreditation or exercising any other powers in respect of the accreditation.

Clause 42 requires every accredited body to supply to the FMA an annual report that includes information relating to its performance in carrying out regulatory functions for the purposes of the Bill and information relating to any material changes to its audit regulatory systems.

Clauses 43 and 44 require the FMA to publish,—

  • each year, a plan relating to its intentions in relation to auditor regulation and oversight under the Bill; and

  • its policies in relation to how it acts, or proposes to act, in determining applications for accreditation and in imposing conditions of accreditation.

Clauses 45 and 46 require the FMA to monitor the audit regulatory systems of each accredited body in order to determine the extent to which those systems are adequate and effective (and to report on those systems).

Clauses 47 to 49 provide for the FMA to give directions to an accredited body if—

  • its audit regulatory systems are not adequate and effective; or

  • the adequacy or effectiveness of the audit regulatory systems can be improved in order to better meet the purposes of the Bill; or

  • its audit regulatory systems are inconsistent with the FMA's plan under clause 43.

The directions may require the accredited body to amend its audit regulation systems to effectively address the matters that caused the FMA to give the directions. An accredited body that fails to comply with a direction commits an offence and is liable to a fine not exceeding $50,000.

Clauses 50 and 51 allow the FMA to suspend or cancel accreditation or to censure an accredited body in certain circumstances, including where—

  • the accredited body has failed to comply with a condition of its accreditation, to supply an annual report under clause 42, or to comply with a direction; or

  • the audit regulatory systems of an accredited body are not adequate and effective.

Clause 52 provides that if the accreditation of a body is cancelled or suspended, each licence issued by the body is treated as cancelled or suspended (unless the FMA orders otherwise). The FMA may also authorise a person whose licence is suspended or cancelled under the clause to act, or continue to act, in respect of an issuer audit under clause 22.

Clause 53 provides for an accredited body to have an opportunity to make submissions to the FMA before various decisions are made under the subpart.

Clause 54 provides for appeals to the High Court against decisions of the FMA under the subpart.

Clause 55 provides that certain provisions of the Institute of Chartered Accountants of New Zealand Act 1996 apply to accredited bodies that are not the Institute (for example, provisions relating to discipline).

Subpart 5Quality review

Clause 56 requires the FMA to ensure that a review is carried out of the systems, policies, and procedures of audit firms that have at least 1 licensed auditor and of licensed auditors who are not partners or employees of an audit firm. A review must be carried out at least once in every 4-year period. The purpose of the review is to ensure that issuer audits are carried out by the audit firm or licensed auditor in accordance with—

  • the requirements imposed by or under the Bill and other enactments; and

  • auditing and assurance standards issued by the Board; and

  • professional and ethical standards issued by the Board.

Clause 57

  • allows the FMA to arrange for the review to be carried out by an accredited body or any other suitably qualified person; and

  • requires the FMA to take reasonable steps to ensure that there is no conflict of interest in respect of the individuals who carry out the quality review on its behalf.

Clause 58 provides for restrictions on the quality review requirements in relation to the Auditor-General.

Clause 59 sets out the matters that a quality review must include.

Clause 60 creates an offence of hindering, obstructing, or delaying the FMA in carrying out a quality review (with a maximum fine of $40,000 in the case of an individual and $100,000 in the case of a body corporate). The provision applies to partners or directors of the audit firm, the licensed auditor, employees and contractors of the audit firm or licensed auditor, and every issuer in relation to which the audit firm or licensed auditor has carried out, or is carrying out, an issuer audit.

Clause 61 provides for the FMA to issue directions if it is satisfied on reasonable grounds that the systems, policies, and procedures of the audit firm or licensed auditor are insufficient. The directions can require the audit firm or the licensed auditor to amend the systems, policies, and procedures to effectively address the matters that caused the FMA to give the directions. The FMA can also give a direction requiring failures in respect of a particular issuer audit to be mitigated or remedied.

Clause 62 provides that a failure to comply with a direction is an offence (with a maximum fine of $25,000) and may result in the cancellation or suspension of a licence.

Clause 63 provides for miscellaneous matters relating to directions and orders.

Clause 64 requires the FMA to prepare a report on each quality review and to publish a copy of it on an Internet site maintained by or on behalf of the FMA.

Subpart 6Investigations by FMA

Clause 65 allows the FMA to start or take over an investigation or investigate in conjunction with an accredited body if the FMA is satisfied that it is in the public interest to do so. However, the FMA may not act in the case of a member of an accredited body unless it is satisfied that the matter is not being investigated promptly or otherwise in a reasonable manner by, or on behalf of, the accredited body or the accredited body has asked the FMA to act.

Clause 66 provides that,—

  • if the FMA starts, or takes over, an investigation in respect of a member of an accredited body, the body may investigate or take action against the auditor in respect of the same matter only with the FMA's written approval; but

  • the FMA may not act in respect of conduct that is, or has been, the subject of proceedings before a disciplinary body.

Clause 67 requires an accredited body to give all reasonable assistance to the FMA to enable the investigation to be carried out. An accredited body commits an offence (with a maximum fine of $100,000) if it fails to give the assistance or otherwise hinders, obstructs, or delays the FMA in carrying out an investigation.

Clause 68 allows the FMA to make various orders if it is satisfied that a licensed auditor has failed to comply with various requirements, including cancelling or suspending his or her licence. The FMA's decision can be appealed under clause 23.

Clause 69 provides for various miscellaneous matters relating to the orders.

Subpart 7FMA may take over and perform regulatory functions

This subpart allows the FMA to take over and perform a regulatory function (in whole or in part), or perform a regulatory function (in whole or in part) in conjunction with the accredited body, if—

  • the accredited body asks the FMA to act; and

  • the FMA is satisfied on reasonable grounds that it is necessary or desirable for the FMA to act in that manner in order to promote the recognition of the professional status of New Zealand auditors in overseas jurisdictions.

Part 3
Amendments to other Acts, regulations, transitional provisions, and other miscellaneous matters

Subpart 1Amendments to other Acts

This subpart and Schedule 1 provide for amendments to other enactments.

Subpart 2Regulations and levies

Clause 73 provides for regulations (for example, regulations relating to fees, forms, and the operation of the register).

Clause 74 provides for levies to recover the estimated costs of exercising or performing the FMA's functions, powers, and duties under Parts 1 to 3. Levies may be imposed on licensed auditors, the Auditor-General, and issuers.

Subpart 3Transitional provisions

Clause 75 provides for persons to be treated as holding a licence issued by the Institute if,—

  • immediately before commencement, the person is a chartered accountant who has, at any time within the 2-year period before that commencement, acted as the auditor in respect of an issuer audit; and

  • satisfies the transitional requirements prescribed under subpart 2 of Part 2.

Clause 76 provides for persons to be treated as holding a licence issued by the FMA if,—

  • immediately before commencement, the person is an overseas auditor who has, at any time within the 2-year period before that commencement, acted as the auditor in respect of an issuer audit; and

  • satisfies the transitional requirements prescribed under subpart 2 of Part 2.

The licences have a term of 2 years but may expire earlier if, for example, the licence holder does not supply registration information to the Registrar.

Clause 77 provides that these provisions do not prevent the Institute or the FMA from exercising any powers in respect of the licences under the Bill.

Subpart 4Miscellaneous provisions

Clause 78 provides that clauses 8 and 9 do not apply to the Auditor-General. In addition, the definition of issuer audit in clause 6 does not include audits carried out under the Public Audit Act 2001. Accordingly, the Auditor-General and employees and other persons who act under the Public Audit Act 2001 are not required to hold a licence in respect of audits under that Act.

Clause 79 provide that the Commission has a power to amend or revoke orders, directions, or notices given under the Bill.

Clause 80 provides for accredited bodies to share information with the FMA.

Clause 81 provides for notice and service of documents under the Bill.

Clause 82 provides for an offence of making false declarations or representations for the purposes of the Bill (with a penalty of a fine not exceeding $50,000).

Part 4
Amendments to Financial Reporting Act 1993

This Part amends the Financial Reporting Act 1993 (the Act). The main changes are as follows:

  • the External Reporting Board (the Board) is continued under the Act. The Board is the same body as the Accounting Standards Review Board that was originally established by the Act:

  • the arrangements for setting financial reporting standards have changed. Currently, the Board reviews and, if it thinks fit, approves financial reporting standards submitted to it for approval by the Institute or any other organisation. Under this Part, these arrangements are changed so that it is the Board that will prepare, consult on, and issue financial reporting standards. Existing financial reporting standards will, however, continue in force:

  • the Board will have a number of new functions, including—

    • preparing and issuing auditing and assurance standards; and

    • developing and implementing the overall strategy for the issue of financial reporting standards and auditing and assurance standards (including a strategy for tiers of financial reporting); and

    • preparing and issuing professional and ethical standards that will govern the professional conduct of licensed auditors; and

    • liaising with international or national organisations that exercise functions that correspond with, or are similar to, those conferred on the Board:

  • the membership of the Board must be not more than 9 members (rather than not more than 7 members) and the qualifications for membership include an express mention of knowledge of, or experience in, auditing:

  • clause 86 amends section 15 (which requires the financial statements of issuers and the group financial statements of issuers to be audited) to require these audits to be carried out by a licensed auditor (unless the issuer is a public entity under the Public Audit Act 2001):

  • the new auditing and assurance standards are given the force of law. New section 15A (inserted by clause 87) provides that if, under section 15 of the Act or any other Act (other than the Public Audit Act 2001 or an Act that is prescribed by regulations), the financial statements of a reporting entity or group financial statements of a group are required to be audited, the auditor must comply with the applicable auditing and assurance standards. An auditor that fails, without reasonable excuse, to comply commits an offence and is liable to a fine not exceeding $30,000:

  • new section 28(2) (inserted by clause 88) allows a financial reporting standard, an amendment, or a determination to be treated as taking effect on the date of the notification of the issue of the standard, amendment, or determination in the Gazette (rather than 28th day after notification). This is to facilitate the ability of certain reporting entities that elect to take advantage of the provision to comply with international financial reporting or accounting standards:

  • new section 29 (inserted by clause 88) provides for the new auditing and assurance standards. Those standards may have general or specific application and differ according to differences in time or circumstance:

  • new sections 34 to 34B (inserted by clause 88) provide for the development of a strategy relating to tiers of financial reporting. The tiers of financial reporting will involve imposing different financial reporting requirements in respect of different classes of reporting entities and other entities in order to ensure that the requirements that apply are appropriate. The strategy must be submitted to the Minister for approval. After it is approved, the Board must take reasonable steps to implement the strategy:

  • new sections 42C and 42D (inserted by clause 91) provide for levies to be imposed for the purpose of funding a portion of the costs of the exercise and performance of the Board's functions, powers, and duties under the Act and recovering the cost of collecting the levies. Levies may be imposed on chartered accountants, licensed auditors, the Institute and other accredited bodies, the Auditor-General, issuers, and other persons who are in the business of offering accounting or auditing services to the public in New Zealand.

The Act currently provides that standards and certain other determinations are subject to disallowance under the Regulations (Disallowance) Act 1989. However, those standards and determinations are not regulations for the purposes of the Acts and Regulations Publication Act 1989. The Act currently provides for public notice of standards in the Gazette and other publications that the Board considers appropriate. This is considered more appropriate than publication in the Statutory Regulations series, given that the standards contain highly technical and complex matters relevant to accountants and auditors, rather than obligations that are of general application or interest to the public. Publication of the standards in the manner that the Board considers appropriate, in particular, ensures that the standards are readily available to all persons that are affected by the standards. This position has been carried over under new section 32.

Various consequential changes have been made to the provisions of the Act dealing with consultation, revocation of standards, public notice of standards, disallowance, and certificates to reflect—

  • the new standard setting process; and

  • the new function of issuing auditing and assurance standards and professional and ethical standards.

Clause 94 amends the Public Audit Act 2001 to require audits of issuers carried out under that Act to, at a minimum, be carried out in accordance with auditing and assurance standards issued by the Board.

Clauses 95 to 97 provide for transitional matters, including—

  • that financial standards approved under the Act continue in effect; and

  • that further consultation is not required if the Board adopts auditing and assurance standards or professional and ethical standards that have previously been issued or approved by the Institute; and

  • provisions that relate to the chairperson and members of the Accounting Standards Review Board.

Schedule 2 contains consequential amendments relating to the changes to the Act.