CA ANZ, CPA raise concerns with bill to establish External Reporting Australia

Legislation to establish a new standards-setting body must include rigorous and transparent due process requirements and ensure that the body has an explicit role in influencing the development of international standards adopted in Australia, professional bodies have told the government.

The Financial Reporting System Reform Bill 2026, if passed, would create a new body, External Reporting Australia, by consolidating the Financial Reporting Council (FRC), the Australian Accounting Standards Board, and the Auditing and Assurance Standards Board into a single entity. The new body would be responsible for performing core financial reporting and sustainability standard-setting functions.

The Financial Reporting System Reform Bill was referred to the Senate Economics Legislation Committee for inquiry last month.

In a joint submission, CA ANZ and CPA Australia have called for various changes to the bill to ensure it meets its objectives and preserves the strengths of the existing framework.

"We have concerns about some aspects of the bill that we believe should be addressed to ensure the effectiveness and integrity of the framework is maintained," the major accounting bodies said.

Under the bill, a governing council would be established as the accountable authority of External Reporting Australia, with the power to create a number of standard-setting boards through legislative instruments.

The bodies have called for more rigorous and transparent due process requirements to be embedded in the legislation governing how these boards operate, such as the manner in which the board is to perform its functions or exercise its powers.

The bodies want to see inclusions such as a requirement for a technical work plan, which would include agenda-setting and project prioritisation, criteria for determining which projects should be standard-setting, and consultation requirements.

The submission said there should also be transparency requirements around the publication of meeting papers and decisions, requirements for effects analyses, requirements in respect of exceptions to procedural requirements, requirements for how internal engagement and adoption decisions are made and how dissenting views are recorded and addressed.

The professional bodies also want the legislation to specify a minimum board size to safeguard technical capability and diversity of views. The submission proposed that each board have at least eight members.

CPA and CA ANZ have also emphasised the need for the legislation to provide clarity and safeguards around governing council intervention powers and mandatory consultation in the development of standards.

Ensuring an explicit role for External Reporting Australia in influencing the development of international standards adopted in Australia is also important, they added.

The professional bodies also want to see an independent post-implementation review of External Reporting Australia, its role, functions, and operations, two years and five years after inception.

The submission warned the government that the proposed reforms "represent a significant structural change to a system that is widely regarded as working well".

"Treasury explicitly stated in its 2025 consultation paper that, for the avoidance of doubt, it was not seeking views on the merits of the policy decision," it said.

"Given that the policy decision to merge the existing bodies is confirmed, and the relative merits, risks and trade‑offs of this change — including consideration of alternative models — have not been subject to a comprehensive assessment through the consultation process, this places a premium on ensuring that the legislative design is robust, proportionate and appropriately safeguarded."