Treasury opens consultation on External Reporting Australia draft legislation

Treasury has opened consultation on draft legislation to combine the Australian Accounting Standards Board, Auditing and Assurance Standards Board and the Financial Reporting Council into a single body.

The name of the merged body would be ‘External Reporting Australia’ and was originally proposed by the government back in 2023.

In November 2023, Treasurer Jim Chalmers revealed the government would look to restructure the nation’s financial reporting bodies to make them more “efficient, effective and fit for purpose” as well as assisting with the implementation of climate and sustainability standards.

Treasury opened the long-awaited consultation period last Thursday (30 October) to industry feedback to help refine the draft legislation before it was introduced to parliament, and it was set to end on 27 November.

According to the consultation brief, the draft legislation of the External Reporting Australia body would set up the body’s structure, governance, administrative and procedural arrangements, dedicated technical boards to make standards for accounting, auditing, assurance and sustainability, transitional arrangements, and other functions.

Treasury noted that in conjunction with the consultation now open on the draft legislation, there were plans to organise an in-person roundtable discussion in mid-November.

On this announcement, CPA Australia shared its support for the body merger in the aim of achieving a more efficient and effective reporting and assurance system.

Ram Subramanian, CPA financial reporting lead, said CPA welcomed the proposal to remove the current function of providing strategic policy advice and reports on audit quality and any mandatory investigation powers – a role already carried out by ASIC to a great extent.

“The devil is going to be in the detail of the legislative instruments that will create the new technical standard setting boards for financial reporting, sustainability reporting and audit and assurance,” he said.

“The proposed governing council appears to be vested with too much power presently. There needs to be adequate oversight of the governing council’s decisions around matters such as the size of the standard-setting boards and the role and responsibilities of the board chairs.”

Subramanian added that it was unclear how appropriate checks and balances would be in place when there was bifurcation of the technical activity that would occur within the new standard-setting boards, while overall responsibility would be with the governing council.

“Many of the attributes within the current structure work well and should be absorbed into the new model. As an adopter of international standards, it is critical the new structure has the ability to represent our economic interests at the international-setting table,” Subramanian said.

“We welcome the proposals for the establishment of a new standard-setting board with responsibility for sustainability reporting standards. This is something CPA Australia has long advocated for.”