Australia

Member Organizations

Member Organization Associate Other PAOs

  Chartered Accountants Australia and New Zealand (Formerly recognized as The Institute of Chartered Accountants in Australia)
  CPA Australia
  Institute of Public Accountants

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    Companies operating in Australia are required by the Corporations Act 2001 (‘the Act’) to prepare and submit annual financial reports to the Australian Securities and Investments Commission (ASIC) which is the country’s corporate, financial markets, and financial services regulator.

    The Act requires the following entities to prepare financial reports: (i) all disclosing entities; (ii) public companies; (iii) companies limited by guarantee (except small companies limited by guarantee); (iv) all large proprietary companies that are not disclosing entities; (v) all registered managed investment schemes; and (vi) small proprietary companies that are foreign-controlled. Financial reports lodged under the Act are required to be prepared in accordance with Australian accounting standards and give a ‘true and fair view’.

    The Australian Accounting Standards Board (AASB), an independent Australian Government agency, sets the accounting standards to be applied in the jurisdiction through an extensive standard-setting process, which includes identifying technical issues as related to the Australian context, research and consultation from stakeholders, and then issuing the standard. There are two tiers of reporting requirements for preparing general purpose financial statements: (i) Tier 1: Australian Accounting Standards (AAS) and (ii) Tier 2: Australian Accounting Standards—Reduced Disclosure requirements.

    The IFRS are incorporated into Tier 1 of Australian Accounting Standards such that companies complying with Tier 1 AAS will be in compliance with IFRS. The following entities must apply Tier 1 requirements: (i) for-profit entities in the private sector that have public accountability (including pension funds); and (ii) Australian Government and state, territory, and local governments.

    All other companies who lodge may apply the Tier 2 requirements which comprise the recognition, measurement and presentation requirements of Tier 1 (and therefore, IFRS) while substantially reducing disclosures related to those requirements. The principles for determining the reduced disclosures are based on the principles used for determining the disclosures prescribed in the IFRS for Small- and Medium-sized Entities (SMEs).

    However lodging entities who are not reporting entities (as defined by Statement of Accounting Concepts 1 ‘The Definition of the Reporting Entity’ can choose to prepare ‘special purpose financial reports’, rather than ‘general purpose financial reports’. Only five accounting standards apply to these types of entities, although ASIC expects that they will apply the full recognition and measurement requirements of IFRS.

    The Act also requires lodged annual financial reports to be audited. In some circumstances, companies may be exempt from financial reporting. ASIC requires auditors and companies to apply standards issued by the Auditing and Assurance Standards Board (AUASB), an independent, statutory agency of the Australian Government, responsible for developing, issuing and maintaining auditing and assurance standards.

    Since April 2006, the AUASB has released Australian Auditing Standards (ASA) based on the ISA issued by the International Auditing and Assurance Standards Board (IAASB), in line with strategic direction from the Financial Reporting Council (FRC). The degree to which the AUASB may make amendments to IAASB standards varies issue-by-issue and only where there is a ‘compelling reason’ such as to meet local legislative requirements.

    The FRC is a statutory body under the ASIC Act 2001 and is responsible for overseeing the effectiveness of the financial reporting framework in Australia. Its key functions include the oversight of the accounting and auditing standards setting processes for the public and private sectors, providing strategic advice in relation to the quality of audits conducted by Australian auditors, and advising the government on these and related matters to the extent that they affect the financial reporting framework in Australia.

  • Regulation of Accountancy Profession

    The accountancy profession in Australia is regulated by the Corporations Act 2001 and the Australian Securities and Investment Commission (ASIC) Act 2001. The Corporations Act 2001 specifies the two professional accountancy titles—registered company auditor (RCA) and qualified accountant—as well as the three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia and New Zealand (CA ANZ), and the Institute of Public Accountants (IPA)—that regulate professionals subject to the oversight and regulation of the ASIC.

    In accordance with the ASIC Act 2001, ASIC’s functions are to: (i) register RCAs who meet the initial professional development requirements outlined in the Corporations Act 2001; (ii) set continuing professional development requirements (CPD) for RCAs; (iii) conduct quality assurance (QA) reviews for all audits to monitor compliance with auditing standards set by the Australian Auditing and Assurance Standards Board (AUASB); and (iv) investigate breaches of law and issue related sanctions. Additionally, in regard to the investigation and discipline of RCAs, ASIC may refer a disciplinary matter to the Companies Auditors Disciplinary Board (CADB). The CADB was established by ASIC Act 2001 as an independent statutory body with the primary role of serving as a disciplinary tribunal. The CADB considers applications for the cancellation or suspension of the registration of auditors put forth by the ASIC after its investigation. The CADB itself has no authority to initiate an investigation into the conduct of RCAs.

    RCAs may audit the financial statements of companies that are required to have an audit under the Corporations Act 2001. ASIC is responsible for registering RCAs who meet the requirements as outlined in Section 1280 of the Corporations Act 2001, which are to: (i) hold a prescribed tertiary accounting qualification of at least three years that includes an audit component and two years of commercial law; (ii) have at least 3000 hours work in auditing in the five years immediately before the date of application, including at least 750 hours supervising audits of companies; (iii) meet a fit and proper person test; (iv) prepare a capability report; and (v) hold appropriate professional indemnity insurance. In addition, ASIC has the discretion to allow individuals to register if they do not meet the prescribed practical experience requirements but have the equivalent of the prescribed practical experience.

    According to the Act, the following designations from the PAOs meet the tertiary accounting qualification requirement to become an RCA:

    • Chartered Accountant (CA) and Fellow CA (FCA) from CA ANZ;
    • Certified Public Accountant (CPA) and Fellow CPA (FCPA) from CPA Australia; and
    • Member Institute of Public Accountants (MIPA) and Fellow IPA (FIPA) from IPA.

    Alternatively, individuals can apply for registration based on their qualifications and demonstration of the audit skills contained in the Auditing Competency Standard for Registered Company Auditors (2015), which was jointly developed by PAO and ASIC representatives and then approved by ASIC. The standard incorporates requirements, tasks, and activities from the revised IES. ASIC requires RCAs to complete at least 120 hours of CPD activities over each three-year period.

    Qualified accountants may certify that an individual (either a natural person or a legal person) have a prescribed net asset or gross income level whereby the individual is exempt from receiving a regulated disclosure document such as a prospectus or product disclosure statement when buying securities or other financial products. A qualified accountant is defined in the Act as a person meeting the criteria in ASIC’s Regulatory Guide 154. According to ASIC, an individual may become a qualified accountant if they belong to one of the following PAOs at the declared membership classification and complies with the PAO’s CPD requirements:

    • CA and FCA from CA ANZ;
    • CPA and FCPA from CPA Australia; and
    • Associate Institute of Public Accountants (AIPA), MIPA and FIPA from IPA.

    Finally, as members of the Australian PAOs, both RCAs and qualified accountants are subject to their educational requirements leading to their respective designations and other regulations, in addition to those of ASIC described above. All the PAOs require their members to adhere to the Accounting Professional & Ethical Standard (APES) 110 Code of Ethics for Professional Accountants, which is based on the International Code of Ethics for Professional Accountants as well as Australian Accounting Standards which incorporate the IFRS. The APES is set by the Accounting Professional & Ethical Standards Board, an independent body that was established in 2006 through a joint initiative by CPA Australia and CA ANZ while the AAS are set by the Australian Accounting Standards Board, an Australian government agency. Finally, all PAOs also maintain quality assurance and investigative and disciplinary systems for their members.

  • Audit Oversight Arrangements

    The Australian Securities and Investment Commission (ASIC) is both the securities regulator and audit oversight body in Australia. Under the ASIC Act 2001, ASIC is responsible for promoting confident and informed markets and investors. ASIC’s authority for audit regulation is encompassed within its general authority and powers as a securities regulator under that legislation. In particular, ASIC’s functions are to: (i) register Registered Company Auditors (RCAs) who meet the initial professional development requirements outlined in the Corporations Act 2001; (ii) set continuing professional development requirements for RCAs; (iii) conduct quality assurance (QA) reviews (referred to as an inspection and surveillance program) for all audits to monitor compliance with auditing standards set by the Australian Auditing and Assurance Standards Board (AUASB); and (iv) investigate breaches of law and issue related sanctions.

    ASIC is a member of the International Forum of Independent Audit Regulators (IFIAR).

    Additionally, in regard to the investigation and discipline of RCAs, ASIC may refer a disciplinary matter to the Companies Auditors Disciplinary Board (CADB). The CADB was established by ASIC Act 2001 as an independent statutory body with the primary role of serving as a disciplinary tribunal. The CADB considers applications for the cancellation or suspension of the registration of auditors put forth by ASIC after its investigation. The CADB itself has no authority to initiate an investigation into the conduct of RCAs.

  • Professional Accountancy Organizations

    Australia has three professional accountancy organizations (PAOs) recognized in legislation.

    All three PAOs may set educational requirements that individuals must meet to earn and maintain their respective designations that lead to legally protected accountancy titles; require members to adhere to professional standards set by the Accounting Professional & Ethical Standards Board, the Australian Accounting Standards Board, and the Australian Auditing and Assurance Standards Board; maintain quality assurance review systems; and investigate and discipline members for misconduct and breach of standards. All three bodies in Australia are members of IFAC and the Confederation of Asian and Pacific Accountants (CAPA). CPA Australia and CA ANZ are Associate Members of the ASEAN Federation of Accountants (AFA).

    Chartered Accountants Australia and New Zealand (CA ANZ)

    The Institute of Chartered Accountants in Australia (ICAA) (founded in 1928) and the New Zealand Institute of Chartered Accountants (NZICA) (founded in 1978) amalgamated to become one body—Chartered Accountants Australia and New Zealand (CA ANZ)—effective December 31, 2014. CA ANZ has members in both Australia and New Zealand and its vision is to empower members to become leaders and shapers of finance and business in Australia and New Zealand. CA ANZ’s key strategic objectives are to support its members and the profession to maintain their relevance and skills at a global level.

    CPA Australia

    Founded in 1886, CPA Australia aims to provide members with education, training, technical support and advocacy as a part of its core services. CPA Australia also works with its members, and local and international bodies to represent the views and concerns of the profession to government, regulators, industries, academia and the general public. CPA Australia offers three levels of membership including Associate (ASA), CPA, and Fellow (FCPA).

    Institute of Public Accountants (IPA)

    Founded in 1923, the Institute of Public Accountants (IPA) represents more than 35,000 members and students working in industry, commerce, government, academia and professional practice. The IPA supports and advocates for its members and the profession, especially those operating in the small and medium-sized entities sector of the economy.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    Under the Australian Securities and Investments Commission Act 2001, the Australian Securities and Investments Commission (ASIC) is authorized to carry out quality assurance (QA) reviews for all audits of all entities that prepare financial reports under the Corporations Act 2001. The ASIC reports that audit firms are inspected on a continuous basis. One audit engagement file is inspected at each Big 4 firm each month. Mid-tier firm audit files may be reviewed every quarter. Small firms that only audit one or two small listed companies, may be reviewed once every 12 years. ASIC’s last public audit inspection report was issued in December 2015 covering audit inspections substantially completed in the 18 months to June 30, 2015. Overall, the ASIC’s review system appears to align with SMO 1 components.

    Additionally, there are three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia & New Zealand (CAANZ), and the Institute of Public Accountants (IPA)—that operate QA review systems for their respective members.

    CPA Australia implements a Quality Review Program to ensure that its members in public practice maintain high professional standards. CAANZ has a Quality and Practice Review Program operating under its Australian Quality Review Committee while IPA members in public practice are subject to a Professional Practice Quality Assurance Review.

    All PAOs report that they have assessed their QA review systems against the revised SMO 1 requirements and concluded that their respective systems fulfill the requirements.

    Current Status: Adopted

  • International Education Standards

    Educational requirements for the two protected professional accountancy titles in Australia are governed by the Corporations Act 2001 and the Australian Securities and Investment Commission (ASIC) Act 2001. The ASIC and three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia & New Zealand (CAANZ), and the Institute of Public Accountants (IPA)—also have a role in setting and implementing initial and continuing professional development requirements (IPD and CPD, respectively).

    Section 1280 of the Corporations Act 2001 prescribes the entry requirements for a registered company auditor (RCA) which include: holding a recognized tertiary accounting qualification from one of the PAOs; practical experience; and passing a competency test.

    According to the Corporations Act 2001, the following designations from the PAOs meet the tertiary accounting qualification requirement to become an RCA:

    • Chartered Accountant (CA) and Fellow CA (FCA) from CAANZ;
    • Certified Public Accountant (CPA) and Fellow CPA (FCPA) from CPA Australia; and
    • Member Institute of Public Accountants (MIPA) and Fellow IPA (FIPA) from IPA.

    To earn and use any of the above qualifications, individuals must:

    • Have an approved university degree;
    • Complete the CPA; CA; or IPA Program, respectively;
    • Complete three years’ practical experience under conditions approved by the respective institutes; and
    • Fulfill CPD requirements which are set at 120 hours over a three year period.

    The ASIC regulations also requires RCAs to complete 120 hours of CPD over a three year period.

    A qualified accountant—the second protected title—is defined in the Corporations Act as a person meeting the criteria in the ASIC’s Regulatory Guide 154. According to ASIC, an individual may become a qualified accountant if they belong to one of the abovementioned PAOs at the declared membership classification and complies with the PAO’s continuing professional education requirements. The membership classifications are the same as an RCA with the addition of Associate Chartered Accountant (ACA) from CAANZ and Associate Institute of Public Accountants (AIPA) from IPA. These are the foundational level qualifications of the institute and require a university degree to commence their postgraduate qualification program.

    The IES were significantly revised in 2015 to emphasize learning-outcomes based approaches. CPA Australia indicates that it has reviewed and revised its programming and accreditation requirements as a result of the revised standards.

    The IES were significantly revised in 2015 to emphasize learning-outcomes based approaches and each of the PAOs has addressed this with revisions to their respective educational programming. Further details can be found within the individual member organizations’ profiles.

    Current Status: Adopted

  • International Standards on Auditing

    The Corporations Act 2001 requires annual financial reports to be audited. The Australian Securities and Investment Commission requires the application of standards issued by the Auditing and Assurance Standards Board (AUASB), an independent, statutory agency of the Australian Government, responsible for developing, issuing and maintaining auditing and assurance standards.

    Since April 2006, the AUASB has released Australian Auditing Standards (ASA) based on the ISA as issued by the International Auditing and Assurance Standards Board (IAASB), in line with strategic direction from the Financial Reporting Council. The degree to which the AUASB may make amendments to IAASB standards varies issue-by-issue and only where there is a ‘compelling reason’ such as to meet local legislative requirements.

    The AUSAB outlines its standard-setting process here, which includes identifying technical issues as related to the Australian context, research and consultation from stakeholders, and then issuing the standard. The AUSAB indicates that the 2016 ISA are in effect.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The Accounting Professional & Ethical Standard Board (APESB), an independent body that was established in 2006, sets the ethical requirements with which all professional accountants who are members of CPA Australia, Chartered Accountants Australia & New Zealand, and/or the Institute of Public Accountants must comply.

    The APESB has issued the Accounting Professional & Ethical Standard (APES) 110 Code of Ethics for Professional Accountants, which is based on the IESBA Code of Ethics.

    The APESB follows a well-documented Due Process and Working Procedures for the Development and Review of APESB Pronouncements to formalize and issue ethical standards. In September 2017, the APESB updated its Code of Ethics to incorporate the 2016 IESBA Code of Ethics, emphasizing the changes due to NOCLAR.

    Current Status: Adopted

  • International Public Sector Accounting Standards

    Financial reporting for public sector entities in Australia is based on the Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB)—an independent Australia government agency. The Australian Accounting Standards incorporate and comply with IFRS and do include a specific standard for public sector accounting. The AASB’s transaction neutrality policy means similar transactions and events are accounted for in a similar manner by all entities.

    The professional accountancy organizations in the jurisdiction report that AASB is currently consulting on a proposed revised policy. It sets out the conditions necessary for the AASB to recommend moving from IFRS to IPSAS as the basis for not-for-profit public sector accounting in Australia.

    Current Status: Partially Adopted

  • Investigation and Discipline

    Investigative and disciplinary (I&D) procedures for professional accountants in Australia are carried out by the Australian Securities and Investment Commission (ASIC) and three professional accountancy organizations (PAOs)—CPA Australia, Chartered Accountants Australia & New Zealand (CAANZ), and the Institute of Public Accountants (IPA)—in the jurisdiction.

    The ASIC is responsible for the surveillance, investigation and enforcement of registered company auditors (RCAs) and overall its I&D mechanism seems to align with SMO 6 best practices. The ASIC conducts regular audit inspections and surveillances and if auditor’s conduct is found to be deficient, the ASIC may impose conditions on an RCA’s registration or other sanction or may refer the matter to the Companies Auditors Disciplinary Board (CADB).

    The CADB was established by the ASIC Act 2001 as an independent statutory body with the primary role of serving as a disciplinary tribunal. The CADB considers applications for the cancellation or suspension of the registration of auditors put forth by the ASIC after its investigation. The CADB itself has no authority to initiate an investigation into the conduct of auditors.

    CPA Australia, CAANZ, and IPA have all established I&D processes for their respective members, which include RCAs as well as qualified accountants.

    Any complaints against CPA Australia members may be submitted to the General Manger, Professional Conduct (GMPC) who will then refer the complaint to investigation to a Professional Conduct Officer (PCO). Based on the findings of the investigation, the PCO and GMPC may refer the case to the Disciplinary Tribunal which will issue sanctions if necessary. Disciplinary Tribunal decisions may be appealed to the Appeals Tribunal. More information on CPA’s Australia’s I&D process is outlined within its bylaws.

    CAANZ has established a Professional Conduct Committee (PCC) to investigate complaints and determined if they should be referred to the Disciplinary Tribunal. Both the PCC and Disciplinary Tribunal may issue sanctions. Disciplinary Tribunal decisions may be appealed to the Appeals Tribunal/Council. More details on CAANZ’s procedures can be found here.

    IPA has an Investigations Office that receives complaints and will conduct investigations. At the conclusion of an investigation, the Investigation Officer may refer the case to the IPA’s Disciplinary Tribunal which may issue a range of penalties. Individuals can appeal a decision to the IPA’s Appeal Tribunal. More detailed information on IPA’s I&D mechanism can be found here.

    All PAOs report that they have assessed their I&D systems against the revised SMO 6 requirements and concluded that their respective systems fulfill the requirements.

    Current Status: Adopted

  • International Financial Reporting Standards

    The Australian Accounting Standards Board, an independent Australian Government agency, sets the corporate accounting standards to be applied in the jurisdiction through an extensive standard-setting process, which includes identifying technical issues as related to the Australian context, research and consultation from stakeholders, and then issuing the standard.

    There are two tiers of reporting requirements for preparing general purpose financial statements: (i) Tier 1: Australian Accounting Standards (AAS) and (ii) Tier 2: Australian Accounting Standards—Reduced Disclosure requirements. The IFRS are incorporated into Tier 1 of Australian Accounting Standards such that companies complying with Tier 1 AAS will be in compliance with IFRS. The following entities must apply Tier 1 requirements: (i) for-profit entities in the private sector that have public accountability (including pension funds); and (ii) Australian Government and state, territory, and local governments.

    All other companies may apply the Tier 2 requirements which comprise the recognition, measurement and presentation requirements of Tier 1 (and therefore, IFRS) while substantially reducing disclosures related to those requirements. The principles for determining the reduced disclosures are based on the principles used for determining the disclosures prescribed in the IFRS for Small- and Medium-sized Entities.

    Current Status: Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 12/2018
We welcome feedback. Please email compliance@ifac.org

Thank you for your interest in our publications. These valuable works are the product of substantial time, effort and resources, which you acknowledge by accepting the following terms of use. You may not reproduce, store, transmit in any form or by any means, with the exception of non-commercial use (e.g., professional and personal reference and research work), translate, modify or create derivative works or adaptations based on such publications, or any part thereof, without the prior written permission of IFAC.

Our reproduction and translation policies, as well as our online permission request and inquiry system, are accessible on the Permissions Information web page.

For additional information, please read our website Terms of Use. ALL RIGHTS RESERVED.