Papua New Guinea

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  Certified Practising Accountants Papua New Guinea

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The Companies Act of 1997 forms the statutory framework for accounting, auditing, and corporate financial reporting in Papua New Guinea (PNG). The Accounting Standards Board was established under the Companies Act to set national accounting and auditing standards, as well as issue guidance on their application. The Accountants Act of 1996 also gives the Certified Practising Accountants of Papua New Guinea (CPAPNG) authority to establish accounting and auditing standards. However, the Accountants Act is being revised to address these conflicting mandates. Pending its approval, the new Accountants Act will no longer give CPAPNG the responsibility for setting national auditing and accounting standards.

    Accounting Framework

    The Companies Act requires all banks and financial institutions, insurance companies, listed companies on the stock exchange, securities companies, superannuation funds, and private companies (including exempt companies) to apply the International Financial Reporting Standards (IFRS) when preparing their financial statements.

    In PNG, companies are not defined as small, medium, or large companies but rather as exempt companies or reporting companies. Exempt companies are companies that do not exceed any of the following three thresholds: (i) total assets of K5 million (US$2 million); (ii) 25 shareholders; and (iii) 100 employees. Reporting companies are any companies that are not classified as exempt. Exempt companies apply IFRS but may also apply IFRS for small- and medium-sized entities (IFRS for SMEs). It is reported that a separate standard for micro-sized entities is being considered.

    Auditing Framework

    Exempt companies are not required to undergo an audit. Companies that exceed one or two of the thresholds may dispense with a statutory audit provided all shareholders agree. Private companies that do not exceed one or two of the thresholds can be audited if approval is granted by their Board of Directors. As established under the Companies Act, all other companies as listed above, are required to have their financial statements audited and follow the International Standards on Auditing.

    Foreign companies and their subsidiaries are required to follow similar financial reporting and audit requirements as domestic companies, regardless of size. Although the Listing Rules of the Port Moresby Stock Exchange, which was established under the Securities Act of 1997, do not set out additional financial reporting requirements for listed companies, the rules do require listed companies to publicly disclose their audited financial statements.

  • Regulation of Accountancy Profession

    Established under the Accountants Act of 1996, the accountancy profession in Papua New Guinea (PNG) is regulated by the Accountants Registration Board (ARB). The ARB is empowered by the Act to: (i) register all individuals qualified to practice accountancy; (ii) determine the standard of qualification and experience required for the various categories of registration; (iii) establish an I&D system for auditors; and (iv) report to the Minister of Finance on any matter relating to the operation of Part XI of the Companies Act, which deals with financial reporting, accounting records and audit.

    Candidates for entry into the profession are required to complete a diploma in accounting or a bachelor’s degree in a related business field. Students with a diploma in a related business field are conferred the title of Registered Accounting Technician until they complete the Certified Accounting Technician (CAT) program and become CATs. Students who have completed a bachelor’s degree in accounting are granted the title of Registered Accounting Graduate (RAG) until they complete the Certified Practising Accountant (CPA) program and become CPAs. Both the CAT and CPA programs are administered by the Certified Practising Accountants of Papua New Guinea (CPAPNG).

    All CPAs in PNG are required to register with the ARB to offer either accounting or auditing services, and membership with the CPAPNG is mandatory as a prerequisite to registration with the ARB. Section 67 of the Accountants Act requires all employers to ensure that all prospective employees are registered with the ARB.

    CPAPNG is established under the Accountants Act, and its main functions as set out in the act include to: (i) review and communicate information on technical developments in the accountancy profession to members; (ii) set accounting and auditing standards to be applied in PNG; (iii) advise the ARB on any matters referred to it; (iv) determine initial and continuing professional development requirements, including setting requirements for admission into the institute; (v) research topics affecting the accountancy profession; (vi) set ethical requirements; (vii) establish an investigation and disciplinary (I&D) system for its professional accountants other than auditors and, where appropriate, to ask the Accountants Statutory Committee to inquire into allegations of improper conduct by a member; (viii) establish and administer, or participate in the establishment and administration of, any organization whose principal objectives relate to the advancement of the accountancy profession; and (ix) promote the interests of the accountancy profession in PNG.

    Revisions to the Accountants Act of 1996, which are still pending approval by parliament, will clarify the I&D functions of the ARB and CPAPNG, respectively as well as remove the standard-setting authority of CPAPNG. Currently, in addition to CPAPNG, the Accounting Standards Board is also authorized under the Companies Act of 1997 to set both accounting and auditing standards in PNG. Under the revised Accountants Act, the ARB and CPAPNG also plan to collaborate to create a quality assurance review system for all professional accountants in PNG and to adopt ISQC 1.

  • Audit Oversight Arrangements

    There are no independent audit oversight arrangements in Papua New Guinea (PNG).

    Auditors are regulated by the Accountants Registration Board (ARB) and the Certified Practising Accountants of Papua New Guinea (CPAPNG) under the Accountants Act of 1996.

    The ARB is responsible for: (i) registering all individuals qualified to practice accountancy; (ii) determining the standard of qualification and experience required for the various categories of registration; (iii) establishing an investigation and disciplinary system for auditors; and (iv) reporting to the Minister of Finance on any matter relating to Part XI of the Companies Act, which includes information related to financial reporting, accounting records and audit.

    To be registered with the ARB, auditors are required to be CPAPNG members. Its responsibilities pertaining to auditor regulation in PNG include: (i) reviewing and disseminating information on technical developments in the accountancy profession to members; (ii) setting auditing standards to be applied in PNG; (iii) advising the ARB on any matters referred to it; (iv) determining initial and continuing professional development requirements, including setting requirements for admission into the institute; and (v) setting ethical requirements.

    The Accountants Act is being revised and is pending approval by parliament. Revisions to the Act will clarify the investigations and disciplinary functions of the ARB and CPAPNG, respectively as well as the standard-setting authority of CPAPNG. Additionally, under the revised Act, the ARB and CPAPNG plan to collaborate to create a quality assurance review system for all professional accountants in PNG and to adopt ISQC 1.

  • Professional Accountancy Organizations

    The Certified Practising Accountants of Papua New Guinea (CPAPNG) was established in 1974 as a mandatory membership organization for all accountancy professionals in Papua New Guinea (PNG)—Certified Practising Accountants and Certified Accounting Technicians. The Accountants Act of 1996 provides CPAPNG with the mandate to: (i) review and communicate information on technical developments in the accountancy profession to members; (ii) set accounting and auditing standards to be applied in PNG; (iii) advise the Accountants Registration Board on any matters referred to it; (iv) determine initial and continuing professional development requirements, including setting requirements for admission into the institute; (v) research topics affecting the accountancy profession; (vi) set ethical requirements; (vii) establish an investigation and disciplinary system for its members and, where appropriate, ask the Accountants Statutory Committee to inquire into allegations of improper conduct by a member; (viii) establish and administer, or participate in the establishment and administration of, any organization, whether incorporated or not, whose principal objectives relate to the advancement of the accountancy profession; and (ix) promote the interests of the accountancy profession in PNG.

    In addition to being a IFAC Member, the CPAPNG is a member of the Confederation of Asian and Pacific Accountants.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    Under the Accountants Act of 1996, the Accountants Registration Board (ARB) is responsible for establishing a mandatory quality assurance (QA) review system for all audits of financial statements in Papua New Guinea. As of August 2019, however, no QA review system exists.

    The Accountants Act of 1996 is being revised and the expected completion date was to be end of 2019. Under the revised Act, the ARB and Certified Practising Accountants of Papua New Guinea (CPAPNG) plan to collaborate to create a QA review system. The CPAPNG reports that the new QA system would be developed in line with the requirements of SMO 1, and it will aim to complete a first draft of the QA procedures once the Act is revised. CPAPNG reports that the revised legislation will also require the adoption of ISQC 1, which has not been adopted at the time of this assessment.

    Current Status: Not Adopted

  • International Education Standards

    Under the Accountants Act of 1996, the Certified Practising Accountants of Papua New Guinea (CPAPNG) is responsible for setting initial professional development (IPD) and continuing professional development (CPD) requirements for professional accountants. CPAPNG reports that its curriculum and syllabus are mostly, but not fully, in line with the revised 2015 IES requirements. CPAPNG conducted a comparison against the IES and identified gaps in IES 3 and 6. The institute indicates that as a part of its new 2020–2025 strategic plan, an important objective will be to address and close the identified gaps.

    Universities offering degrees in accounting and other approved educational offering diplomas in accounting play a role in IPD by providing the education that is required of an individual to embark on a professional accountancy pathway offered by CPAPNG.

    Students who have completed a diploma in accounting or a bachelor’s degree in a related business field are conferred the title of Registered Accounting Technician until they complete the Certified Accounting Technician (CAT) program and become Certified Accounting Technicians. Students who have completed a bachelor’s degree in accounting are granted the title of Registered Accounting Graduate until they complete the Certified Practising Accountant (CPA) program and become CPAs. Both the CAT and CPA programs are conducted by the CPAPNG. A Memorandum of Agreement was signed with CPA Australia in 2014 to incorporate five CPA Australia exam modules into the CPAPNG CPA syllabus.

    To support the adoption of educational requirements, CPAPNG has developed its own modules related to local tax and laws, established practical training requirements and offers CPD courses for its members.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Accounting Standards Board (ASB) is responsible under the Companies Act of 1997 to establish national auditing standards. The Accountants Act of 1996 also gives the Certified Practising Accountants of Papua New Guinea (CPAPNG) authority to establish auditing standards. The Accountants Act is being revised to address these conflicting mandates. Pending its approval, the new Accountants Act will no longer give CPAPNG the responsibility to set applicable auditing standards.

    CPAPNG reports that the ASB convened in May 2017 after a ten-year hiatus and at this meeting, the revised 2016 ISA were adopted to be applied for all mandatory audits in the jurisdiction.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    Under the Accountants Act of 1996, both the Certified Practising Accountants of Papua New Guinea (CPAPNG) and the Accountants Registration Board are responsible for establishing ethical requirements in Papua New Guinea and require professional accountants to adhere to CPAPNG’s Code of Ethics. CPAPNG reports that the 2016 IESBA Code of Ethics is currently adopted in the jurisdiction.

    CPAPNG reports that the 2018 International Code of Ethics for Professional Accountants that is effective June 2019 is being reviewed for adoption.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Government of Papua New Guinea (PNG) is responsible for the adoption of public sector accounting standards. At this time, cash-basis accounting standards are used.

    The government of PNG is working towards the adoption of IPSAS; however, no timeline has been established.

    Current Status: Not Adopted

  • Investigation and Discipline

    Under the Accountants Act of 1996, the Accountant Statutory Committee (ASC) which operates under the oversight of the Accountants Registration Board (ARB) and the Certified Practising Accountants of Papua New Guinea (CPAPNG) share responsibility for the establishment of an investigative and disciplinary (I&D) system for professional accountants in PNG.

    The CPAPNG is responsible for an I&D review system applicable to the conduct of its professional accountants that are non-auditors, while the ARB is responsible for an I&D system for auditors. The ASC is responsible for approving sanctions as recommended by CPAPNG. Revisions to the Accountants Act, which is pending approval, will clarify the respective I&D functions of the ASC and CPAPNG. CPAPNG reports that its system incorporates the majority of SMO 6 best practices with gaps in linkages to a QA review system (which does not exist in the jurisdiction) and a separate body for appeals. CPAPNG is undertaking efforts to eliminate the gaps that have been identified.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Accounting Standards Board (ASB) has the responsibility under the Companies Act of 1997 to set and approve private sector accounting standards. The Certified Practising Accountants of Papua New Guinea (CPAPNG) reports that the ASB convened in May 2017 after a ten-year hiatus and has adopted the latest International Financial Reporting Standards (IFRS) as well as IFRS for Small- and Medium-Sized Entities (IFRS for SMEs).

    Currently, CPAPNG is also granted authority under the Accountants Act of 1996 to set accounting standards. Revisions to the Accountants Act will withdraw CPAPNG’s responsibility for setting national accounting standards.

    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: 08/2019
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