Comparison of auditing legislations in US, UK and New Zealand with Australia.
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Introduction Corporate Law Economic Reform Programme also known as CLERP was came into being on 4 March 1997. It represents a structural review of Corporate Law in six key areas of corporate and business regulation. Those six areas were accounting standards, fundraising, directors duties and Corporate governance, takeovers, electronic commerce, financial markets and Investment Products. CLERP is a program to modernise Australia's Corporations Law and give it an economic focus. Its aim is to introduce world's best practice in business regulation. It is part of the government's broader goal of making Australia a leading financial centre in the region. CLERP is designed to harmonise Corporations Law with pro-enterprise, pro-jobs and pro-investment objectives. One of the underlying objectives of CLERP is to ensure business regulation is consistent with the promotion of a strong and vibrant economy; to facilitate business in the Asia Pacific region and elsewhere. CLERP is intended to improve not only the expression, but also the content and initiative of the law. The introduction of CLERP 9 The federal government has issued a policy paper CLERP 9 as part of its Corporate Law Economic Reform Program in September 2002 and has been implemented on 1st July 2004. It intended to introduce legislation into parliament in 2003. It would consider the issues including the institutional framework for setting auditing standards and whether they should be given the force of law.
informed marketThe CLERP 9 reforms in their entirety should pave the way for a more effective disclosure regime and help to restore investor confidence, which was badly shaken by the collapses of HIH, Pasminco and other companies. Indeed many of the shortcomings identified by the HIH Royal Commission are addressed in the CLERP 9 proposals. The independence of auditors will be re-defined; a cooling-off period of four years will apply before an audit partner can become a director of a client and no more than one former audit partner will be able to join a client at any time. Companies will also have to provide details of all non-audit work, the fees applicable to each item and a statement explaining why those non-audit services do not compromise audit independence. Arguably none of these measures go quite far enough. There is always potential for companies to make use of non-audit services as a bargaining point, and for auditors, wishing to retain high value fee work, to appease their client companies. The Australian Shareholders' Association would like to see auditors debarred from undertaking other services for their clients and audit partners prohibited from employment by former client companies. Why fiddle around with half-measures that may still compromise the integrity of an audit? Other audit requirements include attendance at AGMs, rotation after five years, an ability to incorporate and the introduction of a regime of proportionate liability to ensure that liability rests with all defendants in proportion to their contribution to a plaintiff's loss.
The New York Stock Exchange (NYSE) has submitted proposals to the Securities and Exchange Commission (SEC) to revise their listing standards to reflect the corporate governance reforms introduced by the Sarbanes-Oxley Act. All listed companies are required to comply with the new NYSE standards within 18 months of SEC approval of the rules. The Conference Board formed a highly respected 12 member commission in June 2002 to issue best practice guidelines. The Conference Board Commission has produced findings and recommendations on executive compensation, corporate governance and auditing. The Business Roundtable, an association of chief executive officers committed to improving public policy, produced a white paper known as the Principles of Corporate Governance in May 2002. The principles are also intended to be used as a best practice guide. CLERP 9 development In conclusion, the CLERP 9 developments are unique to Australia. However there have been similar legislation reforms in other countries, at the time of writing CLERP 9. There was the introduction of the Sarbanes-Oxley legislation in the USA, and CLERP 9 here in Australia. All legislation reforms in different countries are likely to interact with other jurisdiction. For example, the Sarbanes - Oxley Act not only affects US companies and auditors, but also any audit firm working as an auditor of a public traded US company or its subsidiary. That means the Act cover any Australia audit firm that does the audit of a subsidiary of a US listed company.
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