Roles of Regulatory Agencies in Australian Financial Reporting

FINANCIAL ACCOUNTING
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FINANCIAL ACCOUNTING
Question 1
The roles of the various regulatory agencies in the Australian context are discussed below.
a) Financial Reporting Council (FRC) – The FRC is the apex body with regards to ensuring
the effectiveness of Australian financial reporting framework. The framework of
operation for FRC has been highlighted in ASIC (Australian Securities and Investments
Commission) Act 2001 (Part 12) (Arens et. al., 2013). One of the key objectives for FRC
is that accounting standards should contain the provision of information that tends to allow
prudent decision making by the external users, allows directors to fulfil their reporting
obligations and permits a correct assessment of the financial performance of the
underlying entity. The accounting standard should also be such that enhance the
competitiveness of Australian reporting entities. Further, FRC also aims to regulate the
auditing standards so that these allow for comprehensive and accurate opinion besides
ensuring that auditor report is reliable and understandable (FRC, 2019). As a result,
confidence of market participants is retained. In wake of the above objective, FRC
maintains oversights over the auditing and accounting processes for standard setting meant
for both private and public sectors. Also, it provides strategic advice with regards to audit
quality in context of Australian auditors. Further, it also advises the Minister with regards
to matters that impact the Australian financial reporting framework (FRC, 2016).
b) Australian Accounting and Standards Board (AASB) – AASB is a government agency in
Australia whose functions are outlined in ASIC Act 2001. One of the main functions of
AASB is to facilitate conceptual framework development with the underlying purpose of
proposed standards evaluation. Another function of AASB is to formulate requisite
accounting standards as per s. 334, Corporations Act 2001. Also, AASB formulates
accounting standards for other purposes as well. AASB represents Australia with regards
to contribution towards harmonisation of accounting standards through the coordination
with relevant bodies from other nations (AASB, 2019). Additionally, through the
formulation and implementation of accounting standards, it is expected that Part 12 listed
main objectives are promoted and fulfilled. These objectives include maintenance of
investor confidence in Australian economy, lowering cost of capital for various entities
coupled with enabling Australian entities to compete successfully on a global platform.
With regards to the objectives, vision of AASB is crucial which highlights increasing
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FINANCIAL ACCOUNTING
stakeholder confidence not only in Australian economy but also external reporting and
capital standards (Deegan, 2014).
c) IFRS Interpretations Committee – The IFRS Interpretations Committee has been
formulated as per the IFRS Foundation Constitution. It was earlier called as the
International Financial Reporting Interpretations Committee (IFRIC). One of the key roles
of this committee is to interpret IFRS application and thereby advice and extend guidance
to various entities with regards to financial reporting issues which the IFRS specifically
addresses through the application. Also, it takes various requests from IASB (International
Accounting Standards Board) and fulfils these (Elliott and Elliott, 2017). The committee
acts as medium between IFRS and the national accounting standard bodies (including
AASB) so as to bring about harmonisation of accounting standards. The IFRS
Interpretations Committee also publishes various draft interpretations so that public
opinion may be solicited on the same. This is done only after approval from IASB. While
finalising interpretation, the committee considers the various public comments in a timely
manner. Before publishing the final interpretation, the committee needs to obtain approval
from the IASB board. It is apparent that IFRS Interpretations Committee plays a vital role
in interpretation of IFRS application and IASB drafts. Further, it also acts as a potent
medium of communication between the national accounting standard setters and the
international accounting standard setters i.e. IASB and IFRS (IASplus, n.d.).
d) ASIC is the key enforcer of provisions and regulations of Corporations Act 2001. The
main role of ASIC is highlighted below (Deegan, 2014).
 Regulate and maintain the financial systems
 Taking extensive measures to enhance the performance of the financial system
 Promotion and encouragement of the participation of the investors/ consumers to
invest and become a part of the financial system
 Minimize the procedural procedures so as to enforce the law in the more effective
manner as well as to seek the civil penalties in case of breach of provisions of
Corporations Act from the honourable courts
 To preserve and process the provided confidential information
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