Trans-Tasman Accounting and Auditing Standards Advisory Group
2011 Report to Ministers

1. Executive Summary

The Trans-Tasman Accounting and Auditing Standards Advisory Group (TTAASAG) was established in 2004 with the purpose of advising the Australian and New Zealand accounting and auditing standard and oversight bodies, and Governments, on strategies to (i) establish a single set of trans-Tasman accounting standards within the broader context of both jurisdictions' objective of adopting international accounting standards; and (ii) maximise the influence of Australia and New Zealand in the development of international accounting standards and the international accounting standard setting process.

TTAASAG continues to achieve its aims through the following key activities:

  1. Monitoring and providing guidance on developments in Australia and New Zealand to facilitate the achievement of common financial reporting policy outcomes enacted under the Single Economic Market Outcomes Framework within proposed timeframes.
  2. Facilitating the implementation of cross-appointment arrangements between the financial strategy bodies, the accounting standard-setting bodies, and the auditing and assurance standard-setting bodies in Australia and New Zealand.
  3. Monitoring the progress of the International Auditing and Assurance Standards Board's (IAASB's) review on audit quality.
  4. Supporting increased engagement with and within the Asia-Pacific region, and working to enhance the presence and influence of Australia and New Zealand.
  5. Enhancing the profile and influence of Australia and New Zealand in the Asia-Pacific and international arena.

Section Three details the progress and achievements of each activity.

In 2012, TTAASAG will build upon the work completed in 2011. The main objectives for the year are to facilitate the ability for for-profit entities subject to general purpose reporting requirements to prepare one set of financial reports for use in both jurisdictions; to promote the mutual recognition of auditors; and to harmonise the audit and assurance standards when the Auditor Regulation Act 2011 comes into effect.

In addition, TTAASAG will review the Single Economic Market outcomes and recommend a new set of measurable and time-bound objectives that will further align the financial reporting and auditing frameworks in Australia and New Zealand. TTAASAG will continue to liaise with the Trans-Tasman Outcomes Implementation Group (TTOIG) regarding any new outcomes.

2. Background

On 30 January 2004, the then Australian Treasurer and the then New Zealand Minister of Finance announced the establishment of TTAASAG. The announcement was made in the context of the business regulatory environment becoming an increasing focus for the Closer Economic Relations framework that has assisted the development of the Australia-New Zealand relationship since 1983. The Memorandum of Understanding (MOU) on the Coordination of Business Law signed by the two Governments in 2000, and the special Ministerial forum held in August 2003 to mark the 20th anniversary of Closer Economic Relations, affirmed the commitment of both countries to increase trans-Tasman business activity including by harmonising accounting standards.

2.1 Terms of Reference

TTAASAG is tasked with providing advice under four broad headings:

  • Standards setting - advice primarily to the oversight and standard setting bodies on achieving greater coordination and information exchange between the two countries, including how to progress the alignment of Australian and New Zealand accounting standards, and auditing and assurance standards, in light of increasing internationalisation of those standards;
  • Policy co-ordination - advice primarily to the Australian and New Zealand governments on the broader policy and legal framework for financial reporting, with a view to promoting a consistent approach to the establishment, application and monitoring of accounting standards, and auditing and assurance standards, wherever appropriate, as well as to the associated regulatory and institutional arrangements and to enhancing the quality of both financial reporting and auditing in both countries;
  • Institutional arrangements - advice to the Australian and New Zealand governments, as well as the oversight and standard setting bodies, on the specific institutional arrangements that might be established over time to maximise the consistency in approach to the establishment, application and monitoring of accounting standards, and auditing and assurance standards; and to minimise impediments to Trans-Tasman business activity; and
  • International influence - advice to the Australian and New Zealand governments, and the oversight and standard setting bodies, on strategies to maintain and enhance Australia and New Zealand's influence on the development of international accounting standards, and auditing and assurance standards, through involvement in relevant international fora, including regionally.

2.2 Membership

The following table sets out the composition of TTAASAG:

Bodies Australia New Zealand
Oversight bodies Financial Reporting Council (FRC) External Reporting Board (XRB)
Accounting standard setters Australian Accounting Standards Board (AASB) New Zealand Accounting Standards Board (NZASB)
Auditing and assurance standard setters Auditing and Assurance Standards Board (AUASB) New Zealand Auditing and Assurance Standards Board (NZAuASB)
Professional accounting bodies CPA Australia
Institute of Chartered Accountants in Australia (ICAA)
Institute of Public Accountants (IPA)
New Zealand Institute of Chartered Accountants (NZICA)
Government departments Treasury Ministry of Economic Development

More information on TTAASAG's work is available at on the TTAASAG website.

3. Key Activities and Achievements in 2011

3.1 Context

TTAASAG met on three occasions in 2011. The section below provides an outline of key developments in 2011 in the auditing and accounting space.

Auditor regulation, including auditing and assurance standards

New Zealand is in the final stages of implementing the Auditor Regulation Act 2011, which will come into force on 1 July 2012. The Act will require auditors to be licensed and audit firms to be registered if they wish to undertake audits of issuers, banks, insurers, and other publicly accountable entities. The Financial Markets Authority (FMA) will have the responsibility to oversee the regulation of auditors and audit firms in respect of issuer audits, similar to the role of the Australian Securities and Investments Commission (ASIC) in Australia.

On an international level, there has been an increased focus on issues of audit quality, the role of the auditor, auditor reporting, and auditor independence. In response to the concerns, the IAASB established an Audit Quality Task Force, which is currently developing a consultation paper setting out a framework for audit quality.1 The European Commission has also announced adoption of reforms of the European audit regulatory system aimed at increasing user confidence in the financial statements of companies.

Accounting standards

In 2011, the New Zealand Government agreed to introduce a new framework for financial reporting requirements. It is intended that the resulting legislation be introduced to Parliament in 2012. The XRB has been consulting on a set of complementary proposals that establish a multi-standards framework for for-profit entities and public benefit entities, and a tier structure will apply to each sector.2 The Australian framework has a single standard for for-profit and not-for-profit entities with two tiers. The accounting standards boards of the two countries have been working together to align accounting standards for for-profit entities.

Internationally, there is an increased appetite for the development of a single set of global high quality accounting standards for profit-oriented entities. The International Accounting Standards Board and its parent body, the IFRS Foundation, are currently working towards the goal of global adoption of International Financial Reporting Standards (IFRS). Australia and New Zealand have been active within the Asia-Oceania region in supporting the adoption of IFRS and providing advice on shaping IFRS.

3.2 Trans-Tasman Activities

  1. Monitoring and providing guidance on developments in Australia and New Zealand to facilitate the achievement of common financial reporting policy outcomes enacted under the Single Economic Market Outcomes Framework within proposed timeframes.

In August 2009, the Australian and New Zealand Governments agreed to an outcomes framework to progress a wide range of cross-border economic initiatives. The outcomes framework includes five matters3 relating to accounting and auditing, and once achieved will benefit both countries by further aligning frameworks in Australia and New Zealand.

Outcome A: For-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements with trans-Tasman companies only preparing one set of financial statements to one set of standards.

This outcome was achieved for Tier 1 for-profit entities (for-profit entities with public accountability) with reporting obligations in both countries, when the single Australia-New Zealand reporting standard for Tier 1 for-profit entities became operative on 1 July 2011.

For Tier 2 for-profit entities (for-profit reporting entities not publicly accountable), substantial progress was made with Australia's introduction of the Reduced Disclosure Regime (RDR) in mid-2010. However, there are still marked differences between New Zealand's Differential Reporting framework and Australia's RDR. The XRB released a paper in 2011 proposing to adopt an RDR modelled on the Australian regime. If the proposals are adopted, Tier 2 for-profit entities required to prepare general purpose financial reports will be subject to the same reporting requirements in both countries.4

Outcome B: Not-for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements.

Australia and New Zealand had policies of sector neutrality before IFRS was adopted. Both countries are currently reviewing their treatment of private not-for-profit entities.

The XRB released a consultation paper Accounting Standards Framework for General Purpose Financial Reporting by Public Benefit Entities in 2011, which proposes to move to a set of accounting standards for not-for-profit entities based on the International Public Sector Accounting Standards (IPSAS).5 However, Australia is currently using IFRS as the basis of accounting standards for not-for-profit entities.

TTAASAG has agreed that the differences do not have a significant impact on trans-Tasman engagement and as a result, has recommended that this outcome be removed until further notice.

Outcome C: Auditors registered in one country can operate in the other country.

New Zealand's Auditor Regulation Act 2011 will take effect on 1 July 2012. The aligned auditor licensing and regulation regimes will facilitate the mutual recognition of auditors in the two countries. Australia and New Zealand are currently working through some operational issues to facilitate mutual recognition arrangements.

Outcome D: Financial reporting standards bodies in Australia and New Zealand have functional equivalence.

This outcome was achieved on 1 July 2011 with the establishment of the XRB, NZASB and the NZuASB. The former Accounting Standards Review Board in New Zealand was re-constituted as the XRB, which has the functional equivalence of the FRC in Australia. The two subsidiary boards, the NZASB and the NZAuASB are functionally equivalent to the AASB and the AUASB.

  1. Facilitating the implementation of cross-appointment arrangements between the financial strategy bodies the accounting standard-setting bodies, and the auditing and assurance standard-setting bodies in Australia and New Zealand.

Cross-border appointments are important for facilitating shared objectives and projects among the standard-setting bodies. In earlier years, TTAASAG supported cross-appointments to the financial reporting strategy bodies and the accounting standards-setting bodies in Australia and New Zealand. These cross-appointments continued seamlessly with the establishment of the XRB on 1 July 2011. In 2011, TTAASAG also supported the cross-appointments of the auditing and assurance standard-setting bodies. This was achieved when cross-appointments were made to the respective auditing and assurance boards with effect from 1 July 2011.

  1. Monitoring the progress of the IAASB's review on audit quality.

TTAASAG has been monitoring the activities of the Audit Quality Task Force established by the IAASB, which is currently developing a consultation paper setting out a framework for audit quality.6 TTAASAG has recommended that Australia and New Zealand coordinate their approaches to audit quality.

In 2011, the Australian Government released a draft Bill on audit quality. Legislative reforms to audit quality are expected to be introduced in 2012.7

3.3 International engagement

  1. Supporting increased engagement with and within the Asia-Pacific region, and working to enhance the presence and influence of Australia and New Zealand

The fifth annual Asia-Oceania Regional Policy Forum was held in Indonesia in May 2011. This annual event brings together policy makers, regulators and national standards setters from jurisdictions in different stages of their IFRS adoption roadmap to share and learn from one another's experiences. The theme of this year's forum was 'Towards One Global Standard: The Challenges and Opportunities of IFRS Adoption in the Asia-Oceania Region'. TTAASAG contributed to the development of the agenda for the forum and to the arrangements for the 2012 forum principally through the steering committee, which involved representatives from the Australian Treasury and the AASB. A number of TTAASAG members attended this meeting, including several who presented at the forum.

The third annual Asian-Oceanian Standards-Setters Group (AOSSG) conference was held in Melbourne in November 2011. TTAASAG received reports from Australian and New Zealand members of AOSSG about the progress of AOSSG in relation to its strategic objectives and thought leadership role. TTAASAG also supported the preparations for the AOSSG conference in Melbourne in November.

  1. Enhancing the profile and influence of Australia and New Zealand in the Asia-Pacific and international arena.

In 2011, a representative from IPSASB updated TTAASAG on the conceptual framework activity of the IPSASB, which is aimed at accountability and decision-making. TTAASAG encouraged both Australia and New Zealand to engage in the consultation process in relation to oversight and resourcing of the IPSASB.

TTAASAG also invited a member of the IFRS Advisory Council to make a presentation at the December meeting. The member gave a presentation on how Australia and New Zealand can make strategic contributions to the IFRS Advisory Council and have a greater influence over the current and upcoming issues.

In addition, TTAASAG members involved in international accounting and auditing bodies, including the IFRS Interpretations Committee and the IAASB, updated TTAASAG on the activities of those bodies. These presentations provided TTAASAG members with updates on developments in policy, standard setting, and auditing and accounting standards. They allowed TTAASAG members to further understand the functions and responsibilities of the various organisations represented and the importance of their work for accounting and auditing standards development in Australia and New Zealand.

Other matters

TTAASAG commenced a review of its Terms of Reference in 2010 with the intention of better reflecting TTAASAG's current role and composition. The Australian and New Zealand Ministers approved the adoption of a new Terms of Reference for TTAASAG, with effect from 1 July 2011.

4. 2012 Objectives

  • Facilitate the ability for for-profit entities to prepare one set of financial reports according to the accounting standards requirements of the jurisdiction in which they are incorporated. This will be achieved by:
    • encouraging legislative change to enable mutual recognition of trans-Tasman financial statements prepared by entities with public accountability; and
    • continuing to monitor and provide guidance on the implementation of regulation and reforms in Australia and New Zealand to facilitate the ability for for-profit entities subject to general purpose reporting requirements to prepare one set of financial reports for use in both jurisdictions.
  • Facilitate the mutual recognition of auditors and harmonisation of audit and assurance standards by:
    • continuing to monitor the implementation of the auditor licensing regime in New Zealand which will come into force on 1 July 2012. These reforms will further align the audit regulation frameworks in both countries and progress the Single Economic Market Outcomes;
    • encouraging and supporting the two auditing and assurance standards boards to work together in harmonising auditing and assurance standards; and
    • monitoring international developments on audit regulatory frameworks.
  • Promote New Zealand and Australia's international influence in relation to the development of auditing and accounting standards by:
    • supporting increased engagement with and within the Asia-Pacific region and working to enhance the presence and influence of Australia and New Zealand through TTAASAG members attending and reporting back from the IFRS Regional Policy Forum to be held in Kuala Lumpur in March 2012;
    • supporting Australia and New Zealand's contribution to AOSSG;
    • continuing to enhance the profile and influence of Australia and New Zealand in the international arena through the work of the TTAASAG's Nominations Committee.
  • Review the current outcomes objectives and recommend a new set of measurable and time-bound objectives that will further align the financial reporting and auditing frameworks in both countries. TTAASAG will continue to liaise with the Trans-Tasman Outcomes Implementation Group regarding any new outcomes.
  • Continue monitoring the development of an international integrated reporting framework by the International Integrated Reporting Council (IIRC).

1 In January 2012, the IAASB deferred the project on Audit Quality for six months, and re-instigated its project on Auditor Reporting as its highest priority. The Audit Quality consultation paper is expected to be available for comment in June 2012.

2 In March 2012, the XRB Board completed its deliberations on the Accounting Standards Framework.

3 As two of the outcomes are closely related, they are considered together as Outcome A.

4 These proposals were finalised by the XRB in March 2012 and reflected in a draft Tier Strategy submitted to the Minister of Commerce,

5 These proposals were finalised by the XRB in March 2012 , and reflected in a draft Tier Strategy submitted to the Minister of Commerce.

6 In January 2012, the IAASB deferred the project on Audit Quality for six months, and re-instigated its project on Auditor Reporting as its highest priority. The Audit Quality consultation paper is expected to be available for comment in June 2012.

7 The Bill was introduced into Parliament in February 2012.