Thursday, June 2, 2011

As of 2 July 2011 all my new blogs will be posted in the Institute’s new myCommunity section.

To follow my blog at its new location, I invite you to login to this exciting new online resource for Institute members and finance professionals.

I look forward to hearing your views on future blog posts in myCommunity.

Lee White

Monday, May 16, 2011

Improving regulation of the insolvency profession

The Senate Economics Reference Committee has made recommendations to government on the regulation of insolvency practitioners in Australia, with the aim of giving corporate insolvency greater priority and prominence in the regulatory framework.

The Institute was closely involved in the Senate Committee consultation process through a detailed submission and an invitation to provide evidence.

We support the push for greater prominence of the insolvency profession but not just with the regulatory structures. A better understanding of insolvency activities and challenges will greatly assist quality outcomes.

The Committee's work was triggered by concerns over the conduct of some insolvency practitioners and claims there had been a lack of action by the regulator, Australian Securities and Investment Commission (ASIC).

The most controversial recommendation was to remove the task of regulating corporate insolvency from ASIC and pass the job onto the Insolvency and Trustee Services Australia (ITSA) agency. This seems like an unlikely outcome, given the transfer of key functions by government to ASIC, such as market supervision from the Australian Securities Exchange.

ASIC has acknowledged the need to lift its game in the insolvency space – it’s allocated more resources to the division. Despite the increase in its regulatory activities over practitioners, this response has drawn yet more criticism - increased activity without improved quality. We don't share these criticisms but we believe it is important to get the right balance in approach to driving improved quality of services, particularly in the co-regulatory environment.

The current laws and regulatory framework can be improved and the insolvency profession, like all professions, should be subject to continual review, be clearly accountable and respond to the changing conditions in the business environment.

What are your thoughts on the regulation of insolvency practitioners?

Tuesday, March 29, 2011

Early warning systems – can more be done to avert economic and financial crisis?

Australia can be pleased with the performance of the economy and financial system during the GFC. Certainly compared to the turmoil in the northern hemisphere, we weathered the storm relatively unscathed. And to be frank there was probably equal weight of good management as well as good luck that helped Australia through.

Nevertheless, I believe it’s important we continue to improve the systems that keep Australia strong. We need to think and explore further improvements to our policy settings, regulatory structures and overall corporate governance to ensure we stay ahead of the game.

At the Institute, our mandate is to serve the public interest - influencing public policy, contributing to and affecting the changes emanating from Canberra, the legislation that will ultimately impact you – the taxpayer.

In keeping with our mandate, the Institute recently released a thought leadership paper entitled Early warning systems – can more be done to avert economic and financial crisis? In collaboration with Access Economics, the paper aims to stimulate thinking and discussions to identify improvements in our macro- and micro economies.

I am very pleased with how this paper has been received since it was released. It appears to have ‘hit the mark’ with our members, regulators and policy makers, both locally and internationally.

Please find some time to consider the paper and let me know whether you think it is tackling the right issues. Also I would really welcome your thoughts and comments about other topics that we should be pursuing with our broader business, economic focus.

Tuesday, February 22, 2011

A wrap-up of the EC conference

It’s been a week since returning to Australia, and I’ve had time to consider further and reflect on the discussions I’d been a part of in Brussels. Here are my brief wrap-up thoughts:

Clearly, there will be change occurring with the policy settings concerning external audit in Europe – Commissioner Barnier made that clear – but what is unknown will be the extent of these changes. For each topic discussed in Brussels there were strong arguments both for and against.

The timing of these changes was set at ‘the end of the European summer’ or no later than the end of October 2011 for a proposed directive.

It seems fairly clear to me that all European countries will be heading to using and following the International Auditing Standards – a sensible outcome.

My sense on auditor independence is that there will certainly be some tightening of limitations on the type of non-audit services that auditors can provide to their clients. I don’t believe that Europe will head for a total ban on all non-audit services – but it was certainly discussed and did have some supporters.

To stimulate the audit concentration focus, suggestions on mandatory rotation of audit firms and joint audits were discussed in great detail. If these were seen to be a ‘bit heavy handed’ then regular competitive tendering may be seen as a suitable option.

The absence of an appropriate legal liability regime (liability capping) in Europe was highlighted as currently being a significant limitation in Europe.

There was much focus and discussion on the evolving role of the audit committee and recognition that it is such a critical component of corporate governance.

My suggestion to assist with appraising all of these current options is to continue to focus on the question – does this proposed change lead to an improvement in audit quality?
At the end of the day, no-one would dispute that we all are committed to the goal of improved audit quality.

Finally in Australia, we should not simply assume that changes in Europe will automatically flow to Australia – we need to consider our individual jurisdiction policy settings and regulatory framework and reach the right judgements about any proposed changes – change simply for the sake of change is not good enough.

Friday, February 11, 2011

EC conference on Financial Reporting and Auditing – Day 2: Audit

Day 2 of the European Commission roundtable in Brussels commenced with a keynote presentation from Michel Barnier (Commissioner for Internal Market and Services).

His opening remarks sent a clear and strong message. He reiterated a view that the 'status quo regarding auditing was not an option'. The EC received 700 responses totalling 10,000 pages and he was currently 'seriously thinking' about the proposed changes. The changes were to support his goal of having a strong single market for Europe.

Commissioner Barnier outlined 5 areas of proposed changes:

1. Clarifying the role of audit – the relationship of audit should not just be with the audited company but with a much broader group, particularly the investors. A view on the state of the health of a company - not just the numbers - is needed.

2. Independence of the Profession – trust of the auditors needs to be re-established. He is looking at the options of mandatory periodic tendering, rotation of audit firms and regulatory approval of auditors for systemic risk companies.

3. Structure of the audit market – the focus on audit share by any firm should have a ceiling and support the French model of joint audits.

4. SME and SMPs – the 'lung for Europe's economy'. He wishes to encourage growth and will consider different levels of requirements for different companies and auditors.

5. Better international co-operation – regulators need to work better together. He commented that Europe's patience was running out with the US desire to converge their accounting standards.

Importantly, the majority of the areas the Commissioner focused on were related to changing and improving the role of the Audit Committee. This is an area highlighted in the Institute’s submissions to EC and the UK House of Lords!

Stay tuned, still more to come!

Thursday, February 10, 2011

EC conference on Financial Reporting and Auditing – Day 1: Financial Reporting

Day 1 of the European Commission roundtable in Brussels started - with a bang - with the opening address from Jonathan Faull - Director General for Internal Market and Services, European Commission.

Speaking to a packed room of nearly 450 international delegates, Mr Faull sent a clear and strong message that the financial crisis and economic downturn in Europe and other countries is 'still on' and, therefore, the discussions of the next couple of days would be focused on solutions.

Mr Faull’s keynote address 'A Time for Change' highlighted two areas of financial reporting, these being financial accounting standards convergence and governance around the IASB.

He stated that the EC decision to adopt IFRS in 2005 for their capital markets was 'the right one' and he recognised that 2011 should be an important year for convergence. He referred to the obvious example of the United States but talked about other countries as well. A salient point here was that whilst convergence was important it should not compromise the quality of accounting standards.

Secondly the issue of governance around the IASB was highlighted for change. It was clear the governance arrangements needed to improve and this will occur through the consultation of a paper issued by the Monitoring Board.

The widely anticipated roundtable event should provide some interesting insights into the EC's audit reform agenda, as well as IFRS, with some high profile speakers including the incoming IASB chair Hans Hoogervorst and EC Internal Markets boss Michel Barnier.

Tomorrow will cover EC audit reform and we expect strong opinions being voiced, starting with Michel Barnier (Commissioner for Internal Market and Services) at 9.45am Brussels time.

Stay tuned - much more to come.

Thursday, January 27, 2011

Academia and the profession working together!

There’s a paradigm shift about to emerge: a forum in Adelaide next week will bring together accounting practitioners with leaders in accounting academia. The aim is to investigate the contemporary challenges around accounting education, academe and the accounting profession in Australia.

What makes this event particularly interesting is that academics and practitioners will participate on the panels of discussion at the same time. Our profession has not seen this approach often and I am optimistic that it will lead to some frank and open conversations. It makes good sense to have these two groups together and engaged on the right issues.

From a practitioner’s perspective, over many years I have always felt torn with academic research. I have seen considerable research that is quite innovative and challenging and leaves me curious for more, while also spurring me to apply these findings to my own work environment. In short, the research is achieving its goals - engaging and driving practitioners to solutions.

But I have also seen research that leaves me underwhelmed – being left with questions like: why has this research been done, what is it trying to achieve, or in particular, I think this research is very helpful but it has been published long after, making the research practically obsolete! This last point – for me – is a particular challenge.

Practitioners see business conditions move significantly – we have all seen this with the GFC in recent times. Because they are working within these dynamic conditions – their expectations for academic research is equally time-sensitive. Some may suggest that this is not reasonable – research needs sufficient time to draw the facts together, undertake the analysis and formulate views and recommendations – and I can accept that too. But where is the optimum positioning with these two views?

The forum in Adelaide could be a potential start to a new working partnership between academia and the profession.