Commonwealth: Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth)

Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 No. 103, 2004 An Act to amend the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001, and for related purposes Contents 1 Short title 2 Commencement 3 Schedule(s) Schedule 1—Audit Reform Part 1—Audit oversight Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Part 2—Qualifications of auditors Corporations Act 2001 Part 3—Auditor appointment, independence and rotation requirements Corporations Act 2001 Part 4—Registration of authorised audit companies Corporations Act 2001 Part 5—Auditors and AGMs Corporations Act 2001 Part 6—Qualified Privilege Corporations Act 2001 Part 7—Expansion of auditors' duties Corporations Act 2001 Part 8—Companies Auditors and Liquidators Disciplinary Board Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Schedule 2—Financial reporting Part 1—CEO and CFO declarations in relation to listed entity's financial report Corporations Act 2001 Part 2—Content of directors' report for listed public companies Corporations Act 2001 Part 3—Financial Reporting Panel Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Part 4—Content of financial reports Corporations Act 2001 Schedule 2A—Financial reporting (true and fair view) Corporations Act 2001 Schedule 3—Proportionate liability Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Trade Practices Act 1974 Schedule 4—Enforcement Part 1—Revision of criminal penalties Corporations Act 2001 Part 2—Protection for employees reporting breaches Corporations Act 2001 Part 3—Disqualification of directors Corporations Act 2001 Part 4—Civil penalty provisions Corporations Act 2001 Part 5—Other amendments Corporations Act 2001 Schedule 5—Remuneration of directors and executives Corporations Act 2001 Schedule 6—Continuous disclosure Part 1—General Corporations Act 2001 Part 2—Infringement notices Corporations Act 2001 Schedule 7—Disclosure rules Part 1—Presentation of disclosure documents Corporations Act 2001 Part 2—Product Disclosure Statements for continuously quoted securities Corporations Act 2001 Part 3—Exemptions from disclosure requirements Corporations Act 2001 Schedule 8—Shareholder participation and information Corporations Act 2001 Schedule 9—Officers, senior managers and employees Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Schedule 10—Management of conflicts of interest by financial services licensees Corporations Act 2001 Schedule 11—Miscellaneous amendments Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Schedule 11A—Register of information about relevant interests Corporations Act 2001 Schedule 12—Transitional provisions Australian Securities and Investments Commission Act 2001 Corporations Act 2001 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 No. 103, 2004 An Act to amend the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001, and for related purposes [Assented to 30 June 2004] The Parliament of Australia enacts: 1 Short title This Act may be cited as the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, on the day or at the time specified in column 2 of the table. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table The day on which this Act receives the Royal Assent. 30 June 2004 2. Schedule 1 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 2A. Schedule 2, Parts 1 and 2 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 2B. Schedule 2, Part 3 1 January 2005. 1 January 2005 2C. Schedule 2, Part 4 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 2D. Schedule 2A The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 3. Schedule 3 A single day to be fixed by Proclamation. 26 July 2004 (Gazette 2004, No. GN28) However, if any of the provision(s) do not commence within the period of 6 months beginning on the day on which this Act receives the Royal Assent, they commence on the first day after the end of that period. 4. Schedule 4, Part 1 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 5. Schedule 4, Part 2 The day after this Act receives the Royal Assent. 1 July 2004 6. Schedule 4, Part 3 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 7. Schedule 4, Part 4 The day after this Act receives the Royal Assent. 1 July 2004 8. Schedule 4, Part 5 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 9. Schedule 5 The later of: 1 July 2004 (a) 1 July 2004; and (b) the day after this Act receives the Royal Assent. 10. Schedules 6 and 7 The day after this Act receives the Royal Assent. 1 July 2004 11. Schedules 8 and 9 Immediately after the commencement of the provisions covered by table item 9. 1 July 2004 12. Schedule 10 1 January 2005. 1 January 2005 13. Schedule 11 Immediately after the commencement of the provisions covered by table item 2. 1 July 2004 13A. Schedule 11A 1 January 2005. 1 January 2005 14. Schedule 12 The day on which this Act receives the Royal Assent. 30 June 2004 Note: This table relates only to the provisions of this Act as originally passed by the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent. (2) Column 3 of the table is for additional information that is not part of this Act. This information may be included in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Audit Reform Part 1—Audit oversight Australian Securities and Investments Commission Act 2001 1 Paragraph 1(1)(d) After "Standards Board", insert ", an Auditing and Assurance Standards Board". 2 Subsection 5(1) Insert: AUASB means the Auditing and Assurance Standards Board. 3 Subsection 5(1) Insert: auditor independence requirements means the auditor independence requirements provided for in: (a) the Corporations Act; and (b) the codes of professional conduct. 4 Subsection 5(1) Insert: Australian auditor means: (a) an individual auditor; or (b) an audit firm; or (c) an audit company; that is conducting, or that has conducted, audits undertaken for the purposes of the Corporations Act and includes a registered company auditor who is participating in, or has participated in, audits of that kind. 5 Subsection 5(1) Insert: international auditing standards means auditing standards made by: (a) the International Auditing and Assurance Standards Board; or (b) another body specified by the regulations. 6 Subsection 5(1) (after paragraph (ea) of the definition of member) Insert: (eb) in relation to the AUASB—a member of the AUASB; and 7 Subsection 5(1) Insert: professional accounting body means a body prescribed by the regulations for the purposes of this definition. 8 Paragraph 127(4)(a) After "the Disciplinary Board,", insert "the FRC,". 9 After paragraph 213(2)(a) Insert: (aa) to the FRC for the purposes of its performance of its functions under the corporations legislation; or 10 Part 12 (heading) Repeal the heading, substitute: Part 12—The Australian financial reporting system 11 After paragraph 224(a) Insert: (aa) to facilitate the development of auditing and assurance standards and related guidance materials that: (i) provide Australian auditors with relevant and comprehensive guidance in forming an opinion about, and reporting on, whether financial reports comply with the requirements of the Corporations Act; and (ii) require the preparation of auditors' reports that are reliable and readily understandable by the users of the financial reports to which they relate; and 12 Subparagraph 224(b)(iii) Omit "accounting standards", substitute "accounting and auditing standards". 13 Division 1 of Part 12 (heading) Repeal the heading, substitute: Division 1—The financial reporting system 14 Subsection 225(2) Repeal the subsection, substitute: Functions generally (1) The FRC functions are: (a) to provide broad oversight of the processes for setting accounting standards in Australia; and (b) to provide broad oversight of the processes for setting auditing standards in Australia; and (c) to monitor the effectiveness of auditor independence requirements in Australia; and (d) to give the Minister reports and advice about the matters referred to in paragraphs (a), (b) and (c); and (e) the functions specified in subsections (2) (specific accounting standards functions), (2A) (specific auditing standards functions) and (2B) (specific auditor independence functions); and (f) to establish appropriate consultative mechanisms; and (g) to advance and promote the main objects of this Part; and (h) any other functions that the Minister confers on the FRC by written notice to the FRC Chair. Note: The FRC was established by subsection 225(1) of the Australian Securities and Investments Commission Act 1989 and is continued in existence by section 261 of this Act. Specific accounting standards functions (2) The FRC functions include: (a) appointing the members of the AASB (other than the Chair); and (b) approving and monitoring the AASB's: (i) priorities; and (ii) business plans; and (iii) budgets; and (iv) staffing arrangements (including level, structure and composition of staffing); and (c) determining the AASB's broad strategic direction; and (d) giving the AASB directions, advice or feedback on matters of general policy and on the AASB's procedures; and (e) monitoring the development of international accounting standards and the accounting standards that apply in major international financial centres; and (f) furthering the development of a single set of accounting standards for world‑wide use with appropriate regard to international developments; and (g) promoting the continued adoption of international best practice accounting standards in the Australian accounting standard setting processes if doing so would be in the best interests of both the private and public sectors in the Australian economy; and (h) monitoring: (i) the operation of accounting standards to assess their continued relevance and their effectiveness in achieving their objectives in respect of both the private and public sectors of the Australian economy; and (ii) the effectiveness of the consultative arrangements used by the AASB; and (i) seeking contributions towards the costs of the Australian accounting standard setting processes; and (j) monitoring and periodically reviewing the level of funding, and the funding arrangements, for the AASB. Specific auditing standards functions (2A) The FRC functions include: (a) appointing the members of the AUASB (other than the Chair); and (b) approving and monitoring the AUASB's: (i) priorities; and (ii) business plans; and (iii) budgets; and (iv) staffing arrangements (including level, structure and composition of staffing); and (c) determining the AUASB's broad strategic direction; and (d) giving the AUASB directions, advice or feedback on matters of general policy and on the AUASB's procedures; and (e) monitoring the development of international auditing standards and the auditing standards that apply in major international financial centres; and (f) furthering the development of a single set of auditing standards for world‑wide use with appropriate regard to international developments; and (g) promoting the continued adoption of international best practice auditing standards in the Australian auditing standard setting processes if doing so would be in the best interests of both the private and public sectors in the Australian economy; and (h) monitoring: (i) the operation of auditing standards to assess their continued relevance and their effectiveness in achieving their objectives in respect of both the private and public sectors of the Australian economy; and (ii) the effectiveness of the consultative arrangements used by the AUASB; and (i) seeking contributions towards the costs of the Australian auditing standard setting processes; and (j) monitoring and periodically reviewing the level of funding, and the funding arrangements, for the AUASB. Specific auditor independence functions (2B) The FRC functions include: (a) monitoring and assessing the nature and overall adequacy of: (i) the systems and processes used by Australian auditors to ensure compliance with auditor independence requirements; and (ii) the systems and processes used by professional accounting bodies for planning and performing quality assurance reviews of audit work undertaken by Australian auditors to the extent to which those reviews relate to auditor independence requirements; and (iii) the action that Australian auditors who have been subject to such quality assurance reviews have taken in response to the reports prepared as a result of those reviews; and (iv) the action taken by professional accounting bodies to ensure that Australian auditors who have been subject to such quality assurance reviews respond appropriately to the reports prepared as a result of those reviews; and (v) the investigation and disciplinary procedures of professional accounting bodies as those procedures apply to Australian auditors; and (b) monitoring the overall compliance by companies, registered schemes and disclosing entities with the audit‑related disclosure requirements of the Corporations Act and the accounting standards; and (c) giving the Minister reports and advice about the matters referred to in paragraphs (a) and (b); and (d) giving professional accounting bodies reports and advice about the matters referred to in subparagraphs (a)(ii), (iii), (iv) and (v); and (e) monitoring international developments in auditor independence, assessing the adequacy of the Australian auditor independence requirements provided for in: (i) the Corporations Act; and (ii) codes of professional conduct; in the light of those developments and giving the Minister, and professional accounting bodies, reports and advice on any additional measures needed to enhance the independence of Australian auditors; and (f) promoting, and monitoring the adequacy of, the teaching of professional and business ethics by, or on behalf of, professional accounting bodies to the extent to which the teaching of those subjects relates to auditor independence. 15 Subsection 225(6) Omit "formulated and recommended", substitute "made, formulated or recommended". 16 At the end of section 225 Add: (7) The FRC does not have power to direct the AUASB in relation to the development, or making, of a particular auditing standard. (8) The FRC does not have power to veto a standard made, formulated or recommended by the AUASB. 17 After section 225 Insert: 225A Financial Reporting Council's information gathering powers (1) The Chair of the FRC, acting on behalf of the FRC, may give a professional accounting body a written notice requiring the body to give the FRC: (a) a copy of: (i) a code of professional conduct of the body; or (ii) a proposed code of professional conduct of the body; or (iii) a proposed amendment of a code of professional conduct of the body; or (b) information about the body's planning or performance of quality assurance reviews; or (c) details of the body's investigation or disciplinary procedures. (2) The notice may require the body to give the FRC information under paragraph (1)(b) or (c) only to the extent to which the information relates to audit work done by Australian auditors. (3) A professional accounting body has qualified privilege in respect of a disclosure made by the body in response to a notice given to the body under subsection (1). (4) A person has qualified privilege in respect of a disclosure made by the person, on behalf of a professional accounting body, in response to a notice given to the professional body under subsection (1). (5) The Chair of the FRC, acting on behalf of the FRC, may give an Australian auditor a written notice requiring the auditor to give the FRC information about, or documents or copies of documents that relate to, one or more of the following: (a) one or more audits conducted by the auditor or in which the auditor participated; (b) the measures the auditor adopted, or the procedures the auditor put in place, to ensure that the auditor was, and continues to be, independent of entities it audits; (c) any other matter prescribed by the regulations for the purposes of this paragraph. Without limiting this, the documents may be audit working papers. Note: A person responding to a notice under this subsection has qualified privilege in respect of the response (see section 1289 of the Corporations Act). (6) Without limiting subsection (5), the notice: (a) may require the Australian auditor to give the FRC information or a document even if doing so would involve a breach of an obligation of confidentiality that the auditor owes an audited body; and (b) may require that a copy of a document to be given to the FRC must be certified by a particular person or a person holding a particular office or position. (7) The notice under subsection (1) or (5) must specify: (a) the information or documents the professional accounting body or Australian auditor must give; and (b) the period within which the body or auditor must give the information or documents. The period specified under paragraph (b) must be not less than 28 days after the day on which the notice is given. (8) The Chair of the FRC, acting on behalf of the FRC, may, by written notice to the professional accounting body or Australian auditor, extend the period within which the body or auditor must give the information or documents. (9) A person commits an offence if: (a) the Chair of the FRC gives the person notice under subsection (1) or (5); and (b) the person does not comply with the notice. Penalty: 10 penalty units. (10) An offence against subsection (9) is an offence of strict liability. Note: For strict liability see section 6.1 of the Criminal Code. (11) A person commits an offence if: (a) the Chair of the FRC gives a firm a notice under subsection (5); and (b) the person is a member of the firm when the notice is given; and (c) the notice is not complied with. Penalty: 10 penalty units. (12) An offence against subsection (11) is an offence of strict liability. Note: For strict liability see section 6.1 of the Criminal Code. (13) A member of a firm does not commit an offence at a particular time because of a contravention of subsection (11) if the member either: (a) does not know at that time that the Chair of the FRC has given the firm the notice under subsection (5); or (b) knows that the Chair of the FRC has given the firm the notice under subsection (5) at that time but takes all reasonable steps to ensure that the notice is complied with as soon as possible after the member becomes aware of those circumstances. Note: A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code. 18 Subsection 227(7) Repeal the subsection, substitute: 227A The Auditing and Assurance Standards Board (1) The Auditing and Assurance Standards Board is established. (2) The Auditing and Assurance Standards Board: (a) is a body corporate with perpetual succession; and (b) must have a common seal; and (c) may acquire, hold and dispose of real and personal property; and (d) may sue and be sued in its corporate name. Note: The Commonwealth Authorities and Companies Act 1997 applies to the Auditing and Assurance Standards Board. This Act makes provision for reporting obligations (annual report, interim reports and estimates), accounting records, audit, banking, investment of funds and duties of officers. (3) All courts, judges and persons acting judicially must: (a) take judicial notice of the imprint of the common seal of the Auditing and Assurance Standards Board appearing on a document; and (b) presume that the document was duly sealed. 227B AUASB's functions and powers Functions (1) The functions of the AUASB are: (a) to make auditing standards under section 336 of the Corporations Act for the purposes of the corporations legislation; and (b) to formulate auditing and assurance standards for other purposes; and (c) to formulate guidance on auditing and assurance matters; and (d) to participate in and contribute to the development of a single set of auditing standards for world‑wide use; and (e) to advance and promote the main objects of this Part. Note 1: The standards made under paragraph (a) are given legal effect by the Corporations Act. The standards formulated under paragraph (b) do not have legal effect under the Corporations Act itself but may be applied or adopted by some other authority. Note 2: See section 224 and sections 234A to 234D for the framework within which the AUASB is to formulate and make auditing standards. Powers (2) The AUASB has power to: (a) engage staff and consultants; and (b) establish committees, advisory panels and consultative groups; and (c) receive money contributed towards its operating costs; and (d) do anything else that is necessary for, or reasonably incidental to, the performance of its functions. Manner of making and formulating standards (3) Without limiting paragraph (1)(a) or (b), the AUASB may make or formulate an auditing standard by issuing the text of an international auditing standard. (4) The text of the international auditing standard may be modified to the extent necessary to take account of the Australian legal or institutional environment. Manner of participating in the development of international standards (5) Without limiting paragraph (1)(d), the AUASB may distribute the text of a draft international auditing standard (whether or not modified to take account of the Australian legal or institutional environment) for the purposes of consultation. 19 Paragraph 232(a) Omit "paragraph 225(2)(d)", substitute "paragraph 225(2)(c)". 20 Paragraph 232(b) Omit "paragraph 225(2)(e)", substitute "paragraph 225(2)(d)". 21 Paragraph 232(c) Omit "paragraph 225(2)(e)", substitute "paragraph 225(2)(d)". 22 After Division 2 of Part 12 Insert: Division 2A—Auditing standards 234A Purposive interpretation of standards Objects of this Part (1) In interpreting an auditing standard made or formulated by the AUASB, a construction that would promote the objects of this Part is to be preferred to a construction that would not promote those objects. Note: Section 224 states the main objects of this Part. Purposes or objects of particular standard (2) In interpreting an auditing standard made or formulated by the AUASB, a construction that would promote a purpose or object of the standard (to the extent to which it is not inconsistent with the objects of this Part) is to be preferred to a construction that would not promote that purpose or object. This is so even if the purpose or object is not expressly stated in the standard. 234B Generic and specific standards Auditing standards made or formulated by the AUASB may: (a) be of general or limited application (including a limitation to different types of audit and specified industries, bodies or undertakings); and (b) differ according to differences in time, place or circumstance. 234C FRC views In performing its functions, the AUASB must: (a) follow the broad strategic direction determined by the FRC under paragraph 225(2A)(c); and (b) follow the general policy directions given by the FRC under paragraph 225(2A)(d); and (c) take into account the advice and feedback on matters of general policy given by the FRC under paragraph 225(2A)(d). 234D International auditing standards (1) The Minister may give the AUASB a direction about the role of international auditing standards in the Australian auditing standard setting system. (2) Before giving a direction under this section, the Minister must receive and consider a report from the FRC about the desirability of giving the direction. (3) The AUASB must comply with the direction. 234E Validity of auditing standards A failure to comply with this Division in relation to the making of an auditing standard does not affect the validity of the standard. 23 At the end of paragraph 235B(1)(a) Add: (iii) the AUASB and its committees, advisory panels and consultative groups; and 24 After subsection 235B(2) Insert: (2A) The report must include details of any change to the AUASB's priorities or business plan that was made as a result of action taken by the FRC. 25 Subsections 235B(5) and (6) Repeal the subsections, substitute: 235BA Report on auditor independence functions (1) As soon as practicable after 30 June in each year, and in any event before 31 October, the FRC must give the Minister a report on: (a) the performance by the FRC, during the year that ended on 30 June in that year, of its functions under subsection 225(2B) (the auditor independence functions); and (b) the findings and conclusions that the FRC reached in performing those functions; and (c) the actions (if any) that were taken by the FRC in respect of those findings and conclusions. The report may be given to the Minister separately or included in the report given to the Minister under section 235B. (2) The Minister may grant an extension of time in special circumstances. (3) The Minister must table the report in each House of the Parliament as soon as practicable. 26 Paragraph 236A(3)(a) Omit "paragraph 225(2)(e)", substitute "paragraph 225(2)(d)". 27 Paragraph 236A(3)(b) Omit "paragraph 225(2)(e)", substitute "paragraph 225(2)(d)". 28 After Subdivision B of Division 3 of Part 12 Insert: Subdivision BA—The Auditing and Assurance Standards Board 236E Procedures (1) Meetings of the AUASB are to be chaired by: (a) the Chair; or (b) the Deputy Chair if the Chair is absent; or (c) a member chosen by the members present if both the Chair and the Deputy Chair are absent. (2) If a meeting of the AUASB, or a part of one of its meetings, concerns the contents of auditing standards or international auditing standards, the meeting or that part of it must be held in public. (3) The AUASB must: (a) comply with any directions about its procedures that the FRC gives under paragraph 225(2A)(d); and (b) take into account the advice and feedback about its procedures that the FRC gives under paragraph 225(2A)(d). (4) Otherwise, the AUASB may determine its own procedural rules (including rules as to notice of meetings, quorum and voting). 236F Appointment of members of the AUASB Appointment of Chair (1) The Minister appoints the Chair of the AUASB. Appointment of other members (2) The FRC appoints the other members of the AUASB. (3) The AUASB may appoint one of its members to be Deputy Chair of the Board. Qualification for appointment (4) A person must not be appointed as a member of the AUASB unless their knowledge of, or experience in, business, accounting, auditing, law or government qualifies them for the appointment. Appointment document (5) An appointment under subsection (1) or (2) is to be made in writing. Period of appointment (6) The appointment document must specify the period of the appointment (not exceeding 5 years). (7) A member holds office for the period specified in the appointment document and is eligible for re‑appointment. Terms and conditions of appointment (8) The Chair holds office on the terms and conditions that are determined by the Minister. (9) The other members hold office on the terms and conditions determined by the FRC. 236G Resignation and termination of appointment Resignation (1) A member of the AUASB may resign their appointment by giving a written resignation to: (a) if the member is the Chair of the AUASB—the Minister; or (b) in any other case—the Chair of the FRC. Termination of Chair's appointment (2) The Chair is not to be removed from office except as provided by subsection (3) or (4). (3) The Minister may terminate the appointment of the Chair of the AUASB for: (a) misbehaviour or physical or mental incapacity; or (b) breach of the terms and conditions of their appointment. (4) The Minister must terminate the appointment of the Chair of the AUASB if the Chair: (a) becomes bankrupt; or (b) applies to take the benefit of any law for the relief of bankrupt or insolvent debtors; or (c) compounds with their creditors; or (d) makes an assignment of their remuneration or property for the benefit of their creditors; or (e) contravenes section 237. Termination of ordinary member's appointment (5) A member of the AUASB (other than the Chair) is not to be removed from office except as provided by subsection (6) or (7). (6) The FRC may terminate the appointment of a member of the AUASB (other than the Chair) for: (a) misbehaviour or physical or mental incapacity; or (b) breach of the terms and conditions of the member's appointment. (7) The FRC must terminate the appointment of a member of the AUASB (other than the Chair) if the member: (a) becomes bankrupt; or (b) applies to take the benefit of any law for the relief of bankrupt or insolvent debtors; or (c) compounds with their creditors; or (d) makes an assignment of their remuneration or property for the benefit of their creditors; or (e) contravenes section 237. 236H Acting appointments (1) The Minister may appoint a person to act as Chair of the AUASB: (a) during a vacancy in the office of Chair (whether or not an appointment has previously been made to the office); or (b) during any period, or during all periods, when the Chair is absent from duty or from Australia, or is for any reason unable to perform the duties of the office. (2) The AUASB may appoint one of its members to act as Deputy Chair of the AUASB: (a) during a vacancy in the office of Deputy Chair (whether or not an appointment has previously been made to the office); or (b) during any period, or during all periods, when the Deputy Chair is absent from duty or from Australia, or is for any reason unable to perform the duties of the office. (3) The FRC may appoint a person to act as a member of the AUASB (other than the Chair): (a) during a vacancy in the office of the member (whether or not an appointment has previously been made to the office); or (b) during any period, or during all periods, when the member is absent from duty or from Australia, or is for any reason unable to perform the duties of the office. (4) Anything done by, or in relation to, a person purporting to act under an appointment is not invalid merely because: (a) the occasion for the appointment had not arisen; or (b) there was a defect in connection with the appointment; or (c) the appointment had ceased to have effect; or (d) the occasion to act had not arisen or had ceased. 29 Subsection 237(1) Omit "and the AASB", substitute ", the AASB and the AUASB". 30 Paragraph 237(2)(b) Omit "or the AASB's", substitute ", the AASB's or the AUASB's". 31 Paragraph 237(2)(c) Omit "a body that sets international accounting standards", substitute "bodies that set international accounting standards or international auditing standards". 32 At the end of subsection 237(2) Add: ; or (e) is made to the Disciplinary Board for the purposes of its performance of its functions under the corporations legislation; or (ea) is made to APRA for the purposes of its performance of its functions; or (f) is made to a professional accounting body for the purposes of its performance of its functions. 33 Paragraphs 238(b) and (c) Repeal the paragraphs, substitute: (b) in paying or discharging, or reimbursing someone for, the costs, expenses and other obligations incurred in connection with the performance by the FRC of its functions and the exercise by the FRC of its powers; and (c) in meeting the administrative expenses of the committees and advisory groups the FRC establishes; and (d) in payment of any remuneration and allowances payable to any person appointed to the FRC or the AASB under this Part; and (e) in making payments to the AUASB. 34 At the end of section 238 Add: (2) The money of the AUASB must be applied only: (a) in payment or discharge of the costs, expenses and other obligations incurred by the AUASB in the performance of its functions or the exercise of its powers under this Act; and (b) in paying or discharging, or reimbursing someone for, the costs, expenses and other obligations incurred in connection with the performance by the FRC of its functions and the exercise by the FRC of its powers; and (c) in meeting the administrative expenses of the committees and advisory groups the FRC establishes; and (d) in payment of any remuneration and allowances payable to any person appointed to the FRC or the AUASB under this Part; and (e) in making payments to the AASB. 35 After paragraph 246(h) Insert: (i) a person engaged as a member of staff, or a consultant, of the AASB under paragraph 227(3)(a); (j) a person engaged as a member of staff, or a consultant, of the AUASB under paragraph 227B(2)(a); (k) an officer or employee of an Agency (within the meaning of the Public Service Act 1999), or of an authority of the Commonwealth, whose services are made available to the FRC or the Disciplinary Board in connection with the performance or exercise of any of its functions or powers; (l) a person engaged by an Agency (within the meaning of the Public Service Act 1999), or of an authority of the Commonwealth, to provide services to the FRC in connection with the performance or exercise of any of its functions or powers; 36 At the end of section 246 Add: (2) Without limiting paragraph (1)(f), the following are taken to be persons appointed for the purposes of this Act: (a) a member of the Disciplinary Board; (b) a member of the FRC or of a committee or advisory group established by the FRC; (c) a member of the AASB or of a committee, advisory panel or consultative group established by the AASB; (d) a member of the AUASB or of a committee, advisory panel or consultative group established by the AUASB. Corporations Act 2001 37 Section 9 Insert: AUASB means the Auditing and Assurance Standards Board. 38 Section 9 Insert: auditing standard means: (a) a standard in force under section 336; or (b) a provision of such a standard as it so has effect. 39 Section 9 Insert: professional accounting body has the same meaning as in the ASIC Act. 40 After section 307 Insert: 307A Audit to be conducted in accordance with auditing standards (1) If an individual auditor, or an audit company, conducts: (a) an audit of the financial report for a financial year; or (b) an audit or review of the financial report for a half‑year; the individual auditor or audit company must conduct the audit or review in accordance with the auditing standards. (2) If an audit firm, or an audit company, conducts: (a) an audit of the financial report for a financial year; or (b) an audit or review of the financial report for a half‑year; the lead auditor for the audit or review must ensure that the audit or review is conducted in accordance with the auditing standards. (3) An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability see section 6.1 of the Criminal Code. 307B Audit working papers to be retained for 7 years Contravention by individual auditor or audit company (1) An auditor contravenes this subsection if: (a) the auditor is an individual auditor or an audit company; and (b) the auditor conducts: (i) an audit of the financial report for a financial year; or (ii) an audit or review of the financial report for a half‑year; and (c) the auditor does not retain all audit working papers prepared by or for, or considered or used by, the auditor in accordance with the requirements of the auditing standards until: (i) the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the audit working papers relate; or (ii) an earlier date determined for the audit working papers by ASIC under subsection (6). (2) An offence based on subsection (1) is an offence of strict liability. Note: For strict liability see section 6.1 of the Criminal Code. Contravention by member of audit firm (3) A person (the defendant) contravenes this subsection if: (a) an audit firm conducts: (i) an audit of the financial report for a financial year; or (ii) an audit or review of the financial report for a half‑year; and (b) the audit firm fails, at a particular time, to retain all audit working papers prepared by or for, or considered or used by, the audit firm in accordance with the requirements of the auditing standards until: (i) the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the documents relate; or (ii) the earlier date determined by ASIC for the audit working papers under subsection (6); and (c) the defendant is a member of the firm at that time. (4) An offence based on subsection (3) is an offence of strict liability. Note 1: For strict liability see section 6.1 of the Criminal Code. Note 2: Subsection (5) provides a defence. (5) A member of an audit firm does not commit an offence at a particular time because of a contravention of subsection (3) if the member either: (a) does not know at that time of the circumstances that constitute the contravention of subsection (3); or (b) knows of those circumstances at that time but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances. Note: A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code. Earlier retention date for audit working papers (6) ASIC may, on application by a person, determine, in writing, an earlier date for the audit working papers for the purposes of paragraphs (1)(c) and (3)(b) if: (a) the auditor is an individual auditor and the auditor: (i) dies; or (ii) ceases to be a registered company auditor; or (b) the auditor is an audit firm and the firm is dissolved (otherwise than simply as part of a reconstitution of the firm because of the death, retirement or withdrawal of a member or members or because of the admission of a new member or members); or (c) the auditor is an audit company and the company: (i) is wound up; or (ii) ceases to be an authorised audit company. (7) In deciding whether to make a determination under subsection (6), ASIC must have regard to: (a) whether ASIC is inquiring into or investigating any matters in respect of: (i) the auditor; or (ii) the audited body for the audit to which the documents relate; and (b) whether the professional accounting bodies have any investigations or disciplinary action pending in relation to the auditor; and (c) whether civil or criminal proceedings in relation to: (i) the conduct of the audit; or (ii) the contents of the financial report to which the audit working papers relate; have been, or are about to be, commenced; and (d) any other relevant matter. Audit working papers kept in electronic form (8) For the purposes of this section, if audit working papers are in electronic form they are taken to be retained only if they are convertible into hard copy. 41 After subsection 308(3) Insert: (3A) The auditor's report must include any statements or disclosures required by the auditing standards. 42 After subsection 309(5) Insert: (5A) The auditor's report must include any statements or disclosures required by the auditing standards. 43 Part 2M.5 (heading) Repeal the heading, substitute: Part 2M.5—Accounting and auditing standards 44 Sections 337 and 339 Repeal the sections, substitute: 336 Auditing standards AUASB's power to make auditing standards (1) The AUASB may make auditing standards for the purposes of this Act. The standards must be in writing and must not be inconsistent with this Act or the regulations. (2) A standard made under subsection (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901. Note: Section 5C provides that the Acts Interpretation Act 1901 (as in force on 1 November 2000) applies to this Act. (3) An auditing standard applies to financial reports in relation to: (a) periods ending after the commencement of the standard; or (b) periods ending, or starting, on or after a later date specified in the standard. (4) If: (a) the AUASB makes an auditing standard; and (b) the standard applies to financial reports in relation to particular periods under subsection (3); and (c) an auditor is conducting an audit of a financial report in relation to a period that occurs before the start of the earliest of those periods; the auditor may elect to apply the auditing standard to that audit unless the standard says otherwise. The election must be recorded in the audit report. 337 Interpretation of accounting and auditing standards In interpreting an accounting or auditing standard, unless the contrary intention appears: (a) expressions used in the standard have the same meanings as they have in this Chapter; and (b) the provisions of Part 1.2 apply as if the standard's provisions were provisions of this Chapter. 338 Evidence of text of accounting standard or auditing standard (1) This section applies to a document that purports to be published by, or on behalf of, the AASB or the AUASB and to set out the text of: (a) a specified standard as in force at a specified time under section 334 or 336; or (b) a specified provision of a standard of that kind. It also applies to a copy of a document of that kind. (2) In the absence of evidence to the contrary, a document to which this section applies is proof in proceedings under this Act that: (a) the specified standard was in force at that time under that section; and (b) the text set out in the document is the text of the standard referred to in paragraph (1)(a) or the provision referred to in paragraph (1)(b). 45 After section 989C Insert: 989CA Audit to be conducted in accordance with auditing standards (1) If an individual auditor, or an audit company, conducts an audit of a profit and loss statement and balance sheet for the purposes of this Subdivision, the individual auditor or audit company must: (a) conduct the audit in accordance with the auditing standards; and (b) include in the audit report on the profit and loss statement, and balance sheet, any statements or disclosures required by the auditing standards. (2) If an audit firm, or an audit company, conducts an audit of a profit and loss statement and balance sheet for the purposes of this Subdivision, the lead auditor for the audit or review must ensure that: (a) the audit is conducted in accordance with the auditing standards; and (b) the audit report on the profit and loss statement, and balance sheet, includes any statements or disclosures required by the auditing standards. (3) An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability see section 6.1 of the Criminal Code. 46 Schedule 3 (before table item 104) Insert: 103B Subsections 307A(1) and (2) 50 penalty units. 103C Subsection 307B(1) 50 penalty units. 103D Subsection 307B(3) 50 penalty units. 47 Schedule 3 (table item 104) Repeal the item, substitute: 104 Subsections 308(1), (2), (3), (3A) and (4) 50 penalty units. 48 Schedule 3 (after table item 104) Insert: 104A Subsections 309(1), (2), (3), (4), (5), (5A) and (6) 50 penalty units. 49 Schedule 3 (after table item 283C) Insert: 283CA Subsections 989CA(1) and (2) 50 penalty units. Part 2—Qualifications of auditors Corporations Act 2001 50 Subparagraph 1274(2)(a)(ii) After "section 1287", insert ", 1287A". 50A Subsection 1279(2) Repeal the subsection, substitute: (2) An application under this section: (a) must be lodged with ASIC; and (b) must contain such information as is prescribed in the regulations; and (c) must be in the prescribed form. 51 Paragraph 1280(2)(a) Repeal the paragraph, substitute: (a) the applicant satisfies subsection (2A) or (2B); and 52 Paragraph 1280(2)(b) Repeal the paragraph, substitute: (b) ASIC is satisfied that the applicant has either: (i) satisfied all the components of an auditing competency standard approved by ASIC under section 1280A; or (ii) had such practical experience in auditing as is prescribed; and 53 After subsection 1280(2) Insert: (2A) The applicant satisfies this subsection if the applicant: (a) holds a degree, diploma or certificate from a prescribed university or another prescribed institution in Australia; and (b) has, in the course of obtaining that degree, diploma or certificate, passed examinations in such subjects, under whatever name, as the appropriate authority of the university or other institution certifies to ASIC to represent a course of study: (i) in accountancy (including auditing) of not less than 3 years duration; and (ii) in commercial law (including company law) of not less than 2 years duration; and (c) has satisfactorily completed a course in auditing prescribed by the regulations for the purposes of this paragraph. (2B) The applicant satisfies this subsection if the applicant has other qualifications and experience that, in ASIC's opinion, are equivalent to the requirements mentioned in subsection (2A). 54 After section 1280 Insert: 1280A Approval of auditing competency standard (1) ASIC may, on application by any person, approve an auditing competency standard for the purposes of paragraph 1280(2)(b). The approval must be in writing. (2) If, on application by a person, ASIC approves an auditing competency standard under subsection (1), ASIC may, on application by that person, approve a variation of the standard. The approval must be in writing. (3) ASIC must not approve an auditing competency standard, or a variation of an auditing competency standard, unless it is satisfied that: (a) the standard, or the standard as proposed to be varied, provides that a person's performance against each component of the standard is to be appropriately verified by a person who: (i) is a registered company auditor; and (ii) has sufficient personal knowledge of the person's work to be able to give that verification; and (b) the standard, or the standard as proposed to be varied, is not inconsistent with this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities; and (c) the standard adequately addresses the level of practical experience needed for registration as a company auditor; and (d) the standard is harmonised to the greatest extent possible with other approved auditing competency standards. (4) ASIC may revoke an approval of an auditing competency standard: (a) on application by the person who applied for the approval; or (b) if ASIC is no longer satisfied as mentioned in subsection (3). The revocation must be in writing. 55 At the end of section 1281 Add: (2) A person to whom the Auditor‑General of the Commonwealth, or of a State or Territory, delegates: (a) the function of conducting an audit; or (b) the power to conduct an audit; is taken to be registered as an auditor under this Part for the purposes of applying Chapter 2M to the audit. 56 After section 1287 Insert: 1287A Annual statements by registered company auditors (1) A person who is a registered company auditor must, within one month after the end of: (a) the period of 12 months beginning on the day on which the person's registration begins; and (b) each subsequent period of 12 months; lodge with ASIC a statement in respect of that period. (1A) A statement under subsection (1): (a) must contain such information as is prescribed in the regulations; and (b) must be in the prescribed form. (2) ASIC may, on the application of the person made before the end of the period for lodging a statement under subsection (1), extend, or further extend, that period. 57 Subsection 1288(3) Omit "registered company auditor or". Note: The heading to section 1288 is altered by omitting "auditors and". 58 Subsection 1288(4) Omit "a registered company auditor or". 59 After Division 2 of Part 9.2 Insert: Division 2A—Conditions on registration of auditors 1289A ASIC may impose conditions on registration (1) Under this section, ASIC may impose only conditions of a kind specified in the regulations. (2) Subject to this section, ASIC may, at any time, by giving written notice to a person registered as an auditor: (a) impose conditions, or additional conditions, on their registration; and (b) vary or revoke conditions imposed on their registration. (3) ASIC may do so: (a) on its own initiative; or (b) if the registered company auditor lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph. Note: For fees in respect of lodging applications, see Part 9.10. (4) Except where conditions are varied on the application of the registered company auditor, ASIC may only impose conditions or additional conditions, or vary the conditions, on registration after giving the auditor an opportunity: (a) to appear, or be represented, at a hearing before ASIC that takes place in private; and (b) to make submissions to ASIC in relation to the matter. This subsection does not apply to ASIC imposing conditions at the time when the applicant is registered. 60 Subparagraph 1292(1)(a)(i) Omit "section 1288", substitute "section 1287A". 61 After subparagraph 1292(1)(a)(i) Insert: (ia) failed to comply with a condition of the person's registration as an auditor; or 62 After paragraph 1292(1)(a) Insert: (b) the person either: (i) has not performed any audit work during a continuous period of not less than 5 years; or (ii) has not performed any significant audit work during a continuous period of not less than 5 years; and, as a result, has ceased to have the practical experience necessary for carrying out audits for the purposes of this Act; or 63 After subsection 1292(1) Insert: (1A) In determining for the purposes of subparagraph (1)(b)(ii) whether audit work performed by a person is significant, have regard to: (a) the nature of the audit; and (b) the extent to which the person was involved in the audit; and (c) the level of responsibility the person assumed in relation to the audit. 64 Section 1298 Omit "section 1288", substitute "sections 1287A and 1288". Part 3—Auditor appointment, independence and rotation requirements Corporations Act 2001 66 Section 9 Insert: associated entity has the meaning given by section 50AAA. 67 Section 9 Insert: audit means an audit conducted for the purposes of this Act and includes a review of a financial report for a half‑year conducted for the purposes of this Act. 68 Section 9 Insert: audit activity: see the definition of engage in audit activity. 69 Section 9 Insert: audit company means a company that consents to be appointed, or is appointed, as auditor of a company or registered scheme. 70 Section 9 Insert: audit‑critical employee, in relation to a company, or the responsible entity for a registered scheme, that is the audited body for an audit, means a person who: (a) is an employee of the company or of the responsible entity for the registered scheme; and (b) is able, because of the position in which the person is employed, to exercise significant influence over: (i) a material aspect of the contents of the financial report being audited; or (ii) the conduct or efficacy of the audit. 71 Section 9 Insert: audited body, in relation to an audit of a company or registered scheme, means the company or registered scheme in relation to which the audit is, or is to be, conducted. 72 Section 9 Insert: audit firm means a firm that consents to be appointed, or is appointed, as auditor of a company or registered scheme. 73 Section 9 Insert: auditor independence requirements of this Act means the requirements of Divisions 3, 4 and 5 of Part 2M.4. 74 Section 9 Insert: authorised audit company means a company registered under Part 9.2A. 75 Section 9 Insert: engage in audit activity: an individual auditor, audit firm or audit company engages in audit activity in relation to an audited body for an audit if the individual auditor, audit firm or audit company: (a) consents to be appointed as auditor of the audited body for a financial year; or (b) acts as the auditor of the audited body for a financial year; or (c) prepares a report in relation to the audited body that is required by this Act to be prepared by: (i) a registered company auditor; or (ii) an auditor of the audited body in relation to a financial year or half‑year. 76 Section 9 Insert: immediate family member for a person means: (a) the person's spouse or de facto spouse; or (b) a person who is wholly or partly dependent on the person for financial support. 77 Section 9 Insert: individual auditor means an individual who consents to be appointed, or is appointed, as auditor of a company or registered scheme. 78 Section 9 Insert: investment in a company, disclosing entity or other body means: (a) a share in the company, disclosing entity or body; or (b) a debenture of the company, disclosing entity or body; or (c) a legal or equitable interest in: (i) a share in the company, disclosing entity or body; or (ii) a debenture of the company, disclosing entity or body; or (d) an option to acquire (whether by way of issue or transfer) an investment in the company, disclosing entity or body covered by paragraph (a), (b) or (c); or (e) an option to dispose of an investment in the company, disclosing entity or body covered by paragraph (a), (b) or (c); or (f) an interest a person holds under an arrangement that is a derivative if: (i) the consideration to be provided under the arrangement; or (ii) the value of the arrangement; is ultimately determined, derived from or varies by reference to an investment in the company, disclosing entity or body covered by paragraph (a), (b), (c), (d) or (e). To avoid doubt, the consideration to be provided under, or the value of, an arrangement in relation to an index is not ultimately determined, derived from or varies by reference to an investment in the company merely because the investment is taken into account in determining the value of the index. 79 Section 9 Insert: investment in a registered scheme means: (a) an interest in the scheme; or (b) a legal or equitable interest in an interest in the scheme; or (c) an option to acquire (whether by way of issue or transfer) an investment in the scheme covered by paragraph (a) or (b); or (d) an option to dispose of an investment in the scheme covered by paragraph (a) or (b); or (e) an interest a person holds under an arrangement that is a derivative if: (i) the consideration to be provided under the arrangement; or (ii) the value of the arrangement; is ultimately determined, derived from or varies by reference to an investment in the scheme covered by paragraph (a), (b), (c) or (d); or (f) an investment in the responsible entity of the scheme. To avoid doubt, the consideration to be provided under, or the value of, an arrangement in relation to an index is taken not to be ultimately determined, derived from or vary by reference to an investment in the scheme merely because the investment is taken into account in determining the value of the index. 80 Section 9 Insert: lead auditor has the meaning given by section 324AF. 81 Section 9 Insert: non‑audit services provider for an auditor conducting an audit means a person who: (a) is not a professional member of the audit team conducting the audit of the audited body; and (b) is either: (i) if the auditor is an individual auditor—an employee of the individual auditor (or of an entity acting for, or on behalf of, the individual auditor); or (ii) if the auditor is an audit firm—a member of the audit firm or senior manager of the audit firm (or of an entity acting for, or on behalf of, the audit firm); or (iii) if the auditor is an audit company—a director of the audit company or a senior manager of the audit company (or of an entity acting for, or on behalf of, the audit company); and (c) provides, or has provided, services (other than services related to the conduct of an audit) to the audited body. 82 Section 9 Insert: play a significant role: a person plays a significant role in the audit of a company or a registered scheme for a financial year if: (a) the person is appointed as an individual auditor of the company or scheme for that financial year and: (i) acts as an auditor for the company or scheme for that financial year; or (ii) prepares an audit report for the company or the scheme in relation to a financial report of the company or scheme for that financial year or for a half‑year falling within that financial year; or (b) a firm or company is appointed as an auditor of the company or scheme for that financial year and the perso