Accounting Infrastructure Reform Bill

I just reiterate the support that Labour has for this bill. What we have done throughout this discussion and throughout the debates on the first reading through to the select committee hearings is that we heard from a broad spectrum of voices from the accountancy, audit, and professional services on this Accounting Infrastructure Reform Bill. It appears to be quite straightforward, and in a lot of ways it is. It does make some general changes, with the intent of making the accounting and audit industry more efficient and effective. I think it is part of a spectrum of measures that the Commerce Committee worked quite cooperatively around to take a common-sense approach to the way that our financial systems operate and to try to bring some accord between particularly the New Zealand and Australian ways that this operates.

Five particular law changes are included in this bill to reduce restrictions on the legal form for audit firms, to provide that charities assurance, which I know that my colleague Mr Nash has reservations about. There was quite a degree of consideration around the changes to charities audits in the bill. The bill requires charities over a certain size to have their financial statements assured by a qualified auditor. Many charities of the large size already obtain assurance, and these provisions make that compulsory. What is actually happening is that it is being made compulsory and ensuring that the quality of the assurance of those charities of that size are brought about by requiring them to be performed by a qualified auditor using the correct audit standards.

The third thing it does is that it means that members of accredited bodies perform statutory audits. From my perspective one of the most significant parts of this bill is that members of accredited professional bodies be allowed to perform most statutory audits if they are recognised by their professional body to be qualified to do so. I think what that does is bring about that efficiency.

The only rider to that is that there is an exemption. There is an exemption on religious grounds, which is most unusual. We do not see that in most legislation—or any legislation, in my experience—that has come before the House. As to how that will actually play out and what the implications of that are, especially given that we are talking about auditing, an auditing function, which is a position of great trust, I am yet to be fully convinced that the legislation is actually going to provide the protections that are necessary to those bodies being audited, and to the general public having confidence in the system. I am not saying that we should not do it; I am just expressing some unease, still, around that.

Fourthly, in respect of qualified accountants performing statutory accounting roles, references to “chartered accountant” in various Acts will be replaced with “qualified accountant” where the context relates to specifying who can perform those accounting-related statutory roles, in order to include the qualified members of the accredited bodies.

Then there were the changes to the New Zealand Institute of Chartered Accountants Act 1996, which are necessary to ensure that agreement to join the Institute of Chartered Accountants in Australia in a combined new trans-Tasman institute. I suppose, in relation to that, it makes sense, and there is no doubt about that. There was wide agreement—not complete agreement.

I am going to make only a very short speech. I have just a couple of quick questions on this, and they are around the commencement. Obviously, you have your stock standard lines that through the Governor-General by Order in Council the bill will become an Act. I am slightly curious, so maybe the Minister of Commerce can help me out on this one, and I was not on the Commerce Committee so I am not privy to this, and maybe one of my colleagues who was will help me. Clause 2(2) actually says: “To the extent that it has not previously been brought into force under subsection (1), the rest of this Act comes into force on 1 April 2017.” I am not too sure but are there some parts of this bill that actually are not going to be brought into force for another 2½ years? That would seem like a long time for a bill that professes a level of transparency that is required, which I think this bill brings, by and large. I have outlined some of my concerns around the charities provisions, and my colleague Clare Curran has talked about those. I still have slight concerns, to be honest.

💬 Clare Curran: I’m sure we can continue the discussion.

Well, I do have some slight concerns that if you have an operation between $0.5 million and $1 million, you do not have to get your accounts fully audited, though they can be reviewed. The Minister talked about the difference between being reviewed and being audited. I appreciate that, and I thank the Minister for his input on that. But are there any parts of the Act that actually are not going to be enforced for another 2½ years? I get the date. Obviously, 1 April is the beginning of the financial year for 2017, but it is a long time, I think you will agree, between this Act coming into force and parts of this Act not being law for 2½ years.

I wonder whether there is a reason behind this. There often are when you get these sorts of Acts, because there are processes that are already in place that need to go through to their conclusion. Obviously, there is no point in having retrospective legislation, even though this is not technically retrospective. If there is already a process in place or things need to run their course, then I understand that. I must admit that 2½ years does seem quite a long time, but there may be something in here that I am unsure of or I do not know about, and therefore the Minister, or maybe even Miss Curran, could enlighten me on that. It is quite a long time.

The other thing, also, is that it is slightly unusual where it says in clause 2(1) that “…1 or more orders may be made bringing different provisions into force on different dates.” I am just wondering, again, whether this is maybe because of a submission that was put in during the select committee process, and for whatever reason it was deemed that this would not hit the books straight away, but that it would be sort of drip-fed in. That might have been because this is about consolidating a lot of the practices that occur in New Zealand and Australia. Am I right there, Miss Curran? There may be reasons behind this, and, no doubt, there are perfectly good reasons.

We all agree on this. This is a good bill, which I think will bring a level of transparency. I think that some of the clauses may be open to jurisprudence as we go forward. As mentioned, I have real concerns when the Registrar of Companies has the ability to allow an auditor who has been struck off to continue to practise under certain circumstances. We did talk about this, and I did allude to this, but I am curious to know whether there are any parts of the Act in particular that are not going to come into play for another 2½ years. That is my only question.

Clause 1 agreed to.

Clause 2 agreed to.

The Committee divided the bill into the Auditor Regulation Amendment Bill, the Charities Amendment Bill (No 3), the Financial Reporting Amendment Bill, and the New Zealand Institute of Chartered Accountants Amendment Bill, pursuant to Supplementary Order Paper 470.

Bill to be reported with amendment presently.