Parker David: Accounting Infrastructure Reform Bill — First ReadingText is incorporated into the Bound VolumeParker David: Accounting Infrastructure Reform Bill — First Reading[Sitting date: 28 January 2014. Volume:696;Page:15592. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Deputy Leader—Labour): I rise to take a call on the first reading of the Accounting Infrastructure Reform Bill. Can I thank the Minister of Commerce for his explanation of the bill. The Labour Party accepts that this is on its face good legislation. It is housekeeping legislation that updates the regulatory framework that oversees audits outside the financial markets audits which are provided for in separate legislation. I agree that it is timely that this be done in part because it also enables through the same legislation the ambitions of the New Zealand Institute of Chartered Accountants to merge with its Australian counterpart to form a trans-Tasman body. My understanding in respect of that from the explanations that have been made to me is that as a consequence of that we are likely to see an increase in its back-office functions in New Zealand which will increase employment opportunities in New Zealand. It is somewhat sad that again New Zealand is trading on its low wage comparison with Australia but we will take that particular advantage on this occasion.I understand that there are sections within the accounting profession that think that this decision is not the right one and they will of course have the right to make submissions to the Commerce Committee and try to convince the select committee as to why their viewpoint is correct. I think there are some within the profession who think that although the majority of accountants quite clearly want this change they would like to be able to prevail despite the fact that they are the minority. They have the right to put their submission to the select committee and the select committee will consider it properly.One of the issues that I will be interested in at the select committee is in respect of incorporated audit firms and whether there will be a requirement of a certain level of either capitalisation or professional indemnity insurance because if we are going to allow the incorporation of partnerships they of course then escape the personal liability that accrues from partnership structures through limited liability company structures to provide audits. I think it is proper for the select committee to inquire whether given that we are effectively letting the current auditors have personal liability through their partnership structures to people to whom they owe duties as auditors if they negligently breach their duty—and I am not saying that it often happens but it does and can happen on occasions—then the damages for which they could be liable to the injured party would not be limited through a corporate veil whereas if we allow limited liability auditors then they will not be able to have recourse to the personal pockets of the auditors.I am sure there are strong reasons for the proposal as put forward but I would be interested to see whether there are minimum capitalisation rules or insurance indemnity rules that apply to ensure that there would be a remedy for someone who is relying upon an audit that has been negligently conducted. I am sure there is some complexity around that that we can explore at the select committee.In terms of the proposals in respect of the audits of charities I agree that larger charities should have decent audits. They are responsible for large amounts of money and they trade sometimes on their charitable purpose and present themselves to the public as being a worthy recipient of charitable donations. So in respect of large charities I agree that audits are appropriate. I think that at select committee we would want to check the thresholds that were applying to what is medium and large because we do not want to unduly regulate small charities and push them into difficult circumstance through expensive compliance regimes. We know that a lot of small charities do a lot of good work. They often run on the smell of an oily rag they do not have a lot of income and there is actually not a lot there to audit. So I do not want to impose on those smaller charities onerous audit rules that would be inappropriate given the size of the money that is in question and therefore the number of things that can go wrong.You can get disproportionate in regulatory response if you try to apply the same rules to organisations of all sizes. It appears that the Government recognises that because for medium and large sized charities it is introducing rules that are different from those that apply to smaller charities. So we will have a look at whether it has got that differentiation about right when we go to select committee and we look forward to receiving submissions from interested parties who would be interested—the charities; in particular the smaller charities—as to whether they are being unduly caught up in this.It is important that we have audits. It is one of these things that we so often take for granted in Western countries—that we can rely upon information that is presented in accounts that are relied upon by citizens when they go about their business with different legal entities. People can have some assurance that the company for example has a certain level of assets. If there is an audited set of accounts that certifies that theaccounts have been prepared in accordance with some accounting standards and that according to the audit it all looks in order that then aids commerce because we have people being able to have confidence that the institution they are dealing with is likely to be good for the contract that they might be entering into with them.I do not want to overstate the importance of this legislation. It is not going to I think in any meaningful way change the way in which the New Zealand economy operates but it is a bit like most areas of legislation—they do have to be tidied up periodically and I thank the Minister for his efforts in that regard.