Little Andrew: Accounting Infrastructure Reform Bill — First ReadingText is incorporated into the Bound VolumeLittle Andrew: Accounting Infrastructure Reform Bill — First Reading[Sitting date: 28 January 2014. Volume:696;Page:15600. Text is incorporated into the Bound Volume.]ANDREW LITTLE (Labour): I rise to add yet again Labour’s voice in relation to the Accounting Infrastructure Reform Bill. I take this opportunity to sound just a note of caution about this bill notwithstanding Labour’s support for it at least in its first reading and to get it to the select committee. I have to say I get very nervous when I see as one of the objectives of a bill of this nature what is described as a “more efficient and effective” accounting and audit industry. If that is one of the objectives for this bill—a more efficient accounting industry—let us just understand what that means because it may not necessarily be good.We need an accounting industry that operates to professional standards because that is what is needed for commercial transparency—at least for those who operate in the public eye such as listed companies—and certainly when it comes to the audit function the last thing we need is an auditor motivated by greater efficiency. What we need actually is auditors motivated by the need to do their job of scrutiny exercisingprofessional judgment so that existing owners of the business and potential future owners of the business can make an informed decision about their ongoing ownership or potential future ownership. That is what we require of auditors—to cast a searching eye over the work that the finance arm of a particular company has done and to provide some level of assurance that the reports that have been provided and the picture that has been painted of the financial health of a company are largely accurate. That is not achieved by greater efficiency; it is achieved by having a proper set of standards and by having those who have the professional responsibility operating within not so much an industry but a sector that has a culture of high professional standards. So when we have a bill that is about facilitating as it says greater efficiency and effectiveness let us be clear about what is being asked for.You know well within the memories of every member of this House and many others besides are the activities of Enron and its auditor Arthur Andersen. Let us face it: the big chartered accountancy firms operate on a commercial basis. That is not necessarily a healthy thing. We do not need accountants and auditors who are motivated by greater profit—who are motivated by trying to get the job done as quickly as possible for the least cost and the greatest charge out to the client. That is actually not a good thing. What we need is an accounting profession that is motivated by the best professional standards and is doing the very important task for those who undertake the audit function of making sure that proper scrutiny is applied.The consequence of Enron and what was ultimately the failure of Arthur Andersen the auditing company was in the United States the Sarbanes-Oxley Act which then led to the International Financial Reporting Standards which we adopted and which have become frankly the bane of many organisations as they adapted to them. But for organisations that are required to undergo a statutory audit—and in this country trade unions are one of them—we gladly adopted the higher standards required in the International Financial Reporting Standards that were adopted by our Institute of Chartered Accountants because we thought that provided greater transparency and greater assurance. I think that set a good standard. What we do not want to do is undermine that by having a set of measures in this bill that enables or empowers accounting firms to operate in a way that is about pursuing the profit motive.My colleague David Parker alluded to one of the provisions in this bill that is allowing accounting firms to operate as limited liability companies. The question will arise: how will they be capitalised? And the question will also arise: who will own them? Will it just be the professional operators—the professional accountants and auditors—in the firm? Or will other private owners be able to have a stake in that firm? It does not engender a great deal of confidence in me that we could have accounting firms with a multiplicity of ownership spread throughout those who have no stake in the professional standards of the organisation but who have a great stake in the profit-generating capacity of it. So let us be very careful about what we are asking for because the fear is that we might actually get it and that will not necessarily be a good thing.You know we have just come through the global financial crisis. I know that the Government members are going to try to convince the public that we are still in the middle of it for some things and say that they are the great austerity managers of the decade and then they will be splashing the cash around for other reasons when they want to—Hon Damien O’Connor: Deficit after deficit.ANDREW LITTLE: Deficit after deficit. But now the Government wants to try to present a softer face after 6 years of flintiness 6 years of presenting a hard-nosed face to the public of New Zealand. Now it wants to splash out on education. It will splash out on early childhood education—we can see that coming—and when it is talking aboutthose things the global financial crisis will not rate a mention. But when it is about taking money away from other things of course we are still in the middle of a global financial crisis. But let us remember what underpinned that. It was a failure of audit standards. It was a failure of transparency. It was a failure of the commercial sector. What we do not want to do having just got through one of the biggest financial lurches in Western history is to then start treading down the path as if none of this matters. Well it does matter. Professional standards in accounting matter.The accounting profession is a very important profession—notwithstanding the number of them running this Government—and we should pay great homage to those who have qualified in that profession and earned their chartered status.Hon Damien O’Connor: Don’t overdo it.ANDREW LITTLE: I am not trying to over-egg the pudding here but this is a very important profession and accountants and auditors provide a very important function in our commercial world. But let us not contaminate their function and undermine their professional standards through measures that will actually have the opposite effect of providing greater assurance greater transparency and better oversight for the benefit of all those operating in the commercial sector but principally shareholders commercial owners and prospective owners as well—those who are looking to take up greater ownership invest more and expand their investment. What the accounting profession does both as accountants and as auditors is fundamental to our commercial integrity as a nation and we do not want to undermine it.I just want to add this point finally before we get off this in relation to the prospects of a trans-Tasman merger of the various chartered accountancy societies. We have had another example of this recently in the commercial sector—that is with patent attorneys. We passed a law recently that provided some sort of harmonisation of measures for patent attorneys on both sides of the Tasman What that is gradually leading to I am told by that profession is an absorption by the Australian patent attorneys of work that would otherwise be done by New Zealand patent attorneys. I have no doubt about it because I know Australians and I love them dearly they are great people and they are great comrades to have in many respects—Hon Damien O’Connor: Not all of them.ANDREW LITTLE: —even though they have not imported our apples for a long time. But they are very good at maximising opportunities for themselves. They are very good at making sure that they maximise their opportunities often at our expense. We do not want to pass a piece of legislation that simply gives them carte blanche to be the auditors of New Zealand. We need to retain our own standards and integrity here and we need to retain our capacity and capability in this area as well in New Zealand.So let us give this bill some very close and intense scrutiny and examination at the select committee but let us understand what the real commercial risks are here the risks to our reputation as a nation and what those commercial risks are. But on that note let us send the bill to the select committee and let us have a good look at it.