Foss Craig: Accounting Infrastructure Reform Bill — Second ReadingText is incorporated into the Bound VolumeFoss Craig: Accounting Infrastructure Reform Bill — Second Reading[Sitting date: 03 July 2014. Volume:700;Page:19242. Text is incorporated into the Bound Volume.]Hon CRAIG FOSS (Minister of Commerce):I move That the Accounting Infrastructure Reform Bill be now read a second time. The main purpose of the Accounting Infrastructure Reform Bill or the “AIR Bill” is to enable the accounting and audit industry to be more efficient and effective. The bill achieves this with five key amendments to existing Acts. It amends the rules on who may perform statutory audits to enable more people to perform audits. It replaces legislative references to “chartered accountant” with references to “qualified statutory accountant” or “qualified auditor” to enable more people to perform statutory accountancy functions. It reduces restrictions on legal form for audit firms while maintaining the quality of audit through standards and checks. It introduces a requirement for independent assurance of financial statements for medium-sized and large charities. It allows the New Zealand Institute of Chartered Accountants more freedom in how to structure itself.A more competitive and efficient accounting market will provide better business advice for New Zealand firms. An effective audit industry that gives better assurance for users of financial statements will build confidence in financial markets. This supports the aims of the Government’s Business Growth Agenda.The Accounting Infrastructure Reform Bill builds on the changes in the Financial Markets Conduct Act 2013 and the Financial Reporting Act 2013. Together these three pieces of legislation contribute to an overarching policy of developing fair efficient and transparent financial markets and promoting the confident and informed participation of businesses investors and consumers.The Commerce Committee’s report includes many sensible recommendations that will help ensure the bill achieves its objectives. These recommendations relate to two areas in particular. The first is the approval of overseas auditors. The Registrar of Companies already has powers to approve an overseas individual as a qualified auditor and to approve overseas professional accountant bodies whose members may then act as qualified auditors. An overseas auditor can then conduct statutory audits of non-financial markets’ conduct in New Zealand provided they are eligible to do so in their home State. However the system has two weaknesses: first the registrar has been given no criteria to apply in considering applications; second there is no ongoing check that professional bodies and auditors continue to meet the approval standard.This issue was raised with me during drafting and I agreed that it needed to be addressed. When the bill was referred to the Commerce Committee I wrote to the chair outlining the issue and a suggested approach. Submitters agreed with our approach and suggested that the guiding principle should be that overseas auditors be subject to New Zealand - equivalent monitoring competence reporting and professional development requirements. The committee has recommended the introduction of a regulation-making power to set criteria for the registrar to apply. It is recommended that auditors be recognised by their professional body and that approved bodies and individuals provide regular reports to the registrar to demonstrate that they still meet the criteria. This will ensure clients and users of financial statements have confidence that overseas auditors meet the same high standards as those based in New Zealand. I therefore welcome this improvement to the bill.Another change I would like to mention relates to professional bodies and audit companies. The New Zealand Institute of Chartered Accountants submitted that the changes contained in the bill to allow audit companies to perform statutory audits may have an unintended effect that is preventing it from investigating and disciplining their members who operate within an audit company. It is crucial to our policy that professional bodies can effectively discipline their members. The select committee has recommended amending the bill to state that if a company is appointed as an auditor that will not affect an accredited body’s powers to investigate and discipline its members under its rules including cancelling and suspending a licensed auditor’s licence. I support these changes.One of the original aspects of the bill is a requirement for certain registered charities to have their financial statements independently assured with the aim of maintaining and strengthening public confidence in the charitable sector. The bill requires large charities to have their financial statements audited and medium-sized charities to have their statements reviewed or audited. The committee did not make any significant changes to those provisions.There are other minor changes in the bill that the Commerce Committee brought about. For example another minor change relates to the requirement to declare non-activity. Some companies that would have had an obligation to deliver financial statements for registration are relieved from doing so because they have not been active in the relevant accounting period. The committee has recommended that those companies deliver a declaration of non-activity to the registrar. This means the registrar can avoid unnecessary compliance action.In conclusion I thank the members of the Commerce Committee for their work in considering and improving the bill. I would also like to acknowledge those who provided submissions. Their suggestions will ensure that the Accounting Infrastructure Reform Bill will promote efficiency competition and an international outlook for the New Zealand accounting market. I commend this bill to the House.Debate interrupted.