Financial Reporting Amendment Act 2014

1: Title
This Act is the Financial Reporting Amendment Act 2014.
2: Commencement
1: This Act comes into force on a date appointed by the Governor-General by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.
2: 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. Section 2(1) brought into force 1 July 2015 Financial Reporting Amendment Act 2014 Commencement Order 2015
1: Amendments to Financial Reporting Act 2013
3: Principal Act
This Act amends the Financial Reporting Act 2013 principal Act OIC LI 2015/114 2015-07-01 Financial Reporting Act 2013
4: Section 5 amended (Interpretation)
In section 5(1) accredited body approved association Institute qualified statutory accountant
a: a chartered accountant (within the meaning of section 19 of the New Zealand Institute of Chartered Accountants Act 1996); or
b: a member of an accredited body (other than the Institute) who holds the full professional designation of that body (for example, a certified practising accountant); or
c: recognised under section 36S Registrar .
5: New section 9A inserted (Transitional, savings, and related provisions)
After section 9
9A: Transitional, savings, and related provisions
The transitional, savings, and related provisions set out in the Schedule have effect according to their terms.
6: Section 34 amended (Purpose and application)
1: After section 34(1)﻿(b)
c: offences for an unqualified person to act as an auditor or to hold himself, herself, or itself out as being a qualified auditor.
2: In section 34(2) of the entity or of its financial statements
7: Section 36 amended (Qualifications of auditor)
1: In section 36(1) of a specified entity (or of its financial statements)
2: Replace section 36(1)﻿(a)
a: the person is—
i: a chartered accountant (within the meaning of section 19 of the New Zealand Institute of Chartered Accountants Act 1996); and
ii: recognised by the Institute, in accordance with the rules of that body, as being eligible to act as an auditor in respect of entities of the same kind as the specified entity; or
ab: the person is—
i: a member of an accredited body; and
ii: recognised by the accredited body, in accordance with the rules of that body, as being eligible to act as an auditor in respect of entities of the same kind as the specified entity; or .
3: In section 36(1)﻿(c)﻿(i) Registrar of Companies Registrar in accordance with section 36A(1)
4: After section 36(1)﻿(c)﻿(i)
ia: the person is recognised by the association, in accordance with the rules of that association, as being eligible to act as an auditor in respect of entities of the same kind as the specified entity; and .
5: In section 36(1)﻿(d)﻿(ii) Registrar of Companies by notice in the Gazette Registrar by notice in the Gazette section 36A(2)
6: After section 36(1)﻿(d)
e: the person is a company, or an overseas company, that is a registered audit firm; or
f: the person is a company that is recognised, in accordance with section 36C
g: the person is an overseas company that—
i: is recognised, in accordance with section 36C
ii: is incorporated or constituted in a country, State, or territory that is approved for the time being under section 36D
iii: has a legal structure that is approved for the time being under section 36D
7: In section 36(2)﻿(a) unless he or she is a licensed auditor unless he, she, or it is a licensed auditor or a body corporate that is a registered audit firm
8: In section 36(4) auditor of a specified entity (or of its financial statements)
9: Replace section 36(4)﻿(d)
d: a body corporate (unless the body corporate is a registered audit firm or recognised as referred to in subsection (1)﻿(f) or (g) .
10: After section 36(5)
6: A notice in the Gazette section 36D
8: New sections 36A to 36T and cross-heading inserted
After section 36
36A: Power of Registrar of Companies to approve associations and auditors
1: The Registrar may, after receiving an application from an association of accountants, approve the association under section 36(1)﻿(c)﻿(i) if, after taking into account the prescribed matters (if any), the Registrar is satisfied that the association satisfies the requirements that are prescribed for the purposes of this subsection.
2: The Registrar may, after receiving an application from a natural person, approve the person under section 36(1)﻿(d)﻿(ii) if, after taking into account the prescribed matters (if any), the Registrar is satisfied that the person—
a: satisfies the requirements that are prescribed for the purposes of this paragraph; and
b: satisfies the minimum standards that are prescribed for the purposes of this paragraph.
3: An application under subsection (1) or (2)
4: The Registrar may, by written notice given to an association or other person,—
a: impose conditions on the approval of that association or person under section 36(1)﻿(c)﻿(i) or (d)﻿(ii); and
b: vary, revoke, add to, or substitute any such conditions at any time.
5: The Registrar may impose any conditions that the Registrar thinks fit (for example, conditions that impose limits or restrictions on the ability of an approved association to recognise its members or conditions that impose limits or restrictions on the types of audits that a person approved under section 36(1)﻿(d) may carry out).
36B: Approved associations and persons must report to Registrar
1: Every approved association and every person who is approved under section 36(1)﻿(d) must, at the prescribed times or on the occurrence of the prescribed events and otherwise in the prescribed manner, send to the Registrar reports that contain the prescribed information (together with a prescribed fee).
2: If an approved association ( A section 36A(1)
a: must, as soon as practicable, give written notice of that non-compliance to the Registrar; and
b: must cease to give recognition under section 36(1)﻿(c)﻿(ia)
3: If a person who is approved under section 36(1)﻿(d) ( B section 36A(2)
a: must, as soon as practicable, give written notice of that non-compliance to the Registrar; and
b: must not act as the auditor of a specified entity or of its financial statements.
4: If an approved association or a person who is approved under section 36(1)﻿(d) fails to comply with this section, the approval of that association or person is treated as suspended until—
a: a date specified in a notice given by the Registrar to the association or person; or
b: the approval is cancelled under section 36I
36C: Institute, accredited bodies, and approved associations may recognise body corporate as eligible to act as auditor
1: The Institute, any other accredited body, or an approved association may recognise a company or an overseas company for the purposes of section 36(1)﻿(f) or (g)
a: satisfies the requirements that are prescribed for the purposes of this paragraph; and
b: satisfies the minimum standards that are prescribed for the purposes of this paragraph; and
c: has at least 1 director who is—
i: a member of the Institute, accredited body, or approved association; and
ii: a qualified auditor under any of paragraphs (a) to (d) section 36(1)
2: Recognition may relate to all specified entities or to 1 or more kinds of specified entities.
36D: Registrar of Companies may approve overseas countries and legal structures
1: The Registrar may, by notice in the Gazette section 36(1)﻿(g)
a: a country, State, or territory; and
b: a specified legal structure of that country, State, or territory (for example, a company incorporated under the law of a particular overseas country).
2: The Registrar must, before approving a country, State, or territory and a legal structure, be satisfied that—
a: the law or the regulatory requirements of that country, State, or territory impose requirements relating to auditor independence that are equivalent to, or as satisfactory as, the requirements that apply to New Zealand auditors; and
b: entities that have that legal structure are eligible to act as an auditor in that country, State, or territory.
3: The Registrar may not approve as a legal structure any kind of overseas limited partnership (within the meaning of section 4 of the Limited Partnerships Act 2008).
36E: Institute, accredited bodies, and approved associations must keep recognition under review
1: The Institute, any other accredited body, or an approved association that recognises any person for the purposes of section 36(1)
2: The purpose of the review is to provide reasonable assurance that the requirements and minimum standards for recognition continue to be satisfied.
3: The systems must include an annual review of each person who is recognised (for example, by requiring the person to verify that the requirements and any minimum standards for recognition continue to be satisfied).
36F: Body corporate must ensure that engagement director is qualified auditor
1: If a body corporate ( A section 36(1)﻿(e), (f), or (g) paragraphs (a) to (d) section 36(1)
2: In this section, engagement director
36G: Recognised body corporate must not act if requirements no longer met
If a body corporate ( A section 36(1)﻿(f) or (g) section 36C
a: must not act as the auditor of a specified entity or of its financial statements; and
b: must, as soon as practicable, give written notice of that non-compliance to the Institute, the accredited body, or the approved association that recognised A.
36H: Offence relating to section 36F or 36G
1: If a body corporate ( A section 36F or 36G
a: A commits an offence and is liable on conviction to a fine not exceeding $150,000; and
b: every director of A also commits an offence and is liable on conviction to a fine not exceeding $50,000.
2: It is a defence to a director charged with an offence in relation to the duty imposed under section 36F or 36G
a: A took all reasonable and proper steps to ensure that the duty would be complied with; or
b: he or she took all reasonable steps to ensure that A complied with the duty; or
c: in the circumstances, he or she could not reasonably have been expected to take steps to ensure that A complied with the duty.
36I: Cancellation or suspension of recognition or approval
1: The Institute, any other accredited body, or an approved association may, in accordance with its rules, cancel or suspend its recognition of a person for the purposes of section 36(1)﻿(a) or (ab) or (c)﻿(ia)
2: The Institute or any other accredited body may cancel or suspend the recognition of a person for the purposes of section 36(1)﻿(a) or (ab)
a: the person is or was subject to an arrangement referred to in section 36T
b: the Institute or body is satisfied that—
i: the person has failed to comply with that arrangement in any material respect; or
ii: the term of the arrangement has ended.
3: The Registrar may—
a: cancel or suspend his or her approval of an association for the purposes of section 36(1)﻿(c) if the Registrar considers that the association does not satisfy, or no longer satisfies, the requirements prescribed for the purposes of section 36A(1)
b: cancel or suspend his or her approval of a person for the purposes of section 36(1)﻿(d) if the Registrar considers that the person does not satisfy, or no longer satisfies, the requirements or minimum standards prescribed for the purposes of section 36A(2)﻿(a) or (b)
c: cancel or suspend his or her approval of an association or a person for the purposes of section 36(1)﻿(c) or (d) if the Registrar considers that the association or person has failed to comply with any conditions under section 36A(4)
d: cancel his or her approval of an association or a person for the purposes of section 36(1)﻿(c) or (d) on the written request of the association or person.
4: The Institute, any other accredited body, or an approved association may—
a: cancel or suspend its recognition of a person for the purposes of section 36(1)﻿(f) or (g) section 36C(1)﻿(a) or (b)
b: cancel its recognition of a person for the purposes of section 36(1)
5: A suspension under—
a: subsection (1), (2), or (4)
b: subsection (3)
6: If a person that has been recognised for the purposes of section 36(1)﻿(f) or (g) section 36C(1)﻿(c)
7: If the Institute, an accredited body, an approved association, or the Registrar cancels the recognition or approval of a person ( A
36J: Effect of cancellation or suspension of accreditation or approval on recognition under section 36
1: If the accreditation of the Institute or of an accredited body ( A
a: cancelled under section 59 of the Auditor Regulation Act 2011, any recognition given by A and referred to in section 36(1)
b: suspended under section 59 of that Act, any recognition given by A and referred to in section 36(1)
2: If the approval of an association ( A
a: cancelled by the Registrar, any recognition given by A and referred to in section 36(1)﻿(c), (f), or (g)
b: suspended by the Registrar, any recognition given by A and referred to in section 36(1)﻿(c), (f), or (g)
3: Subsection (1) or (2) section 36(1)
36K: Registrar of Companies may authorise person to continue to act in respect of audit despite cancellation or suspension under section 36J
1: This section applies if—
a: a person's recognition is cancelled or suspended under section 36J
b: the person is acting, or has been appointed to act, as the auditor in respect of an audit at the time that the recognition is cancelled or suspended.
2: The Registrar may authorise the person to act, or to continue to act, as the auditor in respect of the audit on the terms and conditions that the Registrar thinks fit.
3: The person may act, or continue to act, as the auditor in respect of the audit in accordance with the terms and conditions of the authorisation (and, for the purposes of that audit, the person's recognition must be treated as continuing).
36L: Notification of recognised and approved persons
1: The Institute, any other accredited body, or an approved association must,—
a: as soon as practicable after recognising a person ( A
b: as soon as practicable after cancelling or suspending such recognition, give A written notice of the cancellation or suspension.
2: The Registrar must,—
a: as soon as practicable after approving a person ( B
b: as soon as practicable after cancelling or suspending such approval, give B written notice of the cancellation or suspension.
3: Every notice of suspension given under subsection (1)﻿(b) or (2)﻿(b)
36M: Records of recognised persons
1: The Institute, any other accredited body, or an approved association must—
a: keep a record of all persons that the Institute, accredited body, or approved association (as the case may be) has recognised for the purposes of section 36(1)
b: keep available a record of the persons recognised by it, at all reasonable times, on an Internet site maintained by or on behalf of the Institute, body, or association.
2: The purpose of subsection (1)﻿(b)
3: For the purposes of subsection (1)﻿(b)
a: the record must include the following information about each recognised person:
i: the full name of the person:
ii: the town or city in which the person's principal place of business in New Zealand is located (unless subparagraph (iii)
iii: in the case of recognition under section 36(1)﻿(c)﻿(ia)
iv: the conditions or limitations on the recognition (if any); and
b: the record must be reasonably prominent on the Internet site or the Internet site must contain a reasonably prominent link to the record.
4: A record under subsection (1) section 36I(6)
5: A person that fails to comply with subsection (1) or (3)
36N: Register of approved persons
1: The Registrar must keep a register of all persons that the Registrar has approved for the purposes of section 36(1)﻿(c) or (d).
2: The purpose of the register is to enable any person to determine whether a person is approved for the purposes of section 36(1) and, if so, to obtain relevant information relating to the approval.
3: The register may—
a: be an electronic register; or
b: be kept in any other manner that the Registrar thinks fit.
4: The register must contain the following information about each approved person:
a: the full name of the person:
b: the town or city in which the person's principal place of business is located:
c: the conditions or limitations on the approval (if any):
d: any other prescribed information.
36O: Search of register
1: A person may search the register kept under section 36N
2: The register may be searched only by reference to the contents of the register required by section 36N
3: A search of the register may be carried out only by the following persons for the following purposes:
a: a person, for a purpose referred to in section 36N(2)
b: a person, for the purpose of advising another person in connection with any of the purposes referred to in this subsection:
c: an individual, or a person with the consent of the individual, for the purpose of searching for information about that individual.
36P: Appeals in respect of recognition or approval matters
1: A person may appeal to a District Court against any decision of the Institute, an accredited body, an approved association, or the Registrar—
a: to decline to recognise the person for the purposes of section 36(1); or
b: to decline to approve the person for the purposes of section 36(1)﻿(d); or
c: to cancel or suspend that recognition or approval.
2: An association may appeal to a District Court against any decision of the Registrar—
a: to decline to approve the association for the purposes of section 36(1)﻿(c)﻿(i); or
b: to cancel or suspend that approval.
3: Subsection (1)
4: Subsection (1) sections 36R to 36T
5: An appeal to a District Court under this section must be brought—
a: in accordance with the rules of court; and
b: within 20 working days after notice of the decision is communicated to the appellant, or within any further time a District Court Judge allows on application made before or after the period expires.
36Q: False declarations and representations
1: Every person commits an offence who, for the purpose of obtaining or maintaining recognition or approval for the purposes of section 36(1)
a: either orally or in writing, makes any declaration or representation to the Institute, another accredited body, an approved association, or the Registrar that, to the person's knowledge, is false or misleading in any material particular; or
b: provides to the Institute, another accredited body, an approved association, or the Registrar any document knowing that the document—
i: contains any declaration or representation that is false or misleading in any material particular; or
ii: is not genuine; or
c: makes use of any document knowing that the document—
i: contains any declaration or representation that is false or misleading in any material particular; or
ii: is not genuine.
2: A person who commits an offence under subsection (1)
a: in the case of an individual, a fine not exceeding $50,000:
b: in the case of a body corporate, a fine not exceeding $150,000.
36R: Exemption from membership requirement for certain members of religious societies or orders
1: Section 36(1)﻿(a)﻿(i) or (ab)﻿(i) A
a: the relevant body is satisfied that A is a practising member of a religious society or order whose doctrines or beliefs preclude membership of any organisation or body other than the religious society or order of which A is a member; and
b: the relevant body has entered into a written arrangement with A that complies with section 36T
2: The exemption under subsection (1)
a: the relevant body ceases to be satisfied as referred to in subsection (1)﻿(a)
b: the arrangement is terminated or otherwise comes to an end (unless a subsequent arrangement that complies with section 36T
3: See section 36I(2)
4: In this section, relevant body
a: in relation to section 36(1)﻿(a)﻿(i)
b: in relation to section 36(1)﻿(ab)﻿(i)
36S: Institute or other accredited body may recognise as qualified statutory accountants certain members of religious societies or orders
1: Subsection (2)
a: the Institute or another accredited body is satisfied that a person ( A
b: the Institute or other accredited body has entered into a written arrangement with A that complies with section 36T
c: the Institute or other accredited body is satisfied that A—
i: has satisfactory competence, qualifications, and experience to act as a qualified statutory accountant; and
ii: is otherwise a fit and proper person to be a qualified statutory accountant.
2: The Institute or other accredited body may recognise A as a qualified statutory accountant by including a statement of that recognition in or with the arrangement under section 36T
3: The recognition under subsection (2)
a: the Institute or other accredited body ceases to be satisfied as referred to in subsection (1)﻿(a)
b: the arrangement is terminated or otherwise comes to an end (unless a subsequent arrangement that complies with section 36T
36T: Requirements for arrangement
1: For the purposes of section 36R or 36S
a: state that the arrangement is entered into for the purposes of this section; and
b: include a binding agreement by A to be subject to the following:
i: the rules relating to the investigation of complaints against a member or former member of the Institute or other accredited body:
ii: the rules relating to the hearing of complaints and other matters by a disciplinary body:
iii: the rules relating to appeals from decisions of a disciplinary body:
iv: the rules relating to the kinds of conduct for which a member or former member of the Institute or other accredited body may be disciplined:
v: the rules relating to the actions that may be taken in respect of, and the penalties that may be imposed on, a member or former member of the Institute or other accredited body for such conduct:
vi: in the case of section 36R section 36(1)﻿(a)﻿(ii) or (ab)﻿(ii)
vii: the code of ethics that governs the professional conduct of the members of the Institute or other accredited body.
2: The arrangement may provide for any other matters that the Institute or other accredited body thinks fit, including matters—
a: relating to practice reviews:
b: relating to continuing professional development:
c: relating to reports and access to information:
d: to promote compliance with the requirements imposed by or under any enactment that relate to the conduct of audits or other accounting engagements:
e: to promote compliance with auditing and assurance standards and financial reporting standards:
f: to otherwise promote reasonable care, diligence, and skill in the carrying out of audits or other accounting engagements:
g: relating to the payment of fees:
h: relating to the term of the arrangement.
3: Without limiting the means of enforcing the arrangement, the arrangement is binding on A as if A were a member of the Institute or other accredited body.
4: In this section,— disciplinary body rules Appointment of partnership .
9: New sections 39A and 39B and cross-heading inserted
After section 39 Offences concerning unqualified persons
39A: Offence for unqualified auditor to act
1: A person who acts as the auditor of a specified entity or of its financial statements commits an offence if the person is not a qualified auditor in respect of the entity.
2: A person who commits an offence under subsection (1)
a: in the case of an individual, a fine not exceeding $50,000:
b: in the case of a body corporate, a fine not exceeding $150,000.
39B: Offence to hold out as qualified auditor or as approved person
1: A person must not hold out that the person is—
a: recognised for the purposes of section 36(1)﻿(a), (ab), (c)﻿(ia), (f), or (g)
b: approved for the purposes of section 36(1)﻿(c) or (d) if the person is not so approved; or
c: qualified to act as the auditor of a specified entity or of its financial statements if the person is not a qualified auditor in respect of the entity.
2: A person who fails to comply with subsection (1)
a: in the case of an individual, a fine not exceeding $50,000:
b: in the case of a body corporate, a fine not exceeding $150,000.
10: Section 45 amended (Meaning of large)
Replace section 45(3)
3: Despite subsections (1) and (2), an entity is not large in respect of an accounting period ( period A
a: the entity was an inactive entity in respect of period A; and
b: the entity, within 5 months after the end of period A, delivers to the Registrar a declaration, in the prescribed form, stating that it was an inactive entity in respect of period A.
11: Section 48 amended (Minister must regularly review amounts to take into account inflation)
In section 48(1)﻿(a) of this Act , section 42D
12: Section 49 amended (Order may amend amounts)
After section 49(c)
ca: amending the amounts specified in section 42D .
13: Section 50 amended (Regulations)
1: After section 50(1)﻿(a)
ab: prescribing matters that must be taken into account under section 36A(1) or (2) or 36C
ac: prescribing requirements for the purposes of section 36A(1) or (2)﻿(a)
ad: prescribing requirements for the purposes of section 36C(1)﻿(a)
i: ownership, including requirements relating to who may be a shareholder or member and who may exercise voting rights (for example, requiring all or a majority of voting rights to be held by members of the Institute, an accredited body, or an approved association):
ii: governance, including requirements relating to who may be a director or senior manager (for example, requiring all or a majority of directors to be members of the Institute, an accredited body, or an approved association):
iii: systems, policies, and procedures that relate to any of the following:
A: promoting compliance with the requirements imposed by or under any enactment that relates to the conduct of audits:
B: promoting compliance with auditing and assurance standards:
C: promoting reasonable care, diligence, and skill in the carrying out of audits:
iv: professional indemnity insurance:
ae: prescribing minimum standards for the purposes of section 36A(2)﻿(b) or 36C(1)﻿(b)
af: prescribing fees payable in respect of applications under section 36A section 36B(1)
ag: prescribing matters relating to reports under section 36B
ah: prescribing procedures, requirements, and other matters, not inconsistent with this Act, for the register kept under section 36N
i: the operation of the register:
ii: the form of the register:
iii: the information to be contained in the register:
iv: access to the register:
v: search criteria for the register:
vi: circumstances in which amendments must be made to the register:
ai: prescribing a form for the purposes of section 45(3) .
2: Replace section 50(2)
2: Any regulations made under subsection (1)﻿(ad)
a: specify the terms and conditions upon which insurance is to be available and any circumstances in which the insurance cover may be excluded or modified:
b: specify the minimum terms and conditions that an insurance policy must satisfy:
c: specify circumstances in which a body corporate or any class of bodies corporate are exempt from the requirements:
d: require a body corporate to have arrangements in place that ensure that an accredited body or approved association can ascertain whether the insurance is being maintained in accordance with the regulations.
3: For the purposes of subsection (1)﻿(af)
a: regulations may authorise the Registrar to refund or waive, in whole or in part and on any conditions that may be prescribed, payment of the fee in relation to any person or class of persons:
b: the Registrar may refuse to perform a function or exercise a power until the prescribed fee is paid:
c: any fee payable under the regulations is recoverable by the Registrar in any court of competent jurisdiction as a debt due to the Registrar.
4: Different requirements, dates, methods, or other matters may be prescribed under the regulations in respect of different classes of persons or different circumstances.
14: Section 51 amended (Levies)
Replace section 51(3)﻿(a)
a: qualified statutory accountants; and .
15: New subpart 1A of Part 3 inserted
After section 53
1A: Unqualified person must not hold out as qualified statutory accountant
53A: Offence to hold out as qualified statutory accountant
1: If any enactment requires a qualified statutory accountant to act in respect of a matter, a person must not hold out that the person is qualified to act in respect of the matter if the person is not a qualified statutory accountant.
2: A person who fails to comply with subsection (1)
a: in the case of an individual, a fine not exceeding $50,000:
b: in the case of a body corporate, a fine not exceeding $150,000.
16: New Schedule inserted
After section 61 Schedule Schedule 1
2: Amendments to other Acts
17: Amendments to other Acts
Amend the enactments specified in Schedule 2 OIC LI 2015/114 2015-07-01 Companies Act 1993 Education Act 1989 Electoral Act 1993 Financial Advisers Act 2008 Financial Markets Conduct Act 2013 Financial Service Providers (Registration and Dispute Resolution) Act 2008 Gambling Act 2003 Lawyers and Conveyancers Act 2006 Limited Partnerships Act 2008 Prisoners' and Victims' Claims Act 2005 Privacy Act 1993 Private Schools Conditional Integration Act 1975 Protection of Personal and Property Rights Act 1988 Public Audit Act 2001 Racing Act 2003 Real Estate Agents Act 2008 Receiverships Act 1993 Retirement Villages Act 2003 Trustee Act 1956 Unclaimed Money Act 1971