Treasury increased its regulatory power at the expense of the professional

Treasury increased its regulatory power at the

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Treasury increased its regulatory power at the expense of the professional bodies that had created the accounting standard setting board. As part of CLERP, the FRC had been established as an oversight body over accounting, auditing and ethics standard setting in Australia. Treasury was responsible for appointing members to the FRC and the chair of the AASB, and had, therefore, influence over the appointments. For example, out of the 13 initial members of the FRC in 2002, three had already been part of the Business Regulation Advisory Group for the CLERP proposals, which had been developed by Treasury. One interviewee (FRC, Interview 06/05/2010) noted: “[The FRC] was introduced by the then Treasurer Costello and primarily it came out of the CLERP project […] looking at improving Australia’s corporate law regulations. Costello had already shifted corporate law issues from the
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194 Attorney General’s to the Treasury, which was a significant step. And so therefore, the Department of Treasury then was tasked with the role of reforming corporate law. So when he started to appoint members to the FRC, he decided to include members from the public sector, in particular the Department of Finance, as it was then called, the Department of Finance and Administration probably (DOFA), the Treasuries, representatives of the States and Territories HoTARAC, Heads of Treasury. […] [Person], the head of the markets group in the Department of Treasury. He was on the FRC [… and he had] headed the CLERP process. So he was intimately involved in all the CLERP reforms. So to the extent that the public sector neatly sat alongside the CLERP reforms, he was engaged in that. Five of the 13 FRC members came from public sector backgrounds, who, with one exception, were employed by the Commonwealth government. The influence of Treasury was extended to the AASB, as the FRC was responsible for the appointment of its members. Members of the AASB are not appointed as representatives of their employers, but because of technical expertise. Four of 13 members of the AASB had a public sector background. Of these four, three members were employed by Commonwealth organisations, with one from Treasury and one from Finance. Another important institutional change was giving the FRC the right to provide strategic directions to the AASB under subsection 225(2)(d) of the Australian Securities and Investments Commission Act 1989 (now superseded by section 225(2)(c) of the Australian Securities and Investment Commission Act 2001 (ASIC 2001). The term ‘strategic directions’ was not clearly defined and this caused some irritation and friction between the FRC and the AASB, when the strategic directions for IFRS adoption and GAAP/GFS harmonisation were issued. One interviewee identified the situation as a “master/servant” relationship and recalled: Part of [the problem] was, I think, that the culture of the AASB was very much [that of] an independent standard setter and it saw itself, proudly, as an independent standard setter. And to have another body, doesn’t matter how
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  • Fall '13
  • Government, The Land, International Financial Reporting Standards, Financial Accounting Standards Board, Australian Accounting Standards Board, Snow

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