Concerns flagged over proposed standards bodies merger

Key accounting professionals body, CPA Australia, has raised concerns regarding the Government’s proposed reforms to the Australian financial reporting system that will see standards-setting bodies merge, citing further considerations needed over governance and due process.

The Treasury Laws Amendment Bill 2025 intends to restructure and combine the three existing standard-setting bodies – the Australian Accounting Standards Board (AASB), Auditing and Assurance Standards Board (AUSB) and Financial Reporting Council (FRC) – into one External Reporting Australia, with an overarching Governing Council.

CPA Australia reinforced its support of “modernising” the reporting framework and system, but urged the Federal Government to impose stronger accountability, integrity, governance and due process measures to preserve the independence of and trust in current standards-setting.

In a joint submission to Treasury about the draft legislation filed with Chartered Accountants Australia and New Zealand (CA ANZ), the body, raised the following concerns:

• Insufficient due process: A detailed due process framework is needed. This should be established and referenced in the draft bill.
• Governance risks: The Governing Council and ministerial involvement in technical standard-setting runs the risk of undermining transparency and stakeholder confidence.
• Preserve existing strengths: Whilst this is recognised in principle, the details need to recognise and bring forward some of the existing strengths like research capabilities, international relationships and intellectual capital.

“Independence and transparency are fundamental to credible standard-setting, and while we welcome the flexibility that comes with the new model, every effort must be made to ensure that accountability and integrity are evidenced at all times,” Ram Subramanian, CPA Australia’s Financial Reporting Lead, said.

“The current draft legislation gives the Governing Council significant powers without adequate safeguards, including the ability to make or vary standards and determine the structure and composition of the standard-setting boards. This creates a real risk of undue influence and erodes the integrity of the process.

“We’re calling for clear legislative requirements for transparency, public consultation and balanced representation on the Governing Council and boards. Without these, Australia risks losing the strengths of its current model and diminishing its influence internationally.

“These reforms are an opportunity to future-proof Australia’s reporting system. But flexibility must not come at the expense of accountability and integrity.”

CPA Australia also made the following recommendations to the government to implement:

• Minimum board sizes and balanced multi-stakeholder representation;
• Recognition of a detailed due process framework; and
• Removal of provisions that undermine the balance between the overall governance needs and technical standard-setting work.