Archived News for Finance Sector Professionals - June, 2011

ASIC has released its report summarising the results of 21 audit firm inspections completed between 1 July 2009 and 31 December 2010.

ASIC Chairman Greg Medcraft said ASIC’s inspections had identified some areas where firms needed to  make improvements.

ASIC found for large firms 17 per cent of engagement files reviewed did not contain sufficient appropriate audit evidence and for other firms the figure was 31 per cent.

‘Generally where we concluded that audit engagement files did not contain sufficient appropriate audit evidence, this was based on shortcomings identified for specific key areas of the audit, rather than all areas of the audit,’ Mr Medcraft said. These areas included fair value measurement and impairment calculations.

The Chairman said ‘auditors have a key role in providing independent assurance on financial reports’.

‘As a gatekeeper, investors rely on auditors to make an important contribution to financial reporting quality and informed markets. The community’s expectation of high standards for auditors must be met,’ Mr Medcraft said.

‘Where sufficient appropriate audit evidence was not obtained in key audit areas, the financial reports audited may not be materially misstated. However, the auditor does not have a sufficient basis upon which to reach a conclusion in those audit areas and to support their overall audit opinion on the financial report.

Risk-based methods are used by ASIC to select firms, engagement files and audit areas for review.

Overall, ASIC identified three broad areas where improvements need to be made:

ASIC has issued the first credit infringement notice since it took over regulation of Consumer Credit on 1 July 2010.

The infringement notice has a penalty of $27,500 and was issued to a Sydney-based mortgage broker.

ASIC alleges the company continued to advertise it provided credit services on its website, despite being notified by ASIC that continued advertising may be in breach of the National Consumer Credit Protection Act 2009, because it was not registered, authorised or licensed to provide credit services.

‘Where ASIC identifies a possible breach of the consumer credit laws of this type, our first step will be to require the company to take action to ensure they comply. If the company fails to comply, the credit infringement notice regime allows ASIC to deal with certain civil penalty contraventions by issuing an infringement notice for payment of a penalty as an alternative to commencing civil penalty proceedings’, ASIC Chairman, Mr Greg Medcraft, said.

‘ASIC will not take this step lightly, however, the issuing of an infringement notice should send a clear message to traders that we are prepared to take action for the alleged breach’, Mr Medcraft said.

The company has 28 days from when the infringement notice is served to pay the penalty. Payment of the penalty is not an admission of guilt of the contravention. If the company does not pay the penalty, ASIC can commence civil proceedings against the company for a maximum penalty of $1,100,000.

‘While ASIC has generally been pleased with the industry’s efforts to comply with the new consumer credit legislation, the infringement notice regime provides a new mechanism for ASIC to act against the small number of traders that don’t ‘obey the rules’’, Mr Medcraft said.

‘Mortgage brokers are the gatekeepers between consumers and lenders and they have an obligation to act in accordance with the law. This means consumers should be able to rely on the fact that when a mortgage broker is advertising, they are legally authorised to be providing credit services to that consumer. If they aren’t licensed or authorised to provide credit services, consumers may be exposed to detriment. The issuing of our first notice should signal to industry that ASIC will act promptly to deter breaches of the new consumer credit laws’, Mr Medcraft said.

Foreign finance and insurance businesses affiliated with Australian resident businesses generated $21.2b in gross value added in 2009-10, according to new figures released today by the Australian Bureau of Statistics (ABS). Australian resident businesses had 1,245 finance and insurance foreign affiliates that employed over 75,000 staff.

Finance and insurance foreign affiliates recorded 92% of their sales revenue for finance and insurance services in the host country of the foreign affiliate. This indicates that the foreign affiliates were primarily established to service the markets where they resided.

Foreign affiliates residing in New Zealand, the United Kingdom and the United States of America together accounted for more than 54% of all key measures of finance and insurance foreign affiliate trade activity, including:

Private companies have become more pessimistic about their short term prospects than they were 12 months ago and more than 30 percent have reported negative profit growth, according to KPMG’s annual Private Companies Survey.

A new survey has indicated that small business confidence in the economy is low, with almost a third expecting it to worsen before mid-year, with tax reform, higher interest rates and the emissions trading scheme posing the most significant concerns.

Australia has formally announced its intentions to back the Mexican candidate for the presidency of the International Monetary Fund, throwing more doubt into the race for the job.

The Australian Centre of Excellence for Local Government (ACELG) has published a new Working Paper called The Henry Review of Australia's Future Tax System: The Implications for Local Government.

The Productivity Commission has published its Trade and Assistance Review 2009-10 outlaying the state of trade and sovereign assistance in the country over the last two years.

Melbourne University’s Household, Income and Labour Dynamics in Australia (HILDA) has published a survey into the state of the country's workforce, publishing results in earning satisfaction, descrimination and job retention rates.

The Federal Government has passed legislation that will reform the governance of Commonwealth military and civilian superannuants through improved control arrangements.

The Australian Financial Review (AFR) has published an analysis of credit card spending throughout the country, finding that while spending on services and one-off expenditures, such as meals and films, is increasing, growth in large-scale expenditure on consumer items remains low.

The Electricity Users Association of Australia (EUAA) is today launching a report prepared by Deloitte Access Economics that warns of an estimated $64 billion in damages to the national economy by 2020 if  a nationwide price on carbon is introduced.

The Federal Government has released a discussion paper that argues for workers earning up to $37,000 to get a tax refund that will directly boost their superannuation savings.

Superannuation funds will be able to streamline the way they claim tax deductions for the cost of total and permanent disability (TPD) insurance provided to members following the passage of legislation by the Senate yesterday.

The Australian Prudential Regulation Authority (APRA) has released a discussion paper on its proposals to publish data on general insurance business handled by insurance intermediaries, or brokers.   

The Australian Financial Review has reported that money owed to the Australian Taxation Office (ATO) by bankrupt individuals and insolvent companies has rocketed by 20% to nearly $5 billion over the last year, with concerns that the ATO's new strict debt recovery and economic uncertainty may push more taxpayers into the red.

The Assistant Treasurer Bill Shorten has announced transition arrangements to the new Produce Disclosure Regime that will come into effect next year.

International recruitment and consultancy firm Michael Page has released its Salary & Employment Forecast, showing that the financial services sector is growing on the back of increased business confidence.  

Research conducted by the University of Exeter Business School in the United Kingdom shows that that the Australian government’s Innovation Investment Fund allows start-up companies more scope for follow-on investments and has significantly contributed towards the supply of high-potential businesses.

Statistics published the Australian Bureau of Statistics (ABS) shows that retail turnover has increased by 1.1 per cent in April 2011, after the sector experienced a 0.3 per cent contraction in March.