Media Release

Keeping Australian business and policy development ‘fit for the future’

With public interest and policy influence at the top of the agenda, the Institute of Chartered Accountants in Australia (the Institute) has, for the first time, brought the country’s regulators, standard setters and policy makers to the discussion table. The Institute’s latest thought leadership paper, developed in collaboration with Access Economics, Early warning systems: can more be done to avert economic and financial crises?, was launched at a landmark forum held last week at the Art Gallery of NSW.

Lee White, Executive General Manager and co-author of the paper, envisions hosting such a forum more regularly where regulatory agencies, government departments and the financial community can convene to discuss and perhaps find solutions to the most pressing issues facing the tax payer, particularly those with long-term implications.

“Australia has been widely recognised internationally for dodging the crisis bullet. As one of the only westernised countries to survive the global financial downturn relatively unscathed, our governance and regulatory framework have been commended.

“As the global economy recovers, it is important to undertake analysis, such as this thought leadership paper, to stimulate discussion on how we can improve to ensure we protect the taxpayer in the event of an economic crisis. It is equally important that Australia is not complacent about making improvements for the future.”

By the end of 2009, Europe and the US governments had handed over approximately USD 14 trillion in bailout money. To bring these debt levels back into line, the tax payer of these jurisdictions will have to pay.

Early warning systems: can more be done to avert economic and financial crises? explores macro- and microeconomic indicators of a crisis. Discussions at the forum included better information being disclosed by companies to assist regulators’ understanding of the corporate sector’s financial position and attitude to risk. Other indicators may come from credit rating agencies that are also able to assess the systemic exposure of individual companies.

The forum discussion included a focus on the increasing importance of the audit committee, its independence and fundamental role in upholding sound corporate governance. The participants considered the merit in enhancing the role of the audit committee, including better disclosures of key information in the annual report, and an improved understanding of the role of audit.

Another area explored in the paper and the forum is the inclusion of prospective (as opposed to retrospective) information in annual reports. Companies could report or disclose an assessment of their business model and potential risks.

The forum concluded that whilst even more information disclosure is needed, the challenge would be the administrative cost and time needed to collate and share the information across institutions. This would then require a coordinated response to avoid a crisis and who or what body would manage this response?

“In addition to better information, having regulators with the independence and courage to call a looming disaster and take necessary action is required. A strong culture of regulatory independence and a shift away from the ‘herd mentality’ are key to saving the last person standing – the tax payer,” said Mr White.

Article last Updated 24 February 2011