CHAPTER 1 Introduction to accounting and business decision making 11changes to the Corporations Act. The main changes were in the areas of auditor responsibilities, dis-
closure requirements of directors, requirements for the preparation of concise annual reports, abolition
of the concepts of authorised capital and par value, and the accounting standard-setting program. The
website of ASIC provides detailed information on the changes to the Corporations Act (see www
.asic.gov.au).
The role of company regulation is to protect different stakeholders (such as investors, consumers
and lenders) and help promote a strong and vibrant economy. Regulation assists in monitoring the
preparation, presentation and distribution of financial statements. Company regulation also helps
liquidators to obtain records from bankrupt companies, to carry out legal proceedings against direc-
tors, and to ensure that appropriate information is provided to the different stakeholders of listed
companies.
The main source of company regulation in Australia is the Corporations Act, enforced through
ASIC. The Corporations Act stipulates (among other things) that disclosing entities prepare financial
statements and, in doing so, comply with accounting standards and regulations. The other important
sources of regulation are the Listing Rules of the ASX; and the accounting principles, standards,
ethics and disciplinary procedures of the accounting profession, represented by two main accounting
associations: the Chartered Accountants of Australia and New Zealand (CAANZ) and CPA Australia.
The roles of ASIC, the ASX and other government organisations involved in company regulation
in Australia and the role of the professional accounting associations are discussed in the following
sections.
VALUE TO BUSINESS• Corporate collapses and episodes of insider trading and company fraud have resulted in changes to
corporate regulation.
• Corporate regulation protects the interests of the different stakeholders and promotes confidence
and investment in business and economic activities.
• The main source of company regulation is the Corporations Act, enforced through ASIC.Australian Securities and Investments Commission (ASIC)
The Australian Securities and Investments Commission (ASIC) acts as the company watchdog and
enforces company and financial services laws (such as the Corporations Act and the ASX Listing Rules)
to protect consumers, investors and creditors.
ASIC’s role, as stated in the Australian Securities and Investments Commission Act 2001 (Cwlth), is to:
- uphold the law uniformly, effectively and quickly
- promote confident and informed participation in the financial system by investors and consumers
- make information about companies and other bodies available to the public
- improve the performance of the financial system and the entities within it.
ASIC administers and enforces several laws, including the Corporations Act, the ASIC Act, the
Insurance Contracts Act 1984 (Cwlth), the Superannuation Industry (Supervision) Act 1993 (Cwlth), the
Retirement Savings Accounts Act 1997 (Cwlth), the Life Insurance Act 1995 (Cwlth) and the Medical
Indemnity (Prudential Supervision and Product Standards) Act 2003 (Cwlth).
Corporations Act 2001
By far the most important Act under the auspices of ASIC is the Corporations Act 2001 (Cwlth). The
Corporations Act is based on the legislative powers that the Australian government has under s. 51 of
the Australian Constitution. The Corporations Act contains various sections that provide guidance for
corporations in Australia. It includes such sections as the definition of a disclosing entity; the accounting