Companies Act of India and Corporations Act of Australia Essay

1.0 Introduction

The subject statement will prosecute is the similarity between the Companies Act of India and the Corporations Act of Australia. The Acts of the Apostless reference to the state of affairs in India and Australia associating to concern entities, activities and certain other associations.

The study will besides turn to the equality of the auditing criterions and relationship to International Standards. Auditing Standards areA based on the ISAs issued by the IAASB of the IFAC, in line with strategic way from the Financial Reporting Council.

The study will likewise turn to whether India has equality of APES 110 Code of Ethics for Professional Accountants. The application and enforcement of such codification of India will be examined and compared to Australia.

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Finally, the study will turn to the quality of scrutinizing and experiences in India and Australia in their corporate history. The study will besides prosecute how they have performed.

Comparison of the Regulatory Environment

Audited account activity and hearers are subjected to many statutory facets including the demands of professional organic structures, stock exchanges, ordinance, authorities regulative bureaus and State or Federal statute law. ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007 ) . India and Australia have Acts of the Apostless for the smooth operation of corporate organic structures and related activities in the state with underlined several commissariats and Torahs.

2.1 Companies and Corporation Act

The fundamental law of India has stated several Torahs and ordinances to modulate and safeguard the companies runing in India. While integrating a company in India 1 must follow prescribed Torahs and ordinances stated under the Companies Act 1956 and other related amendments. There are other related Indian Acts of the Apostless which support the Companies Act 1956 sing to securities ( SEBI Act ) , fiscal coverage patterns of insurance companies ( IRDA Act ) and one-year revenue enhancement audit ( Income Tax Act ) . ( http: //support.exportersindia.com/legal-aspects/companies.htm )

Australia has a federal constitutional system. “ the Corporations Act ” is a Commonwealth of Australia which is the chief statute law modulating companies in Australia. This act trades with concern entities in Australia at federal and interstate degree. The Trade Practices Act 1974 and the State and Territory Fair Trading Acts besides set up liability for false and deceptive statements, Crimes Act 1914 imposes an duty to describe offenses. The Australian Securities and Investments Commissions Act 2001 provide Australian Securities and Investments Commission ( ASIC ) and associated boards with important regulative powers to implement the demands of the Corporations Act and to order extra ordinances. ” ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007, p75 )

2.2 Supporting Companies Acts in Quality Auditing

The act clearly states on the readying, presentation, publication and revelation of fiscal statements and an audit of all companies by a member-in-practice certified by the Institute of Chartered Accountants of India ( ICAI ) . ( India – Accounting and Auditing ROSC, 2004 )

In the affair of Australia, the Corporations Act prescribes the hearer ‘s map, and regulates hearer ‘s activities. Companies must name an hearer to scrutinize the company ‘s fiscal studies. These fiscal studies have to be audited by hearer under s 307 of the Corporations Act to organize an sentiment whether the studies are in conformity with the Corporation Act with accounting criterions ( Fogarty M & A ; Lansley A, 2010 )

2.3 Securities Exchange Listing Rules and Supporting in Quality Auditing

SEBI is the regulator for the securities market in India. Securities and Exchange Board of India ( SEBI ) Act of 1992 is to forestall unwanted minutess in securities and protects investors and develops and regulates the Indian securities markets. The Stock Exchange Listing Agreement ( Clause 41 ) requires all listed companies to print unaudited quarterly fiscal consequences harmonizing to the prescribed format. The company shall be responsible to follow all the demands specified in the Companies Act, the listing norms issued by SEBI from clip to clip and such other conditions, demands and norms that may be in force from clip to clip. ( www.sebi.gov.in/bylaws/ch4.pdf )

Australian Securities Exchange ( ASX ) is a license holder of an Australian Market under the Corporations Act. ASX supervises the market for securities issued by listed entities.A It has stated the behaviour of listed entities through its listing regulations. The Listing Rules create duties that are extra, and complementary, to common jurisprudence duties and statutory duties. The listed companies require to lodge the one-year and half-year study and the hearer ‘s study with ASIC and the ASX. ( Fogarty M & A ; Lansley A, 2010 )

3.0 Comparison on the usage and ordinance of Auditing Standards

The rule and intent of Auditing Standards is to set up compulsory demands and guidelines to hearers in carry throughing their professional liabilities and duties in scrutinizing the fiscal studies of companies. ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007, p75 )

3.1 Auditing Standards in India and Australia

ICAI has established AASB to publish scrutinizing criterions in India. Consequently, the Board issues Statements on Standard Auditing Practices and Auditing and Assurance Standards under the authorization of the council. Till day of the month, ICAI has issued 30 five auditing criterions and three are under consideration of the Council. Chartered Accountant Act ( 1949 ) regulates the accounting profession in India and consequently mandates the ICAI to publish Accounting Standards and Auditing and Assurance Standards. ICAI issues counsel notes on accounting and scrutinizing patterns in countries where criterions do non be. ( India – Accounting and Auditing ROSC, 2004 ) . It is the responsibility of the members of the Institute to guarantee that the auditing criterions are followed in the audit in their studies. If member is unable to execute an audit in conformity with the by and large accepted auditing criterions, he would be held guilty of professional misconduct under clause 9 of Part 1 of the Second Schedule to the Chartered Accountants Act, 1949. ( hypertext transfer protocol: //www.icai.org/resource_file/7750dept_aasb_indian_scenario.pdf )

Relatively, on the other manus, the AUASB issues scrutinizing criterions ( ASAs ) in Australia. There are seven classs of auditing criterions which are as follows:

ASA 100 – 199 Introductory affairs

ASA 200 – 299 General rules and duties

ASA 300 – 499 Risk appraisal and response to assessed hazards

ASA 500 – 599 Auditing grounds

ASA 600 – 699 Using the work of others

ASA 700 – 799 Audit decisions and coverage

ASA 800 – 899 Specialised countries

Each ASA contains an authorization statement that links to the mandating the statute law. “ The Corporate Law Economic Reform Program ( Audit Reform and Corporate Disclosure ) Act 2004 ( CLERP 9 ) came into consequence in 1 July 2004 and led to amendments to the Corporations Act 2001 which gave AUASB the force of jurisprudence under the Act. Section 307A of the Act requires hearers to carry on audits and reappraisal of fiscal prepared under Part 2M.3 of the Act, in conformity with auditing criterions. ” ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007, p75 )

3.2 Auditing Standards – Puting

ICAI is supported by the Accounting Standard Board ( ASB ) the Auditing and Assurance Standard Board ( AASB ) by fixing the bill of exchange ordinances and ICAI approves and order a deadline for acceptance. AASB identifies the country where auditing criterions are needed. Board is usually assisted by survey groups consisting the members of ICAI. ( India – Accounting and Auditing ROSC, 2004 )

The Auditing and Assurance Standards Board ( AUASB ) is the statutory organic structure of Australia which issues scrutinizing criterions ( ASAs ) , and criterions on reappraisal battles, confidence battle and related services. AUASB staff and board members identify a proficient issue and so mention to the IAASB. The AUASB will discourse and research. Finally, the result is submitted to the IAASB for remarks. ( http: //www.auasb.gov.au/About-the-AUASB/The-standard-setting-process.aspx )

3.3 International Harmonization of Auditing Standards

International Standards on Auditing ( ISAs ) are issued by International Auditing and Assurance Standards Board ( IAASB ) . Due to the globalisation of concern and capital markets, unvarying accounting and auditing criterions are developed.

ICIA is a member of the International Federation of Accountants. Therefore, scrutinizing criterions issued by the ICAI are in harmoniousness with the International Standards on Auditing. It has issued 30 five auditing criterions matching to the Engagement Standards issued by the IAASB of the IFAC and three auditing criterions are in the grapevine. A list of the Engagement Standards issued by the IAASB and the auditing criterions issued by the ICAI there against is given as Annexure I. A rapprochement of the Engagement Standards with the auditing criterions issued by the ICAI is given as Annexure II. ” ( hypertext transfer protocol: //www.icai.org/resource_file/7750dept_aasb_indian_scenario.pdf )

SinceA April 2006, the AUASB hasA released Australian Auditing Standards ( ASAs ) A based on the ISAs issued by the IAASB, in line with strategic way from the Financial Reporting Council. Therefore, issues on the IAASB work plan are besides included on the AUASB work plan, although the grade of engagement by the AUASB varies issue-by-issue and may be substantial or non-substantive. ( http: //www.auasb.gov.au/About-the-AUASB/The-standard-setting-process.aspx )

3.0 Comparison of the ethical and quality environment

A codification of moralss consists of general statement of ideal behavior, or specific regulations that define unacceptable behaviour. The codification provides important counsel on lower limit acceptable criterions of professional behavior. ” ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007, p118 ) . India has codification of moralss which is equality to Australia. Both follow the same cardinal rules, similar conceptual model.

3.1 APES 110 Code of Ethics for Professional Accountants

Accounting Professional and Ethical Standards Board ( APESB ) is responsible for puting the joint moralss codification, assorted professional criterions ( APES ) and counsel notes ( AGS ) . APES 110 is based on the Code of Ethics for Professional Accountants issued by Internal Ethics Standards board, which is a commission of the International Federation of Accountants. Code trades with issues associating to independence and professional assignment. ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007 ) .

3.2 Code of Ethics in India

India in a really similar, the Chartered Accountants Act, 1949 along with its agendas sets out different signifiers of behaviour, which recognizes the aims of the accounting profession are to work at the highest criterions of professionalism and public presentation to run into the public involvement demand. An indispensable demand of such group is the credence and observation of professional ethical criterions modulating their relationship with clients, employers, employees, fellow members of the group and the public by and large. ( hypertext transfer protocol: //www.cvc.nic.in/codeethics.pdf )

3.3 Cardinal Principles

In accounting profession, hearers have to detect five ethical rules of the codification which are as follows: ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007 )

Integrity – Hearers must be straight frontward and honest in executing the professional services

Objectivity – Hearers should be just and should non let bias or prejudice, struggle of involvement or influence of others to overrule objectiveness.

Professional competency and due attention – Hearers should execute with due attention and competency and has to keep professional cognition and accomplishment at a high degree based on up-to-date developments in pattern, statute law and techniques.

Confidentiality – Hearers should esteem the confidentiality of information and should non utilize or unwrap any such information without specific authorization or unless there is a legal responsibility or professional right to unwrap.

Professional behaviour – Hearers should move in a mode consistent with the good repute of the profession and chorus from any behavior which might convey disrepute to the profession.

3.5 Application of Code of Ethical motives

The Code is divided into three parts plus besides includes a definitions subdivision:

Separate A applies to all professional comptrollers.

Part B applies to professional comptrollers in public pattern.

Part C applies to professional comptrollers in concern.

The professional comptrollers in public pattern demand to be familiar with Partss A and B, and professional comptrollers in concern demand to be familiar with Partss A and C. ( SAFA Ethics and Independence Committee, 2004 ) . “ Part A of the codification establishes the cardinal rules of professional moralss for members and provides a conceptual model for using those rules. While, Part B and C exemplify how the conceptual model is to be applied to place and turn to menaces in specific state of affairss. ” Part B of the codification contains nine chief subdivisions which are relevant to hearers and most have deductions for or straight pertain to independence. ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007, p119 )

3.6 Enforcement of Code of Ethical motives

The Chartered Accountants Act, 1949 and Schedules to the Act set out the acceptable signifiers of behaviour of the members of the profession. It is framed for the ordinance Chartered Accountants. Section 22 of the Chartered Accountants Act defines and depict what constitutes ‘professional misconduct ‘ and the look ‘professional misconduct ‘ shall be deemed to include any act or skip specified in any of the agendas. ( hypertext transfer protocol: //www.icai.org/post.html? post_id=735 )

Relatively, the Institute and CPA Australia jointly fund the Accounting Professional and Ethical Standards Board ( APESB ) who is responsible for puting the joint moralss codification, assorted professional criterions ( APES ) and counsel notes ( AGS ) . Section 290 of the codification trades with issues associating to professional independency for confidence battles, where an bing client of a member engages them to supply confidence services and where the member ‘s ability to supply these services could potentially be compromised by bing battles.

( hypertext transfer protocol: //www.cpaaustralia.com.au/cps/rde/xchg/cpa-site/hs.xsl/knowledge-auditing-toolkit-guides-code-ethics.html )

5.0 Comparison of the Audit Quality Experiences

Meanwhile, the proficient company Satyam Computer Services Ltd. is one of the biggest prostrations in Indian corporate history. In the affair of Australia, it has experienced the corporate catastrophe of several high profile companies like HIH on One. Tel, Pasminco, Ansett Australia, Impulse Airline, Harris Scarfe Holdings. The grounds are due to weak regulative system, enforcement of Torahs, weak accounting and auditing criterions. ( Fogarty M & A ; Lansley A, 2010 )

5.1 Audit Quality

Audit quality means how good an audit detects and studies stuff misstatements in fiscal statements. Audit quality involves a broad scope of inter-related factors of legal model associating to scrutinize ordinance, the company hearer enrollment system, the hearer independency and the accounting and auditing criterions. It is a contemplation of hearer public presentation, competency, unity and independency. ( Arens A, Beasley M, Best P, Elder R, Fiedler B & A ; Shailer G, 2007 )

‘The UKFRC and the Treasury ‘ have considered some factors as cardinal drivers of audit quality which are as follows:

The civilization within an audit house

The accomplishments and personal qualities of audit spouses and staff

The effectivity of audit procedure

The dependability and utility of audit coverage

Factors outside the control of hearers impacting audit quality

Audit ordinance model

The audit reappraisal procedure

Corporate administration describes the control and way of corporations. By and large the construct and rules addresses the safeguarding of unity in fiscal coverage. It recommends that companies should hold a construction to independently verify and safeguard the unity of their fiscal study. ( The Treasury, 2010 )

5.2 Experiences in India and Australia

India has managed its passage into a planetary economic system good, and although it suffers accounting and corporate administration dirts. Satyam Computer Systems Ltd. India ‘s 4th largest package services company collapsed due to false accounting and weak corporate administration. Indian Authorities charged Chairman other subordinate participants such as CFO, pull offing manager, the company ‘s planetary caput of internal audit with duty for the fraud and files charged against them. Satyam ‘s hearers, board of managers bear some duty for the fraud because of their failure to observe it. Global auditing steadfast Price Waterhouse Coopers ( PWC ) audited Satyam ‘s books from June 2000 until the find of the fraud. Several observers criticized PWC harshly for neglecting to observe the fraud. Due to weak regulative system, the enforcement of the Torahs and the audit criterions the company failed in Indian corporate history. ( Winkler D, 2010 )

On the other manus, HIH insurance company of Australia collapsed due to some accounting and corporate administration grounds. Poor corporate administration, uneffective audit commission, compromised hearer independency, misdirection, hapless concern determination devising and executing, are some of the grounds. The audit commission was wholly concerned with the affairs straight concerned with the histories and figures. There was no concern with hazard direction and internal control. Arthur Andersen was supplying non audit service. The president of company was uneffective and was failed to transport out his functions. Board did non decently transport out its function. As a consequence, the company failed in the corporate history. ( Lipton P, 2003 )

6.0 Decision

An audit is an independent appraisal of a company ‘s fiscal statements presented by company ‘s direction. The Auditing Standards are issued as legislative instruments and are lawfully enforceable for audits during fiscal coverage periods. The Companies Act in India and the Corporation Act 2001 of Australia provide the guidelines for the hearer for executing audit in any concern, company or entity. Therefore it is really of import to hold knowledge to such Acts of the Apostless and counsel before scrutinizing. Auditing Standards are established as guidelines to hearers in carry throughing their professional liabilities and duties in scrutinizing the fiscal studies of companies. Code of moralss is compulsory for all members. APES110 provide the codification of moralss for professional comptroller and the conformity is compulsory. Principle of APES110 applies to this audit are unity, honestness, objectiveness, professional competency and due attention, professional behaviour, confidentiality. Audit quality involves a broad scope of inter-related factors of legal model associating to scrutinize ordinance, the hearer independency and the accounting and auditing criterions.