Financial Reporting Council minutes documenting the decisions of the oversight body of the two standard setting boards in Australia have been publicly available for some time and now Australians interested in the work of the oversight body will be able to see it meet in public.
The significance of the recent decision to open the meetings of the FRC to the public will not be understood by some commentators and politicians, however, because they were not there when the FRC was first mooted, created and then observed.
They have no understanding of the campaigns that took place back when the body was first formed to press for a greater degree of transparency.
I do as it was my Freedom of Information request that started the process of the FRC minutes being uploaded for community reference all those years ago.
Individuals on the FRC were no doubt amused and annoyed in equal measure when I lodged an FoI request for the minutes in the first instance because the law said the FRC could make its own rules on how it meets and what it does.
That is rather cosy in a situation where the activities being spoken about and directions being contemplated were all to do with the public interest.
I know that there were people within the bureaucracy who were trying to find a way of not having the minutes published. Calling the minutes ‘working papers’ of the FRC was one excuse that was tried by a bureaucrat. It was resolved in favour of the minutes being put up on the FRC site.
That was an argument someone from an accounting firm tried to use against releasing a submission from the major accounting firms to the review conducted by Ian Ramsay on auditor independence done not long after Enron collapsed. The document – a so-called ‘working paper’ – was made available only after this cranky author wrote a piece for the Fairfax Press highlighting the fact that a submission made to the Ramsay Inquiry and cited by the report was not being released by the biggest accounting firms in the country.
The firms were unhappy with the publicity at the time, but that publicity resulted in some very productive conversations when people understood the jig was up and there was a need to talk frankly about what was being said to the government.
Taxpayers pay for the FRC and the two standard setters that develop and issue accounting and auditing standards that form a part of the law. This is not a process that was taken over to develop some clandestine body of standards for a shadowy guild of abacus bearing accountants so the in-camera nature of the FRC meetings was always rather curious.
The taxpayer was always entitled from the outset to have greater visibility of the process, which, regrettably, did not exist because in-camera meetings remained the norm despite having the option to open the processes up to greater public view and involvement.
This meant that critical discussions about the matters on which the FRC would direct the boards it oversees were not held in public, but the standard setters were forced to meet in public to fulfil the directives thrown their way.
What should have happened in the case of the adoption of international accounting standards back in 2002 was a proper due process or even public meetings so those discussions could be observed.
Advocates for adoption will probably attack what I have said above by asking me whether I thought the decision was wrong because they agree with the outcome.
What I think about the ultimate policy decision is irrelevant. The process and how you carry the community there from the outset is what is critical and remains important.
That decision to adopt international accounting standards taken more than 18 years ago continues to have an impact and a recent parliamentary committee report on audit regulation pointed to impairment standards that some companies had trouble grappling with in a pandemic environment.
Decisions have consequences and they must be made with an appropriate level of transparency on an ongoing basis from this point forward.
It is also important that the fourth estate, the media, remembers that the processes that develop the very standards that companies must comply with when they prepare their financial statements are public.
The FRC’s decision to open its doors means that the full process is able to be tracked and not just followed vicariously through the public actions and public documents of the two boards it oversees. It ought to be complimented on the decision.
Critics of the way in which the oversight regime is run, which includes those that argue former partners of Big Four firms should not chair the oversight body, will now have no excuse. They can sit in, listen and get up to speed on the process.
Public meetings are important but if those that criticise the system, write about it or participate in it as advocates of one cause or another fail to attend the public meeting then it is the critics rather than the council itself that need to reconsider the way they behave.
Public meetings of the FRC will assist in holding the FRC accountable to the taxpayers that pay for the system. Those same public meetings will also provide the FRC with an additional question to ask those in the broader stakeholder community taking the time to criticise the body: where were you when we discussed this matter in public?