The Accounting Ethical and Professional Standards Board (APESB) has approved a new and revised APES 330 – Insolvency Services, the first revision since 2014. This standard must be complied with by accountant members of CAANZ, CPA and IPA who provide insolvency services.
It covers practitioner issues of independence, remuneration, inducements and so on.
It does not cover standards expected of the professional bodies themselves. Perhaps it should.
APESB reports there is little change from the previous version, at least in comparison with the changes in the law, practice and case law since 2014. In fact, APESB saw little need to address the changes made by the Insolvency Law Reform Act 2016 (ILRA) given that “no substantive amendments were made as a result of these reforms as the legislation in many respects incorporated aspects already included in APES 330”.
This means that the responsibilities imposed by the ILRA on individual accountants in relation to their duties as trustees or liquidators sitting on independent registration and discipline committees, including their independence and confidentiality obligations, do not fall within APES 330. The Acts, including the Schedules and the Rules, and the general law, may have been seen as sufficient.
APES 330 has been updated to address new “legal precedents set by Australian courts”, meaning relevant case law, in particular in relation to the independence of insolvency practitioners. A list of independence cases is now contained in APES 330 – ASIC v Franklin, Queensland Mining v Butmall, Club Superstores, Advance Housing, Commonwealth v Irving, Ten Network Holdings, Bovis Lend Lease v Wily, and Recycling Holdings, being some of the important cases in this area, up to 2016.
APES 330 now refers to the accountants’ obligations under the Code of Ethics to report offences under ‘NOCLAR’ – “Non-Compliance with Law and Regulations”, meaning relevant breaches of the law. As much as APES 330 now says is that a member “who becomes aware of instances of non-compliance with laws and regulations when providing Insolvency Services” must comply with the Code of Ethics.
APES 330 might usefully have given an example, such as a staff member reporting their employer insolvency appointee’s purchase of an asset in the estate without authority, or their claim for excessive remuneration. AFSA has usefully addressed the NOCLAR issues in some more detail for insolvency practitioners.
The industry bodies
Coupled with NOCLAR is the statutory whistleblowing powers of the three accounting bodies themselves, and ARITA and others, by way of s 40-100 industry notices.
Although ARITA, CAANZ, CPA, IPA and other bodies were given these and other responsibilities under the ILRA, those bodies are in no sense regulated by AFSA or ASIC in respect of their discharge of those responsibilities, or otherwise. This contrasts with the co-regulatory model in the UK, and as will be the case in New Zealand under the Insolvency Practitioners Regulation Act 2019, where the recognised professional bodies are themselves regulated by the insolvency regulator.
In the case of NZ, if as expected CAANZ becomes an ‘accredited body’ under the Act, with approval to act as a ‘disciplinary body’, it will need to meet the Act’s requirements and report annually on its performance to the Registrar.
The fact that Australia has no regulatory oversight of CAANZ or its other insolvency industry bodies is perhaps all the more reason why those bodies might themselves come under a code of conduct to ensure proper compliance with their statutory regulatory responsibilities in insolvency, and report on their performance.