Australia: Are you ready for the new ASX rules?

HG Corporate Advisory and Governance Alert: 22 April 2014

The Corporate Governance Principles and Recommendations 3rd Edition (Principles and Recommendations), which was released on 27 March 2014 by the ASX Corporate Governance Council (Council), requires that companies disclose their internal audit and assurance protocols to investors.

It was recently reported1 that only approximately half of ASX listed companies have internal audit functions. With the new Principles and Recommendations commencement date fast approaching, it is now more important than ever that all ASX listed companies have established either:

  • a formal internal process; or
  • an assurance protocol arrangements for independently verifying and safeguarding corporate reporting.

In this Alert, Partner Brian Moller and Trainee Solicitor Kaitlyn Rafter outline the internal audit functions and assurance protocols which will become mandatory for companies from 1 July 2014, as well as provide a brief overview of the new information sheet released by ASIC in relation to audit quality.

Key points

  • The Principles and Recommendations will require listed companies to comply with more intensive reporting and a greater standard of corporate governance practices.
  • All listed companies are required to meet the corporate governance practices which are contained in the Principles and Recommendations (or provide cause for not doing so).
  • The disclosure is required to be made by a listed company in either its annual report or on the company's website.
  • A number of recommendations have been released by ASIC in a new information sheet which addresses the responsibilities and obligations of directors and audit committee members in audit quality of audit committees.
  • The Principles and Recommendations take effect for a listed entity's first full financial year commencing on or after 1 July 2014.

The Principles and Recommendations

As highlighted in a previous Alert, the latest Principles and Recommendations, albeit seeking to provide companies with greater flexibility for their corporate governance reporting, will require listed companies to comply with more onerous reporting and a heightened standard of corporate governance practices in Australia.

In doing so, the Principles and Recommendations (which were released in 2007 and amended in 2010) aim to incorporate lessons from the Global Financial Crisis and other local and global corporate governance developments.

What are the requirements?

Under Listing Rule 4.10.3, companies listed on the ASX are required to meet the corporate governance practices which are contained in the Principles and Recommendations. If they do not, a company must disclose its decision not to comply and its reasons for not doing so.

The Principles and Recommendations now provide that all companies should disclose:

  • a company's internal audit function, including how the function is structured and what role it performs; or alternatively;
  • if a company does not have an internal audit function, it must disclose this fact, as well as disclosing the processes that the company employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. This includes, but is not limited to, explaining:
    • the processes for the appointment and removal of the external auditor; and
    • the rotation of the audit engagement partner.

Where a listed company decides it is able to oversee the corporate reporting process efficiently and effectively, without establishing an entirely separate audit committee, the fact that it does not have an audit committee must also be disclosed.

According to the Principles and Recommendations, these heightened audit reporting requirements are to serve a dual purpose of risk management, as well as to safeguard the integrity of the company's corporate reporting.

The requirement under Listing Rule 12.7, that a listed company must have an audit committee in place for the entirety of the financial year still remains in the following circumstances:

  • where it is listed on the S&P All Ordinaries Index at the beginning of your financial year;
  • where it is listed on the S&P/ASX 300 Index at the beginning of your financial year; or
  • if it has been included in the S&P/ASX 300 index for the first time less than three months before the beginning of that financial year, it must take steps to comply with Structure and Disclosure Requirements within three months of the beginning of the financial year.

How to comply: Your corporate governance statement

The disclosure is required to be made by a listed company in either its annual report or pursuant to Listing Rule 4,10,3 which allows disclosure to be made on the company's website instead.

The Council has encouraged listed companies to provide a "holistic and informative explanation of their corporate governance framework" in disclosing compliance with the listing rules or under the Principles and Recommendations.

However, please note that this does not mean that it is simply enough to state that you have complied with the recommendation of the Principles and Recommendations. Rather, companies need to explain what policies and practices have been implemented and where readers can find further information about those policies and practices (ie on company websites).

How to comply: Audit committees – new ASIC information sheet

ASIC recently released Information Sheet 196 Audit quality: the role of directors and audit committees ( INFO 196). INFO 196 lists a number of recommendations in order to assist directors and audit committees in ensuring the quality of the external audit of a financial report.

INFO 196 makes it clear that directors (whether or not they are members of a company's audit committee), as well as audit committee members, have a crucial role in supporting audit quality.

INFO 196 dictates that directors and audit committees should consider the following in order to ensure audit quality and effectiveness:

  • non-executive directors recommending auditor appointments and setting audit fees;
  • assessing the commitment of the auditors to audit quality;
  • reviewing the resources devoted to the audit, including the amount of partner time and the use of experts;
  • accountability within the audit firm for quality;
  • support by company management for the audit process;
  • two-way communication with the auditor on concerns and risk areas;
  • ensuring independence of the auditor, and
  • reviewing audit firm responses to findings from ASIC audit inspections.

When will this take effect?

The Principles and Recommendations take effect for a listed entity's first full financial year commencing on or after 1 July 2014.

This means that companies with a 30 June balance date are required to adopt the Principles and Recommendations for the financial year ending 30 June 2015. Companies with a 31 December balance date are expected to adopt the Principles and Recommendations for the financial year ended 31 December 2014. However, the Council has encouraged listed entities to adopt the Principles and Recommendations earlier.


1King, A. 2014 ASX rules a windfall for internal auditors, Australian Financial Review, 16 April, viewed 16 April 2014 < >

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.