find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
ASX rules yielding little risk info

ASX rules yielding little risk info

MOST LISTED Australian companies have not used the advent of the Australian Stock Exchange’s corporate governance guidelines to increase disclosure on risk management issues, KPMG has found.The…

MOST LISTED Australian companies have not used the advent of the Australian Stock Exchange’s corporate governance guidelines to increase disclosure on risk management issues, KPMG has found.

The accounting firm studied the annual reports of the top 130 ASX listed companies and found that many firms chose to provide only “limited generic” information regarding their compliance with the requirements of principle 7 (recognise and manage risk), particularly recommendation 7.2, the CEO and CFO sign off to the board on financial statements and risk management.

However, KPMG found that only 44 per cent of the top 130 listed firms disclosed that the board received the CEO/CFO sign off and just 45 per cent of disclosing firms provided any details of the sign off, despite details being key to the reader of the reports making a judgment on the companies risk and internal control systems.

While non-disclosure does not equate to non-compliance, or that non-disclosing firms do not have confidence in their risk and internal controls systems, it could cause problems, KPMG reported.

The CEO/CFO sign off is mandated by the US Sarbanes-Oxley Act (SOX), but it is also regarded as a cornerstone of good corporate governance. Disclosing nothing on the basis that compliance has been achieved limits the opportunity to enhance stakeholder confidence and understanding of the confidence and integrity of the systems and the sign off.

There are also concerns that using generic wording to describe the sign offs is reducing the usefulness and value that a more comprehensive disclosure can provide.

“By choosing to access public capital, companies take on an obligation to consider governance issues seriously and to make proper disclosure to the market,” said Dr Ian Pollard, a member of the ASX’s implementation review group for the principles. “That is not an onerous expectation given the fundamental nature of the issue.”

Pollard, who is also a chairman and director of both large and small listed companies, added that the framework intends to accommodate the diverse needs of Australian listed firms. “However, we found that this flexibility is not well understood, particularly by smaller companies, and needs to be communicated more effectively,” he said.

Despite the lack of disclosure on the part of some firms, KPMG’s study also unearthed some best practises among reporting companies. Packaging giant Amcor received praise for its full wording of the CEO/CFO sign off, its referral to the implementation of policies adopted by the board, while OneSteel was also praised for its detailed descriptions of the CEO/CFO sign off and its description of its business risk profiling system and its key risks.

According to senior risk figures, the issue is not necessarily the structure of the ASX guidelines, but that they are voluntary. “We are struggling with the volume of all of this, and trying to determine how much of this we’re going to do in the future,” said one head of risk at one of the firms praised in the report. “Where do you draw the line on these things and its another job entirely to quantify the benefits.” With |so many non voluntary initiatives to deal with, and questions over the commonality of approach across SOX and the ASX guidelines, there are concerns that the ASX guidelines are left behind.

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weeklys sister publication

7.2 What is it?

Recommendation 7.2 is often referred to as the principles-based version of Sarbanes-Oxley Act section 404. It requires firms to disclose when they have not met the requirements for a CEO/CFO sign off to the board on financial statements and the systems of risk management and internal controls; and specified items in accordance with suggested disclosure in Recommendation 7.3 and other guidelines including a description of the risk profile and the system of risk management and internal control.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

ASX rules yielding little risk info
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Applauds
07:00
LCA applauds proposed Modern Slavery Act
The Law Council of Australia has welcomed new recommendations for the development of a Modern Slaver...
Mentoring
07:00
Top-tier offers targeted mentoring for Indigenous law students
Students at Macquarie University will be the first to benefit from a new Indigenous mentoring progra...
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...