Who is responsible for making sure a company follows the law?

In Plain English

Based on the provided text, it depends on the type of company and the specific law in question.

  • Generally: Management, with oversight from those charged with governance (like a board of directors), is responsible for ensuring a company follows laws and regulations (Auditing Standard ASA 250).
  • Commonwealth Entities: The accountable authority of a non-corporate Commonwealth entity is responsible for ensuring compliance with the Legal Services Directions 2017.
  • Corporations Act: Directors, secretaries, other officers and employees of corporations have duties to ensure the company follows the law (Corporations Act 2001).
  • Auditing: Auditors play a role in identifying non-compliance, but determining whether an act constitutes non-compliance is generally a matter for the courts (Auditing Standard ASA 250).
  • Net Zero Economy Authority Act 2024: The CEO must promote and monitor compliance with Part 4 of the Net Zero Economy Authority Act 2024.

Detailed Explanation

Several pieces of legislation outline responsibilities for ensuring legal compliance within different types of organizations:

  • General Responsibility: Auditing Standard ASA 250 emphasizes that management, with oversight from those charged with governance, bears the primary responsibility for ensuring an entity's operations comply with laws and regulations. This includes establishing policies and procedures for prevention and detection of non-compliance.
  • Commonwealth Entities: The Legal Services Directions 2017 places specific responsibilities on the accountable authority of a non-corporate Commonwealth entity. This includes ensuring efficient and effective handling of legal services, adopting appropriate management strategies for compliance, and reporting potential breaches of the Directions.
  • Corporations Act 2001: The Corporations Act 2001 outlines the duties of directors, secretaries, other officers, and employees of corporations. These duties include exercising care and diligence (section 180), acting in good faith (section 181), and avoiding improper use of their position (section 182). These individuals are responsible for ensuring the company follows the law.
  • Auditor's Role: While auditors are responsible for considering laws and regulations during a financial report audit (Auditing Standard ASA 250), they are not the ultimate arbiters of legal compliance. The auditor's role is to detect non-compliance that may materially misstate the financial report and to report identified or suspected non-compliance. Determining actual non-compliance is generally the role of a court or adjudicative body.
  • Net Zero Economy Authority Act 2024: The CEO must promote and monitor compliance with Part 4 of the Net Zero Economy Authority Act 2024.