Audit and assurance news

May 2012

Date issued: 11 May 2012   

Transitional provisions for the regulation of auditors of issuers began on 1 May 2012. Overseas auditors wishing to conduct audits of issuers from 1 July 2012 will need to comply with the new regulations.

Assurance Engagements on Greenhouse Gas Statements (PDF)

Date issued: 11 May 2012

Exposure Draft 01/12: ASAE 3410, issued by the Auditing and Assurance Standards Board, proposes a new assurance standard that conforms with the international standard ISAE 3410. It establishes requirements and provides guidance to assurance practitioners undertaking reasonable or limited assurance engagements on greenhouse gas statements, including reports on emissions, energy consumption and energy production under the National Greenhouse and Energy Reporting Act 2007 and associated regulations.

CPA Australia members can email their comments on the DP to CPA Australia by Friday 1 June.

Discussion Paper: Law and Assurance for Larger Registered Charities

Date issued: 3 May 2012

The Discussion Paper: Audit and Assurance for Larger Registered Charities, issued by the New Zealand Ministry of Economic Development, proposes the introduction of assurance requirements for the financial statements of larger registered charities in New Zealand. The Discussion Paper proposes a tiered structure, with audits for registered charities with operating expenditure greater than NZ$300,000, and an audit or review for registered charities with operating expenditure greater than NZ$200,000.

CPA Australia members can submit their comments and suggestions to professionalstandards@cpaaustralia.com.au by Friday 6 July. 

January 2012

Auditor independence and firm rotation

Date issued: 16 January 2012

CPA Australia has made a submission (PDF) to the Public Company Accounting Oversight Board on its Concept Release on auditor independence and audit firm rotation. CPA Australia considers the status quo adequately addresses auditor independence and, given the absence of specific evidence pointing to improvements in audit quality as a result of the proposals, does not support the proposed changes of introducing mandatory audit firm rotation.

Submission to the United Kingdom FRC on proposals to reform

Date issued: 16 January 2012

The submission (PDF) recommends that the United Kingdom Financial Reporting Council (FRC) retain their structure with appropriate powers delegated to operating bodies within the structure. CPA Australia supports more regulatory powers to demonstrate independent oversight of the audit function and powers to directly communicate with and regulate audit firms where appropriate.

December 2011

New Zealand audit regulations for accredited bodies

Date issued: 11 December 2011

The Financial Markets Authority (FMA) has released Consultation Paper Proposed Requirements for Accredited Bodies Under the Auditor Regulation Act 2011, which sets out the minimum standards and conditions that the FMA proposes should be met by organisations seeking accreditation.

Accredited bodies are responsible for licensing domestic auditors and audit firms to carry out issuer audits in New Zealand. The FMA in New Zealand is responsible for overseeing the regulation of licensed auditors and registered audit firms for audits of issuers.

CPA Australia members can submit their comments and suggestions to professionalstandards@cpaaustralia.com.au by Monday 19 December.

Members are also encouraged to directly submit comments and suggestions to the FMA by 5.00 pm Thursday 22 December.

November 2011

Proposed standard: assurance engagements on fundraisings

Date issued: 29 November 2011

CPA Australia's submission (PDF) in response to exposure draft ED 03/11, Proposed Standard on Assurance Engagements ASAE 3450 Assurance Engagements involving Coroporate Fundraisings and/or Prospective Financial Information (PDF) is generally supportive. CPA Australia highlights the overwhelming size of the proposed standard and recommends it be split into three standards, addressing historical financial information, pro forma information and forecast information. The scope of the proposed standard is broad, including small practitioners helping small to medium enterprises to raise finance, a further reason for simplification.

Proposed standard: comfort letter engagements

Date issued: 29 November 2011

CPA Australia's submission (PDF) in response to exposure draft ED 02/11 Proposed Standard on  Related Services ASRS 4450 (PDF) is generally supportive. As some sections of the standard refer to agreed-upon procedures and others to limited assurance, CPA Australia recommends level of assurance being provided is clarified and the often-used term "financial forecast" is defined.

Auditor licensing in New Zealand: proposed changes

Date issued: 21 November 2011

The Financial Markets Authority (FMA) has released Consultation Paper: Licensing of Auditors and Registration of Audit Firms. The consultation paper sets out the minimum standards and conditions proposed by the FMA, such as minimum experience and qualification requirements. These changes will have a significant impact on obtaining a license to carry out issuer audits in New Zealand.

The FMA in New Zealand is responsible for overseeing the regulation of licensed auditors and registered audit firms for audits of issuers. CPA Australia members can submit their comments and suggestions to professionalstandards@cpaaustralia.com.au by Thursday 8 December. Members are also encouraged to submit comments and suggestions to FMA directly by 5.00 pm Friday 16 December.

General purpose water accounting reports: consultation

Date issued: 21 November 2011

The Joint Accounting Bodies submission (PDF) in response to Consultation Paper: Assurance Engagements on General Purpose Water Accounting Reports (PDF) is generally supportive of the proposals. The submission recommends a reasonable assurance based stand-alone standard and also highlights the need for additional awareness in reacting to any changes while the water accounting standard is being developed concurrently.

The submission also notes:

• a preference for a stand-alone assurance standard that draws from the Auditing and Assurance Standards Board standards, and from other disciplines relevant to water reporting and assurance
• a preference for a prescriptive approach (rather than a principles-based approach) in determining the qualifications of assurance practitioners, underpinned by a competency framework
• a reference for a reasonable assurance-based approach with an option for limited assurance, if needed – limited assurance may be relevant initially, while water reporting and assurance develop
• that assurance should be provided on all elements of the water reports, with the assistance of subject matter specialists where needed
• that the assurance standard should draw from relevant auditing standards when providing guidance on use of external and internal experts and internal audit functions

AUASB reissues GS 007 

Date issued: 7 November 2011 

The Auditing and Assurance Standards Board (AUASB) has revised and reissued Guidance Statement GS 007 (PDF) Audit Implications of the Use of Service Organisations for Investment Management Services. Requirements in various AUASB standards regarding service organisations have been added since the guidance statement was first issued in March 2008.

The minimum control objectives provided in GS 007 have been reviewed and revised and the AUASB has prepared a comparative table (PDF) to help service auditors in those objectives.

Post-implementation review of Clarified ISAs

Date issued: 7 November 2011

The International Auditing and Assurance Standards Board’s (IAASB) post-implementation review (PDF) of Clarified International Standards on Auditing (ISA) focuses on whether Clarified ISAs are being consistently understood and implemented in a way that achieves the IAASB’s goals in revising and redrafting them.

Members can email their comments on the exposure draft to professionalstandards@cpaaustralia.com.au by 31 July 2012.

Enhancing audit quality

Date issued: 7 November 2011

The Joint Accounting Bodies, of which CPA Australia is a member, have lodged a submission to Treasury regarding the Exposure Draft Enhancing Audit Quality. The submission (PDF) includes a recommendation for a tiered approach to accommodate small and medium entities and support for the seven-year audit partner rotation. 

October 2011

Enhancing audit quality

Date issued: 10 October 2011

The Treasury has released Exposure Draft Corporations Legislation Amendment (Audit Enhancement) Bill 2011. Key proposals include:

• the option to extend audit partner rotation from five to seven years, provided directors and audit committee are satisfied that this is necessary
• larger audit firms would be required to prepare and disclose annual transparency reports on their websites
• the Australian Securities and Investments Commission (ASIC) would be permitted to publish reports on firms that have failed to address deficiencies identified by ASIC
• ASIC would be empowered to communicate directly with a company over its financial reporting compliance or audit conduct 

The comment period is now closed. However, you can still email in your views to professionalstandards@cpaaustralia.com.au

CPA Australia lodges submission in response to PCAOB

Date issued: 6 October 2011

CPA Australia has lodged its submission in response to the Public Company Accounting Oversight Board's (PCAOB) Concept Release Possible Revisions to PCAOB Standards Related to Reports on Audited Financial Statements and Related Amendments to PCAOB Standards.

The key points raised in the submission (PDF) are:

• it is appropriate for management to disclose information, and for auditors to provide assurance on the information reported 
• the core role of auditors and their attached legal accountabilities mean they are not in a position to freely and discursively report on the entity they are auditing 
• the pass or fail approach of audit reports is valuable in that the auditor provides a clear "yes" or "no" answer after applying their expertise.

The submission also highlights specific Australian requirements, such as the independence declaration.

Joint Accounting Bodies submission on ISAE 3000

Date issued: 6 October 2011

The Joint Accounting Bodies have made their submission to the International Auditing and Assurance Standards Board in response to the exposure draft regarding the proposed standard ISAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information.

The submission (PDF), while generally supportive, raises the following key points: 

• the need for a risk assessment as part of the engagement, which is currently absent 
• care is needed in disclosing a summary of procedures undertaken, to avoid users linking the length of procedures to the level of assurance 
• the distinction between attestation and direct engagements could be enhanced 
• the problems surrounding negative assurance need to be addressed at a framework level

AUASB – new exposure drafts regarding corporate fundraisings and comfort letters

The Auditing and Assurance Standards Board (AUASB) has issued the following exposure drafts: 

• ED 02/11 – ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information (PDF). The proposed standard would replace AUS 804 The Audit of Prospective Financial Information and related Guidance Statement AGS 1062 Reporting in Connection with Proposed Fundraisings
• ED 03/11 – ASRS 4450 Comfort Letter Engagements (PDF). The proposed standard is a new pronouncement which would provide guidance for auditors when requested by their clients to provide a comfort letter to certain parties in relation to the client’s offering document

The comment period is now closed. However, you can still email in your views to professionalstandards@cpaaustralia.com.au

August 2011

ASIC future focuses for auditors

Date issued: 30 August 2011

CPA Australia has released a fact sheet (PDF) outlining Australian Securities and Investments Commission's (ASIC) future focus areas for auditing and where auditors can find the guidance they need to address these areas.

Date issued: 29 August 2011

CPA Australia will make submissions on two consultation papers regarding auditor reporting.

The International Auditing and Assurance Standards Board has released a consultation paper entitled Enhancing the Value of Auditor Reporting: Exploring Options for Change.

The Public Company Accounting Oversight Board (PCAOB) has also released a consultation paper entitled Concept Release on Possible Revisions to PCAOB Standards Related to Reports on Audited Financial Statements and Related Amendments to PCAOB Standards.

The consultation papers explore possibilities of improved and expanded auditor reporting by:

• rearranging or rewording paragraphs included in audit reports
• allowing ‘free form’ narrative by the auditor on significant judgments and risks
• providing assurance or other services on information and matters outside the financial report

The comment period is now closed. However, you can still email in your views to professionalstandards@cpaaustralia.com.au

July 2011

AUASB issues Amending Auditing Standard ASA 2011–1

Date issued: 29 July 2011

The Auditing and Assurance Standards Board (AUASB) has issued a new Auditing Standard, ASA 2011–1 Amendments to Australian Auditing Standards. ASA 2011–1 (PDF) applies for financial reporting periods commencing on and after 1 July 2011, although early adoption is permitted. The new standard aims to amend the Clarity auditing standards issued in October 2009.

The amendments arise from:

• consequential changes to acknowledge the revised APES 110 Code of Ethics for Professional Accountants, issued by the Accounting Professional and Ethical Standards Board in December 2010
• amendments which aim to enhance the quality of the Clarity auditing standards through editorial changes to correct inadvertent grammatical errors and improve the consistency of expression and format

The amendments have been incorporated into the relevant auditing standards and the resultant compiled auditing standards are found under the Australian auditing standards in Clarity format. Although the amendments do not have an impact on the requirements of the auditing standards, practitioners should use the compiled versions when conducting audits.

New South Wales – incorporated associations and co-operatives

Date issued: 29 July 2011

The New South Wales Registry of Co-operatives and Associations (the registry) has issued two class orders relating to the audit of financial statements of associations incorporated under the Associations Incorporation Act 2009 (New South Wales), and one class order relating to the preparation of financial statements by Tier 1 associations together with a regulatory guide for this class order. The class orders provide relief to Tier 1 associations relating to qualifications of the auditor, auditor independence and financial reporting requirements.

The registry has also issued a class order which permits small co-operatives incorporated under the Co-operatives Act 1992 (New South Wales) to have a review of their financial statements under ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity in lieu of an audit, subject to certain conditions as set out in the class order. The class order applies to co-operatives with revenue of not more than $250,000 and is effective from Friday 1 July.

For further information visit the New South Wales Government website.