Knowledge bank - June 2007

Law and audit (revisited)

Q: What are the requirements that audits of companies’ accounts and group audits need to fulfil?

A: In Australia, audits of listed entities are required to be conducted in accordance with auditing standards issued by the statutory Auditing and Assurance Standards Board (AUASB). The AUASB has recently revised and reissued the majority of the auditing standards. For financial reporting periods starting on or after 1 July 2006, the standards are legally enforceable for audits conducted under the Corporations Act (2001). This includes audits of listed entities. A full listing of these auditing standards can be accessed on the AUASB website.

In addition, the auditing standards issued by the AUASB require that auditors comply with relevant ethical requirements relating to audit engagements. Relevant ethical requirements (which include independence requirements) ordinarily comprise the code of ethics of a recognised professional accounting body in Australia.

The Accounting Professional and Ethical Standards Board (APESB) is the body responsible for issuing APES 110: Code of ethics for professional accountants with which members of CPA Australia and the Institute of Chartered Accountants are obliged to comply. APES 110 conforms with the Code of ethics for professional accountants issued by the International Federation of Accountants (IFAC).

Transparency

Q: Is the information auditors or audit firms are required to disclose in their annual statement filed with the Australian Securities and Investments Commission (ASIC)?

A: Registered company auditors and authorised audit companies have the obligation to file annual statements annually with ASIC. They also must report certain happenings that affect the accuracy of the regulating body’s records or which might have a bearing on the auditor’s ability to carry out their duties honestly. There is no specific legal requirement for company auditors and authorised audit companies to have their profile disclosed publicly.

In terms of required disclosures, Part 9.2A.03 of the Corporations Act (2001) requires that an authorised audit company prepare an annual statement containing information as follows:

• declaration that the information about the company on the Register of authorised audit companies provided for in the legislation is correct
• a statement of whether the company has, at all times in the relevant period, met the above registration requirements and if not the details about the way in which the company did not meet the requirements
• required details about the company’s professional indemnity insurance policy for claims that may be made against the applicant
• information about criminal proceedings (if any) that have been taken against the company
• for each director of the company and each employee of the company who is a registered company auditor, details of criminal or disciplinary proceedings (if any) that have been taken against these individuals
• a statement of whether the company has resigned or been removed from office as an auditor during the relevant period and if so provide the relevant details
• a statement of whether a director or employee of the company has resigned or been removed from office as a liquidator during the relevant period and if so provide the relevant details
• a list of the 10 audits, including the approximate dollar value of the fees, for which the company has received the highest audit engagement fees in the relevant period

Reference: June 2007, volume 77:05, p.72.

This page is available online at:
http://www.cpaaustralia.com.au/cps/rde/xchg/cpa/hs.xsl/724_23049_ENA_HTML.htm