Q. I am a graduate employed in an accounting firm and gained admission to CPA Australia or ICAA last year. I would like to be able to become an RCA as soon as possible. How should I go about this?
A. Read and familiarise yourself with s.1280 of the Corporations Act 2001, the Auditing Competency Standard, the Log Book, and ASIC RG 180 Auditor Registration.
Assuming you have satisfied the educational requirements of s.1280 of the Act, you should then seek out an appropriate assessor within your firm. Choice of assessor is extremely important. The assessor is a person who not only supervises your work and is able to assign you to appropriate audit engagements, but a person who is prepared to take on the responsibilities of an assessor and guide you through the completion of the tasks set out in the log book.
You should then plan with your assessor how and when you are going to demonstrate your ability to competently perform the various tasks and how and when you will acquire the knowledge and skills to do so.
The standard states that it is anticipated most applicants will demonstrate their audit competencies on a number of audit engagements over a three to five-year period, commencing with the year of their admission as a member of CPA Australia or ICAA. However, if your assessor is able to assign you full time to relevant audit engagements, it may be possible for you to gain the necessary skills and knowledge and to demonstrate your competence in a lesser period.
If you apply for registration within two years of admission as a member of CPA Australia or ICAA, you will need to submit, in addition to two reports by referees required by ASIC, a Statement by a Referee, stating the circumstances that enabled you to acquire the necessary knowledge and skills within such a relatively short period of time.
Q. Who can be my assessor?
A. Your assessor should be a person within your firm who is an RCA and either personally, or as a member or employee of a firm, is subject to periodic quality reviews and minimum professional development requirements. The assessor must also be responsible, directly or indirectly, for reviewing or supervising your work, be prepared to accept the obligations of an assessor and be in a position to oversee your progress through the log book.
Q. What are the obligations of an assessor?
A. As well as overseeing your progress through the log book, the assessor is required to:
- ensure you are given the opportunity to both acquire the knowledge and skills required to competently perform the various tasks expected of an RCA and demonstrate to the assessor that you are competent in performing those tasks
- assess, and attest to, whether you are able to competently perform the tasks
- verify your performance against each component of the standard
- have personal knowledge of your work to be able to give that verification.
In addition, the assessor should familiarise him or herself with the requirements of the standard. In particular, the assessor should have a good understanding of the tasks and sub-tasks to be performed by the applicant, the skills and knowledge required to perform those tasks, the methods used to assess competency, and the assessor's obligations. These are all set out in the standard.
Q. Can the person signing the Statement by Referee also be my assessor?
A. Yes. The referee signing this Statement must be an RCA, have known you for at least two years and be a member or employee of a firm that is subject to quality review. Your assessor will usually be such a person.
Q. Can the person signing one of the referees' reports be an assessor?
A. Yes. Note that a referee's report is different from a Statement by a Referee. ASIC requires two referees' reports (as evidence that you are capable of performing the duties of an auditor) and in some instances, the standard requires a Statement by a Referee to be submitted. However, the assessor can sign both the Statement by a Referee and one of the two ASIC referees' reports.
Q. I am a member of ten years standing and have extensive experience in auditing corporate financial statements. Do I need to again demonstrate my competency in the different tasks and activities?
A. Not necessarily. In some instances, particularly during the years immediately following the introduction of the new legislation, there may be a number of members that have, as part of their normal audit work over recent years, already demonstrated to an RCA in their office that they are competent in performing the tasks described in the Standard. These members may be in a position to immediately apply for registration.
If you are such a member, you should complete the log book showing details of the audit engagements in which the competencies were demonstrated and have it signed by the RCA as assessor. Where the log book is completed on a retrospective basis, this should only be done with appropriate supporting evidence and records to substantiate that reconstruction.
If competencies relating to some tasks were demonstrated more than five years prior to the date of application, a Statement by Referee is also required stating that you have acquired and retained the competencies that are necessary to perform those tasks.
Q. For the last five years I have been self employed and had no need to be registered as an RCA. However, I now need this registration. I obtained extensive audit experience with my previous employer and demonstrated my competency in all relevant tasks during that period to the audit partner who was then, and still is, an RCA. Can I apply now?
A. Yes. You will need to:
- complete the log book for each of the tasks and activities and leave the Statement by Assessor at the end of the log book blank
- submit with your application a Statement by a Referee stating that he/she believes you are sufficiently competent to be registered as an RCA, attesting that you have acquired and retained the competencies required to perform each of the tasks and activities and, in relation to each, the basis for making such statement.
This referee would normally be the audit partner of your previous employer. As with all applications for registration, ASIC additionally requires two referees' reports, one of which needs to be from an RCA who has directly supervised your work. Thus, in this instance, three referee's reports/statements will be required, two of which the audit partner of your previous firm may provide.
Q. What happens if the audit partner of my previous firm refuses to act as a referee?
A. The same information is required. However, you now need to find an RCA who has directly supervised your work and is in a position to be able to:
- state he/she believes you are sufficiently competent to be registered as an RCA
- attest that you have acquired and retained the competencies required to perform each of the tasks and activities
- in relation to each of the tasks and activities, the basis for making such a statement.
Q. I am employed as an audit manager with a firm of accountants and have extensive experience in a variety of companies, large and small, as well as straightforward and complex. I want to leave and establish my own firm but to do so, I need to be an RCA. My existing employer, due to resource limitations, is reluctant to provide an assessor. What are my options?
A. One option is to complete the log book for each of the tasks and activities and leave the Statement by Assessor blank. You will need to submit with your application a Statement by a Referee stating that they believe you are sufficiently competent to be registered as an RCA, attesting that you have acquired and retained the competencies required to perform each of the tasks and activities and, in relation to each task and activity, the basis for making such statement. The referee in this instance needs to be either an employee or member of a firm that is subject to quality review, but not necessarily from your firm. However, ASIC requires two further referees' reports, one of which needs to be from an RCA who has directly supervised your work.
Another option is to apply for registration not on the basis of competency but on the basis of your experience. You need, during the previous five years, 3000 hours of audit experience working under the direction of an RCA, at least 750 hours of which has been spent in supervising audits of companies. (Refer to Corporations Act 2001, Reg 9.2.01). Your application needs to be accompanied by two referees' reports, one of which needs to be from an RCA who has directly supervised your work.
Q. I am a partner in a two-person partnership. The firm does not have any complex company audit clients but does undertake the audit of superannuation funds that need to be audited by an RCA. My partner is an RCA, but he is retiring in three years, so I have to become registered by that time. Although I have participated extensively in the audit of the superannuation funds, I am unlikely to have any other extensive audit experience. Can I apply to become an RCA?
A. The standard states that an applicant is expected to be able to competently perform certain tasks in all situations that are likely to be encountered by the applicant in the foreseeable future. However, the standard also states that if the actual number of audits on which an applicant is engaged is limited in number or if all audits are straightforward in nature, the applicant may find it difficult to demonstrate sufficient competency.
If you have demonstrated your competency in performing all tasks and activities on a number of superannuation funds that have differing environmental conditions and are of varying levels of complexity to the satisfaction of your assessor, then you are able to apply. There is no requirement in the standard that competencies must be demonstrated on entities incorporated under the Corporations Act and neither does the Act specify that company audit experience is required by applicants satisfying the components of an approved competency standard.
However, the Act does require ASIC to be satisfied that you are capable of performing the duties of an auditor and are otherwise a fit and proper person to be registered as an auditor, although ASIC's advice is that 'capable' refers to the applicant's ability to meet their general duty of care and perform duties in a manner that is not negligent.
Q. Can I demonstrate some sub-tasks relating to a particular task on one audit engagement and the other sub-tasks on another audit engagement?
A. No. Refer to paragraph 4.3 of the Standard. Neither should you demonstrate some sub-tasks relating to a particular task to one assessor and other sub-tasks to another assessor. The assessor is required to evaluate whether you are capable of performing a particular task as well as attesting to that fact in the log book. The assessor's signature in the log book indicates you have demonstrated your competency in that task to the satisfaction of that assessor. This requires you to demonstrate all sub-tasks relating to that task to that assessor.
Q. Can I demonstrate all tasks and activities on the one audit engagement?
A. It is possible, although unlikely, that an assessor could evaluate your competency in all tasks and activities on the one audit engagement. The assessor will want evidence that you are competent in performing these tasks in a variety of situations and under different environmental conditions. Although the assessor may simply question you as to how you might perform a task in other situations, it is likely he or she will also want to observe you performing the task on more than one audit engagement.
Where you demonstrate competencies relating to the one task or activity on more than one audit engagement, the audit engagement information will not fit in the space provided in the Log Book, and you will need to reference the log book to an attachment which records this information. For example, write across the columns in the log book ('Audit client', 'Audit firm', 'Assessor', 'Date' and 'Comments'), the words 'Refer attachment'.
The attachment should have the same column headings as the log book, and under each heading, list the task, the relevant audit clients, audit firm, assessor and date (and comments if appropriate). The assessor should sign the relevant section of the attachment.
Q. Can I have more than one assessor?
A. Yes. In some instances, where there is more than one person in your firm supervising your work and both people are RCAs, it may be appropriate to have more than one assessor. Also, if you have changed employment and have, for example, previously demonstrated competencies to an assessor within your previous firm, you will need to demonstrate the remaining competencies to an assessor employed by, or a member of, your new firm.
Q. What is the column headed 'Comments' in the log book used for?
A. The assessor may use this column if he or she considers a comment necessary. However, there is no necessity to include a comment. Note that a comment by the assessor such as 'Not sufficiently demonstrated' is not appropriate as applicants should only record in the log book details of audit engagements where the relevant task or activity has been demonstrated to the satisfaction of the assessor.