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Audit guide sets context for inquiry

Auditors are under the microscope, but is a wholesale overhaul of the profession necessary?

Claire Grayston | March 2020

CPA Australia has published the revised A guide to understanding audit and assurance – Australian listed companies. This plain English guide helps to set the scene for the Parliamentary Joint Committee Inquiry into the Regulation of Auditing in Australia (PJC Inquiry).

As a quick reference tool, it can help stakeholders to frame their views and assess recommendations which have been made or will emerge as the inquiry progresses. Armed with an understanding of the status quo, along with any upcoming changes already in train, such as international standard-setting projects on non-assurance services and audit fees, they can better assess which measures represent a real change and may better appreciate the likely impact of any proposed changes.

Step-by-step process guide

The guide steps through the audit process and each section of the auditor’s report, with the objective of helping stakeholders understand the reliance which they can place on the audit. It reflects the current audit requirements, but it does not mean to say that change is not warranted.

Indeed, the PJC Inquiry provides a great opportunity to explore how stakeholder needs may be better addressed and whether there are legislative or regulatory measures which can improve audit outcomes. The most significant changes cannot be readily made by the auditors themselves as they do not set the scope of the statutory audit nor the standards for auditing or ethics.

Sound understanding sorely needed

Changes to the audit framework to improve confidence in audit and better address stakeholder needs would be welcome, but public commentators and agitators for change need to base calls for reform on a sound understanding of the existing requirements for audit and auditors, so that the actual impact can be understood. Only then will any reforms create real change to address the PJC’s concerns, which can be implemented in a manner which is appropriate, consistent and proportionate without imposing an unnecessary burden.

CPA Australia’s submission to the PJC Inquiry highlights that there are a number of key areas where reforms would be beneficial, based on analysis of the root causes of the identified problems. Solutions will need to encompass not only auditors, but also the broader reporting eco-system to be effective.