ASIC today released the latest results of its audit inspection program. ASIC’s general observations are that Australia has a skilled audit profession committed to independence and audit quality.
The report summarises the results of ASIC’s audit regulation activities from 1 July 2006 to 31 December 2007, which included audit inspections of 19 firms.
ASIC significantly increased the number of audit and review engagements selected for review compared to prior periods, reflecting the evolving focus of the audit inspection program.
‘Our review of aspects of selected engagement files extends beyond monitoring compliance with the specific regulatory requirements and includes an assessment of whether sufficient and appropriate evidence is on file to support key decisions and significant judgements regarding the audit,’ said ASIC’s Chief Accountant Mr Lee White.
Mr White said that ASIC had reported its findings separately to each of the firms.
Mr White also noted that most firms inspected more than once by ASIC have committed resources and further enhanced quality control systems and processes to ensure compliance with the legislative requirements for auditor independence and audit quality. In contrast, some firms visited for the first time had not taken a proactive approach to planning and implementing effective policies, systems and processes.
‘The future focus of ASIC’s inspections will include those firms who audit significant public interest entities, and how firms are complying with the legally enforceable auditing standards.
‘The downturn in market conditions experienced since late 2007 has introduced challenges for auditors that were not necessarily present in ASIC’s inspections.
‘Specific areas of focus in the next inspection period will include technical consultations, using the work of experts, particularly in relation to fair value measurements, sectors that are at risk given the current market turbulence and using the work of other auditors,’ Mr White said.
ASIC will also continue to liaise with the Public Company Accounting Oversight Board of the United States of America (PCAOB) and other international audit oversight bodies with the intention to conduct work jointly with them or on their behalf to minimise the regulatory burden on Australian audit firms.
Background
ASIC’s audit inspection program commenced after the passing of the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9). Since then, ASIC has published public reports on its inspection program to better inform firms, the investing public, companies, audit committees and other interested stakeholders.