AUASB Board Chair Response to ASIC Reports

Friday, October 28, 2022

Melbourne, Australia, — The Chair of the Auditing and Assurance Standards Board (AUASB), Mr. Bill Edge, welcomes ASIC’s Audit inspection report: 1 July 2021 to 30 June 2022.

“The Audit Inspection findings are an important indicator of audit quality and compliance with our auditing standards”, Mr Edge said.

“ASIC acknowledges that their program is focused on a limited number of the more complex and challenging audits and the results may not be representative of audit quality more broadly. It is therefore important to consider other indicators of audit quality such as the results of ASIC’s Financial Reporting Surveillance program and the Financial Reporting Council and AUASB’s Survey of Audit Committee Chairs, which have not raised any significant concerns that the level of audit quality is unsatisfactory in Australia”, Mr Edge said.

“We are confident of the robustness of the AUASB’s standards. We are aware that some of the ASIC Audit Inspection findings are due to differing views around professional judgements made by the auditor in the application of standards, the extent of audit evidence obtained, and an acceptable level of documentation. Auditors are required to exercise a high-level of professional judgement in applying principle-based accounting and auditing standards. The areas where there are the most findings are in those which require a high level of professional judgement.”

As Australia’s independent auditing standard-setter, the AUASB regularly engages with ASIC and auditors to understand the cause of Audit Inspection findings.

“Our work with ASIC and practitioners has not made us aware of any amendments required to the AUASB’s Auditing Standards”, Mr Edge said.

“We also welcome ASIC’s ‘Root cause analysis: Audit firm thematic review’ report following its review of the root cause analysis on negative audit quality findings conducted by the largest six audit firms. The findings in this report support how audit practitioners can apply this technique to identify and address the root causes of any review and inspection findings. For other practitioners wishing to apply their own Root Cause Analysis we refer them to ‘An External Auditor’s Guide to Improving Audit Quality Using Root Cause Analysis’ produced in 2019 by a number of stakeholders on behalf of the largest six audit firms for guidance.”

“The AUASB has issued revised Quality Management Standards which take effect on 15 December 2022. These new Quality Management Standards will continue to improve and maintain audit quality as detailed in our recent publication ‘Quality Management Standards – Enhancing Audit Quality’. We also addressed issues identified in prior ASIC Inspections in our December 2021 publication ‘Supporting Auditors in Enhancing Audit Quality’. We will continue to engage with ASIC, auditors, and other stakeholders to identify initiatives that the AUASB can undertake to assist with enhancing audit quality.”