Latest public inspection report on audit quality
The latest public inspection report on the audit profession by the Australian Securities and Investments Commission (ASIC) found that the majority of the firms inspected performed audit work in accordance with the relevant Australian auditing standards.
The results reflect a strong audit profession, which is a key component in maintaining and promoting investor confidence and integrity in Australia’s capital markets, says Lee White, executive general manager at the Institute of Chartered Accountants in Australia (the Institute).
“The ASIC public report of inspection findings gives important feedback to the audit profession to assist with improving its practices,” says Mr White. In the latest report, ASIC identified a few areas that need improvements to audit quality. Inspections such as ASIC’s and the Institute’s Quality Review Program satisfy just one phase within the framework for managing audit quality.
ASIC recognised the commitment to audit quality shown by the firms, evident in ASIC’s revisit of the audit firms, which revealed they continue to maintain or improve their processes.
“Remediation by audit firms (one phase in managing audit quality) means that audit practitioners are committed to using the results of inspections to make timely and effective improvements and that they are holding themselves accountable for these actions,” agreed Mr White.
“Insufficient audit evidence was identified as a shortcoming by ASIC, and it remains a focus for the Institute. We will continue to work with the regulator and the practitioners to ensure the audit opinion is supported by the audit evidence,” said Mr White.
The regulator also concluded that improvements were needed to the level of professional scepticism exercised. “Professional scepticism by auditors is integral to an effective audit and features prominently in the auditing standards. It is this type of attribute that underpins the value of the auditor and the audit. But professional scepticism should not be limited to auditors alone. All of those involved in the financial statements supply chain to the capital markets - including statement preparers, directors, boards, audit committees and the regulators – should remain focused on a professionally sceptical approach to their role and responsibilities,” added Mr White.
A recent survey by the Institute, CFO Survey 2011: Corporate Governance Performance and Insights, found that 86 per cent of the respondents agreed or strongly agreed that their auditors demonstrate sufficient levels of professional scepticism.
The ASIC audit inspection report covered 21 firms, completed in the 18 months to 31 December 2010.
Institute of Chartered Accountants Australia
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Article last Updated 12 November 2012