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Welcome to the thirty-third edition of Accounting & Assurance News Today for 2008. What follows is a brief update on changes and proposed changes in the financial reporting and assurance sphere.
1. Institute to lodge submission on audit clarity EDs
The Institute will lodge its joint submission with the two other professional accounting bodies to the Auditing and Assurance Standards Board (AUASB) on the following exposure drafts on Monday, 1 September 2008: - ED 5/08 ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report
- ED 6/08 ASA 260 Communication with Those Charged with Governance
- ED 7/08 ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment
, and
- ED 8/08 ASA 330 The Auditor’s Procedures in Response to Assessed Risk
The submission is to be placed on the Institute website on Monday.
2. Institute lodges submission to Senate not-for-profit enquiry
The Institute has today lodged its submission to the Senate Economics Committee’s enquiry into disclosure regimes for charities and not-for-profit organisations (see ANT28/2008).
Our four main recommendations to the Committee were:
- A single national disclosure and regulatory regime for not for profit organisations (NFPs) should be introduced.
- The issue of a single disclosure and regulatory regime should be referred to the Minister for Superannuation and Corporate Law for development in the context of the Green Paper on financial services issued on 3 June 2008.
- The regulatory regime should operate under a tiered system on the basis of revenue thresholds.
- There ought to be a single, separate accounting standard for NFPs, with appropriate recognition for small, non-complex NFPs.
Currently our submission is a confidential committee document protected by Parliamentary Privilege and we are unable to release it publicly on our website without the Committee’s permission. We will notify readers when we are able to publish the submission on our website. In the meantime if you have any specific questions please contact the Reporting & Assurance team whose details are at the end of this newsletter.
3. New current economic conditions page
The Institute has collected together resources relating to the preparation and audit of financial reports in the current challenging economic climate on the following web page.
4. AASB meeting highlights – 27 August 2008
This week’s meeting at the Australian Accounting Standards Board (AASB) saw rapid progress on the development of a revised superannuation standard to replace AAS 25 Financial Reporting by Superannuation Plans. Specific decisions made include the tentative agreement to: - Exclude contributions and benefit statements from the income statement (or operating statement as it is currently called)
- Not require disclosure of a management expense ratio for the entity as a whole
- Require information regarding sensitivities on investment asset assumptions but not on actuarial assumptions involved in calculating accrued benefits
- Refer superannuation funds that offer insurance contracts to members to the specific requirements in the current insurance standards, rather than developing separate requirements in the superannuation standard
- Require recognition of past benefit costs in the period in which the amendment to the plan’s trust deed occurs.
The AASB completed its first review of the standard component of the proposed exposure draft Superannuation Plans and Approved Deposit Funds. The AASB is yet to consider Application Guidance and Basis of Conclusions components. The standard component of the exposure draft is to be updated to reflect decisions made on seven issues papers discussed at the meeting (some of those are mentioned above), and for the review comments made by the AASB on the principles expressed in exposure draft. The AASB is likely to take at least two more meetings to finalise the exposure draft.
The AASB also approved the following for issue in Australia: - AASB 2008-8 Amendments to Australian Accounting Standards – Eligible Hedged Items, applicable for periods commencing from 1 July 2009
- Interpretation 15 Agreements for the Construction of Real Estate, applicable for periods commencing 1 January 2009
- Interpretation 16 Hedges of a Net Investment in a Foreign Operation, applicable for periods commencing from 1 October 2008
- Exposure Draft on Simplifying Earnings Per Share: Proposed amendments to IAS 33, comments required by 31 October 2008
- Exposure Draft on Improvements to IFRSs, comments required by 20 October 2008.
The AASB also discussed and approved, subject to minor content and formatting changes, a revised AASB 1039 Concise Financial Reports. The changes to AASB 1039 result from consequential amendments arising from Accounting Standards being AASB 101 Presentation of Financial Statements and AASB 8 Operating Segments, due to commence application/revision from periods commencing 1 January 2009. Therefore the revised AASB 1039 will also apply to periods commencing from 1 January 2009.
5. AASB Transparency now available
Issue 4 of the AASB’s e-newsletter “Transparency” is now available on the AASB website.
Main articles in this issue are: - Income and government grants and other non-exchange transactions
- Should the AASB develop its own emissions standards?
- Differential reporting update
- Super: AASB considers a replacement for AAS 25
- Update from the joint FRSB/AASB meeting in New Zealand
6. SEC proposes IFRS Roadmap
On 27 August 2008, the US Securities and Exchange Commission (SEC) voted to publish for public comment a proposed roadmap that could lead to the use of IFRS by US issuers beginning 2014. The US would make its final decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors.
Public comment on the SEC’s proposing release should be received by the SEC no later than 60 days after its publication on the Federal Register. For more information, view the media release.
7. IFRIC meeting agenda – 4-5 September 2008
The next International Financial Reporting and Interpretations Committee (IFRIC) meeting will be held in London on 4-5 September 2008. Issues to be discussed include: - D24 Customer Contributions
- D23 Distributions of Non-cash Assets to Owners
- Review of Tentative Agenda Decisions
- Time pattern of the user’s benefit
- Accounting for trailing commissions
- Transaction costs to be deducted from equity
- Staff Recommendations for Tentative Agenda Decisions
- Customer-related intangible assets
- Restricted securities
- Application to prepaid employer’s contribution reserve
The agenda can be downloaded from the IFRIC website.
8. IASB accelerates consolidation project
In response to a recommendation made in a report (pdf) from the Financial Stability Forum, the International Accounting Standards Board (IASB) has decided to accelerate its Consolidation project (involving the creation of a single standard on consolidation to replace IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities) by progressing directly to an exposure draft. It is expected that this exposure draft will be available for public comment by the end of 2008.
Additionally, the IASB will hold a series of roundtable meetings to facilitate progress on the project by obtaining public comment at an early stage of the project. Participants in the first roundtable, which will be held on Wednesday 17 September 2008 in London (but also broadcast online), will be drawn from members of the IASB’s advisory groups. The second roundtable will be held in North America at the end of September, with further details to be released soon. The IASB will consider holding additional roundtables in other nations, provided there is sufficient interest. Participation is open to interested parties with the relevant technical experience.
For more information, visit the IASB website.
Auditing & Assurance News | |
9. AUASB issues ASRE 2400 and ASRE 2405 and amends ASRE 2410
The AUASB has completed its revision of standards dealing with Review Engagements of historical financial information with the release of the following pronouncements: - ASRE 2400 Review of a Financial Report Performed by an Assurance Practitioner Who is Not the Auditor of the Entity
- ASRE 2405 Review of Historical Financial Information Other than a Financial Report
- ASA 2008-1 Amendments to Auditing Standards
ASA 2008-1 makes amendments to the existing ASRE 2410 Review of Interim and Other Financial Reports Performed by the Independent Auditor of the Entity.
The AUASB has also published an explanatory guide to the AUASB standards applicable to Review Engagements that provides information on the background, approach and diagrammatic summaries of the auditor’s obligations under the ASRE standards.
The two new standards ASRE 2400 and ASRE 2405 as well as the changes to ASRE 2410, are operative for engagements commencing on or after 1 October 2008.
ASRE 2400, ASRE 2405, compiled ASRE 2410 and the explanatory guide are available for download from the AUASB website.
10. SEC and ASIC sign mutual recognition agreement
SEC Chairman, Christopher Cox, the Australian Minister for Superannuation and Corporate Law, Senator Nick Sherry, and Australian Securities and Investments Commission (ASIC) Chairman, Tony D’Aloisio have entered into a mutual recognition arrangement between the SEC, the Commonwealth Government, and ASIC.
Through this agreement, the SEC and the Australian authorities agree to consider providing exemptions to exchanges and securities brokers in one another’s countries. These exemptions could allow U.S. stock exchanges and broker-dealers (that are regulated by the SEC) – subject to conditions imposed by Australian authorities – to offer their services to Australian wholesale investors and financial firms without being subject to most ASIC regulations. The same applies to the reverse situation, where Australian stock exchanges and broker-dealers could offer their services to the U.S. market free from most SEC regulation.
The SEC and Australian authorities will begin considering regulatory exemptions under the arrangement and it is expected that the process of considering initial applications for exemptions for approval by the authorities could be concluded in early 2009.
For further information, see the ASIC website.
11. ASIC announces executive appointments
The Australian Securities and Investments Commission (ASIC) has announced senior executive appointments following the completion of its recent strategic review. The new appointments and new structure will come into effect on 1 September 2008.
For full details, see the ASIC website.
Professional & Ethics News | |
12. APESB meeting highlights – 11-12 August 2008
Highlights of the most recent meeting of the Accounting Professional and Ethical Standards Board (APESB) held on 11-12 August 2008: - ED 02/08 APES 345 Reporting on Prospective Financial Information will be re-exposed for 30 days following a decision to expand its scope
- The Board supports in principle the development of a separate pronouncement on the role of the accountant in Due Diligence Committees
- A taskforce will be established to oversee the development of a new standard APES 350 Risk Management
- Further re-drafting of a Financial Advisory Services Discussion Paper is required before it can be issued for public comment
- The Board considered an Outsourcing discussion paper and commented on issues that its Outsourcing taskforce needs to consider when developing the proposed pronouncement
- APES 320 Quality Control for Firms will be updated in accordance with recent revisions to International Standard on Quality Control (ISQC) 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements and Other Assurance and Related Services Engagements
For further information, visit the APESB website.
13. EU will link its carbon trading market to the UN scheme
The European Commission has announced that the European Union (EU) will link its carbon trading market to the United Nations’ scheme by December 2008 at the latest. This initiative is hoped to give more scope to Europe’s biggest polluters of Europe (e.g. steel and energy firms) to subsidise CO2 reduction projects, in return for credits under the EU’s trading system.
Moreover, the linking of the systems will allow companies to transfer the “certified emission reductions” issued under the UN’s Clean Development Mechanism to EU member states.
As part of a concerted effort to cut greenhouse gas emissions and tackle climate change, the EU has fixed emission quotas for each of the 27 member states. Overall, the EU is seeking to cut carbon emission by 20% by 2020.
The full article is available here.
ASA 230 Audit Documentation
Q: Recent ASIC audit reviews have revealed instances of lack of compliance with the requirements of ASA 230 Audit Documentation. As a result, ASIC have indicated that in their Audit Inspection Program they will continue to look for compliance with this standard. What do I need to do to ensure my documentation is up to scratch?
A: ASA 230 requires auditors to prepare on a timely basis audit documentation that provides: - a sufficient and appropriate record of the basis for the auditor's report, and
- evidence that the audit was performed in accordance with Auditing Standards and applicable legal and regulatory requirements
The standard goes on to define what constitutes audit documentation (paragraph 8) and requires the form, content and nature of this documentation to be prepared in such a way that an experienced auditor having no previous connection with the audit would be able to understand: - the nature, timing and extent of the audit procedures adopted
- the evidence obtained for those procedures and the results thereof and
- any significant matters arising and the conclusions reached (paragraph 11)
Further guidance on each of these requirements is contained in paragraphs 12 onwards which spell out all the essential procedures imposed by this standard.
There are also other standards that require the completion of audit documentation, notably ASA 300 paragraph 27 re the audit plan and audit strategy, ASA 315 paragraph 143 re the assessment of audit risks, the understanding of an entity’s control systems and the audit response thereto and ASA 330 relating to the choice of and completion of tests to deal with assessed risk.
A complete list of the documentation requirements contained in all the ASA’s is contained in the Institute’s newly released Australian Audit Manual (section 3.6 [page 278 onwards]) which can provide more guidance in this area. The manual discusses the relevant requirements and provides commentary on the activities needed to comply with them.
There is also a checklist of the mandatory requirements for all the auditing standards available on the Institute website.
Listed below are the notable upcoming open domestic and international accounting and assurance exposure drafts. Members are encouraged to prepare their own submission on each document and submit them to the Institute (techsubmissions@charteredaccountants.com.au) no later than one week before the closing date shown.
1 August 2008
AASB ED 163 Proposed Amendments to AASB 1049 for Consistency with AASB 101
30 August 2008
AUASB ED 5/08 ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report
AUASB ED 6/08 ASA 260 Communication with Those Charged with Governance
AUASB ED 7/08 ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment
AUASB ED 8/08 ASA 330 The Auditor’s Procedures in Response to Assessed Risk
This list does not represent a complete list of the exposure drafts on issue. For all other open exposure drafts, refer to our dedicated exposure draft website.
Chartered Accountants Technical Conference
Throughout October in Sydney and Melbourne. Addresses the latest legislation changes and technical details in separate streams for business and practice. The need–to–know updates that will make a difference to your growth.
Chartered Accountants Audit Essentials Workshop
Throughout November in Sydney, Parramatta, Melbourne, Adelaide, Perth and Brisbane. Find out which hot spots ASIC will be targeting, ensure you can address them, and get the latest updates on auditing standards and regulatory requirements.
Chartered Accountants Managing the Payroll Function Workshop
Throughout November in Sydney, Melbourne, Adelaide, Perth and Brisbane. Legislative changes resulting from the Federal Budget have impacted payroll, be able to confidently deal with the myriad of issues affecting you.
Please continue to help us to improve the newsletter by sharing your comments on articles featured in this newsletter, or any financial reporting and auditing issues and experiences that might be of interest to other members. Responses should be emailed to "Your Input" (techsubmissions@charteredaccountants.com.au) and may be published in future editions of ANT.
We welcome new subscriptions. To subscribe, unsubscribe or to update your mailing details, please visit the newsletters section of the Institute website. Alternatively, you can email ant@charteredaccountants.com.au. Please note that this email address should not be used for technical queries.
Accounting & Assurance News Today is an initiative of the Reporting and Assurance Team of the Institute of Chartered Accountants in Australia.
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This is an initiative of, and has been prepared by the Reporting and Assurance Team of the Institute of Chartered Accountants in Australia. While every effort has been made to ensure the accuracy of the information contained therein, neither the Institute nor its employees shall be liable on any grounds whatsoever in respect of decisions or actions taken as a result of using this publication. The information provided is a general guide only and should not be used, relied on or treated as a substitute for specific professional advice or referral to the relevant specific standard.
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