Accounting and Auditing News Today (ANT) Issue No 30 - 3 August 2007

Welcome to the thirtieth edition of Accounting & Auditing News Today for 2007. What follows is a brief update on changes and proposed changes in the financial reporting sphere.

1. AUASB meeting highlights - 30-31 July 2007

The Auditing and Assurance Standards Board (AUASB) met in Melbourne on Monday and Tuesday. Matters covered included:

• David Boymal, Chairman of the Australian Accounting Standards Board (AASB) addressed the AUASB on the differential reporting regime proposed in Invitation to Comment ITC 12 "Request for Comment on a Proposed Revised Differential Reporting Regime for Australia and IASB Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities".

  After some discussion the AUASB indicated that it would consider the implications of the invitation to comment for future audit reports under a new reporting regime for SMEs, when these proposals are progressed further.

  The Institute encourages members to participate in this ongoing debate and provide feedback either to the Institute (techsubmissions@charteredaccountants.com.au) or directly to the AASB by the requested deadline of 1 September 2007.

• The Board discussed proposed Guidance Statement GS 003 "Audit Requirements for Australian Financial Services Licensees under the Corporations Act 2001", which is an update of existing AGS 1068. Subject to some minor wording changes it will be approved for release out of session, once ASIC finalises revisions to Form FS 71 and its regulatory guide relating to breach reporting. It will be applicable for financial reporting periods ended 30 June 2007.

• Proposed ASRE 2400 - "Review of Historical Financial Reports and Other Historical Financial Information (revision of AUS 902 "Review of Financial Reports"). The Board requested some changes and anticipates approving the standard at its next meeting in September 2007.

• A draft bulletin on Auditing Small and Medium Sized Entities and the initiatives underway both locally and internationally to address some of the concerns raised by small and medium sized practitioners. This is expected to be issued in August. The Board is awaiting the ISA guide being developed by the IFAC Small and Medium Practices committee, scheduled for completion in 2007.

• A proposed draft of a Guidance Statement titled "Audit Implications of Prudential Reporting Requirements for General Insurers", which is expected to be approved at the Board's next meeting in September 2007.

• Other projects currently underway:
  • A proposed Guidance Statement - "Using the Work of an Actuary"
  • Compliance Engagements - proposed new standard on assurance engagements
  • The audit implications of Australian Accounting Standard AASB 1049 "Financial Reporting of General Government Sectors by Government"
  • A proposed Guidance Statement - "Audit Implications of the Use of Service Organisations for Investment Management Services". Comments are to be sought from key stakeholders.
  • A proposed Guidance Statement - "Special Considerations in the Audit of Investor Directed Portfolio Services and Investor Directed Portfolio-Like Services"
  • A proposed Guidance Statement to address the audit requirements of self managed superannuation funds
  • Performance Auditing - proposed revisions of AUS 806 "Performance Auditing" and AUS 808 "Planning Performance Audits"
  • Update of AGS 1056 "Electronic commerce - Effect on the Audit of a Financial Report"

The highlights from the 1-2 August meeting of the Australian Accounting Standards Board (AASB) included:

• Insurance Contracts Discussion Paper: Discussed measuring pre-claims liabilities, and an option of measuring insurance contracts at the value of all expected future cash flows.

• Differential Reporting/SMEs: Discussed the approach to the AASB submission to IASB on its exposure draft, in particular the proposed recognition and measurement simplifications.

• Financial Reporting by Unlisted Public Companies: Agreed a submission on the Treasury Discussion Paper, in particular supporting the introduction of a differential reporting regime.

• Interpretations: Approved the release of AASB Interpretation 13 "Customer Loyalty Programmes" and AASB Interpretation 14 "AASB 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction". Approved the release of two draft Interpretations D21 "Real Estate Sales" and D22 "Hedges of a Net Investment in a Foreign Operation" for comments by constituents. D21 and D22 shortly will be placed on the AASB website. Agreed to develop a draft Interpretation on 'Petroleum Resource Rent Tax - Applicability of Income Tax Standard'.

• Business Combinations: Noted the differences between the proposed revised 2007 versions of IFRS3/IAS 27 and their current versions. Agreed to seek input on the development of specific Aus paragraphs for not-for-profit and public sector entities. It was noted that the International Accounting Standards Board (IASB) is likely to release its revised standards in September.

• Superannuation Entities: Agreed a Consultation Paper 'Consolidation of Subsidiaries by Superannuation Funds' that will be finalised out-of-session. The Consultation Paper will seek comment on 4 methods of fair value measurement in a consolidation context.

• IPSASB Meeting: Noted the highlights of the July meeting of the International Public Sector Accounting Standards Board (IPSASB); and discussed the IPSASB project on social benefits (disclosure) and its likely impact in the Australian context. An exposure draft is likely to be issued later during the year.

• Presentation of Financial Statements: Discussed proposed revisions to AASB 101 'Presentation of Financial Statements' resulting from the soon to be issued revised IAS 1 based on the IASB Exposure Draft 'Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation'.

• Extractive Activities Research Report: Noted the progress on the Australian commitment to the IASB's research project on extractive activities.

• Draft Issues Paper: Income from Non-Exchange Transactions: Provided staff with feedback on the Issues Paper that will be used as a basis of joint deliberations with the NZ Financial Reporting Standards Board in October.

• Key Management Personnel Disclosures: Deferred for six months the development of an exposure draft that would propose deleting paragraphs Aus25.1-Aus25.9.3 in AASB 124 'Related Party Disclosures' relating to key management personnel.

The International Financial Reporting Interpretations Committee (IFRIC) has released for public comment a draft Interpretation IFRIC D22 "Hedges of a Net Investment in a Foreign Operation". The proposal is open for public comment until 19 October 2007.
Top

The USA's Public Company Accounting Oversight Board has entered into a Statement of Protocol with the Australian Securities and Investments Commission (ASIC) to enhance cooperation in the supervisory oversight of auditors and public accounting firms that practice in the two regulators' respective jurisdictions.
Top

There was an error in the registration details as reported in the above article in ANT29 (27 July 2007). The correct email address is lcloutter@aasb.com.au.

Members are encouraged to register their interest as the proposals in ITC 12 "A Proposed Revised Differential Reporting Regime for Australia and the IASB Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities" have the potential to radically change the reporting environment in Australia, with the removal of the reporting entity concept.
Top

Since ANT29 (27 July 2007), the email address for the Institute's Technical Enquiry Service has conveniently changed to techsec@charteredaccountants.com.au.

This would be better for members as it involves only a minimal change.
Top

Q: I conduct a number of audits under the provisions of the Corporations Act 2001. Now that auditing standards are legally enforceable for Corporations Act audits what is the impact on my professional indemnity (PI) insurance?

A: This is a risk management matter for you and your practice to which you should give some immediate attention. It is common for PI policies to include a clause that denies cover for criminal offences. However, that clause would normally have been inserted before the CLERP 9 legislation, which made auditing standards legally enforceable in respect of Corporations Act audits, was enacted.

In summary:

1. Auditing standards are now legally enforceable for audits conducted under the provisions of the Corporations Act 2001
2. This is in respect of reporting periods commencing on or after 1 July 2006 (ie 30 June 2007 financial year ends)
3. Breaches of the auditing standards are a criminal offence

National Audit Conference 2007 DVD
If you didn't attend the National Audit Conference in June 2007 - don't miss out on this opportunity to view the conference at your convenience informing you and your colleagues.

Technical Conference
(8-10 October, Sydney & Melbourne)
All the latest practical information at your fingertips.

Regional Roadshow
Don't miss your chance to enjoy expert technical opinion, and detailed reviews of the issues that you and your clients face. You're sure to walk out with actions you can take, and value you can add.
Top

Outlined below are the comment closing dates for all current exposure drafts. Members are encouraged to prepare their own submission on each document and submit them to the Institute no later than one week before the closing date shown.

For more information, refer to the Institute's Technical Standards' exposure drafts web page

Forward all ED submission/comment emails to techsubmissions@charteredaccountants.com.au.

10 August 2007
APRA Prudential Standard APS 120 Securitisation

17 August 2007
AASB ED 155 "Financial Reporting by Whole of Governments
Supplement to ED 155

31 August 2007
APES ED 03/07 "Proposed Amendment to Network Firms in Section 290: Independence - Assurance Engagements of APES 110 Code of Ethics for Professional Accountants"

1 September 2007
AASB SME ITC "A Proposed Revised Differential Reporting Regime for Australia and the IASB Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities"

3 September 2007
AASB ED 156 "Proposals Arising from the Short-term Review of the Requirements in AAS 27, 29 and 31"

12 September 2007
PAIB (IFAC) "Preface to IFAC's International Management Accounting Statements and International Good Practice Guidance"

14 September 2007
APES ED 04/07 "Terms of Engagement"

15 September 2007
ISA 200 (revised and redrafted) 'Overall Objective of the Independent Auditor, and the Conduct of an Audit in accordance with International Standards on auditing'
ISA 500 (redrafted) 'Considering the Relevance and Reliability of Audit Evidence'

5 October 2007
IFRIC D21 'Real Estate Sales'

19 October 2007
IFRIC D22 'Hedges of a Net Investment in a Foreign Operation'

26 October 2007
AASB ITC 13 'Preliminary Views on Insurance Contracts'

31 October 2007
IASB proposed IFRS for SMEs field test questionnaires

16 November 2007
IASB Discussion Paper "Preliminary Views on Insurance Contracts"

Technical Query Service
The Institute's Technical Standards Team responds to inquiries from members on auditing and financial reporting issues. This service provides general assistance and guidance only. Members have the responsibility to apply their own professional judgment. The service can be contacted on (02) 9290 5702.

Do you know someone interested in receiving ANT?
We welcome new subscriptions. To subscribe, unsubscribe or to update your mailing details, please visit http://www.charteredaccountants.com.au/enewsletters/enewsletters

More information is available at our website.

TECHNICAL/XFILES/ARTICLES/ANT/ANT30_07_08_03.doc. The Technical Standards team comprises, Jeanette Dawes CA, Roslyn Hatton CA, Stephanie Kemp CA, Claire Locke CA, Andrew Stringer; Benjamin Lau and Jane Ma - Technical Standards Assistants.