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ASIC audit inspection program: focus for 2007
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Background 
In 2006, the Australian Securities and Investment Commission (ASIC) inspected the Big Four (Deloitte, KPMG, Ernst & Young and PriceWaterhouseCoopers) and six mid-tier firms (BDO, Horwath and PKF in Sydney, Grant Thornton in Perth, Pitcher Partners in Melbourne and RSM Bird Cameron). In 2007, follow up inspections will be undertaken with all these firms (including some offices not previously visited). Additionally, other partnerships of the mid-tier associations will be inspected, along with some additional mid-tier firms. 
 
Inspection focus for 2007 
ASIC has announced where it will focus its efforts in the 2007 reviews. The Institute recommends all firms review their policies and procedures in preparation for this.  
 
ASIC has said: 
'The inspections will continue to examine independence and audit quality. We will continue to focus on the practical application of the auditor rotation requirements, which became effective for financial years beginning on 1 July 2006. We will also significantly increase the number of audit engagement file reviews, with particular focus on those auditing standards which our inspections showed were poorly applied, in particular:

  • AUS 402 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatements
  • AUS 210 The Audtor’s responsibility to Consider Fraud in an audit of a Financial Report
  • AUS 514 Audit Sampling and Other Selective Testing Procedures
  • AUS 208 Documentation'
In light of auditing standards being given the force of law for Corporations Act audits, inspections will also focus on how firms are managing the transition to standards such as APES 320: Quality Control for Firms, the code of ethics and the code of professional conduct. 
 
Inspections will also review firms' processes in light of the new broader definition of 'network firm' (effective 1 January 2008):  
'This raises a number of issues for the mid-tier firms in particular; for instance, all firms in the network will be required to be independent of each other’s audit clients.' 
 
ASIC will also continue to liaise with international oversight bodies with the intention to work jointly in respect of Australian audit firms that are registered with them. 
 
For more information: 
 
 
Last updated: 8 November 2006