ASA 2013‑2 |
Auditing Standard ASA 2013‑2
Amendments to Australian Auditing Standards
Issued by the Auditing and Assurance Standards Board
ASA 2013‑2 |
Auditing Standard ASA 2013‑2
Amendments to Australian Auditing Standards
Issued by the Auditing and Assurance Standards Board
This Auditing Standard is available on the Auditing and Assurance Standards Board (AUASB) website: www.auasb.gov.au
Auditing and Assurance Standards Board Level 7, 600 Bourke Street Melbourne Victoria 3000 AUSTRALIA | Phone: (03) 8080 7400 Fax: (03) 8080 7450 E-mail: enquiries@auasb.gov.au Postal Address: PO Box 204, Collins Street West Melbourne Victoria 8007 AUSTRALIA |
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ISSN 1833-4393
PREFACE
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Paragraphs
Application...............................................................1-2
Operative Date..............................................................3
Introduction
Scope of this Auditing Standard.................................................4-5
Objective..................................................................6
Definitions.................................................................7
Amendments to Auditing Standards
Amendments to ASQC 1.....................................................8-27
Amendments to ASA 200....................................................28-29
Amendments to ASA 220....................................................30-36
Amendments to ASA 230....................................................37-38
Amendments to ASA 240....................................................39-43
Amendments to ASA 260....................................................44-53
Amendments to ASA 265......................................................54
Amendments to ASA 300....................................................55-57
Amendments to ASA 315....................................................58-76
Amendments to ASA 402......................................................77
Amendments to ASA 500....................................................78-79
Amendments to ASA 550....................................................80-82
Amendments to ASA 600....................................................83-93
The Auditing and Assurance Standards Board (AUASB) issues Auditing Standard ASA 2013‑2 Amendments to Australian Auditing Standards, pursuant to the requirements of the legislative provisions and the Strategic Direction explained below.
The AUASB is an independent statutory committee of the Australian Government established under section 227A of the Australian Securities and Investments Commission Act 2001, as amended (ASIC Act). Under section 336 of the Corporations Act 2001, the AUASB may make Auditing Standards for the purposes of the corporations legislation. These Auditing Standards are legislative instruments under the Legislative Instruments Act 2003.
Under the Strategic Direction given to the AUASB by the Financial Reporting Council (FRC), the AUASB is required, inter alia, to develop auditing standards that have a clear public interest focus and are of the highest quality.
This Auditing Standard makes amendments to the following Auditing Standards:
ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards (27 October 2009)
ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information (27 June 2011)
ASA 230 Audit Documentation (27 October 2009)
ASA 240 The Auditor's Responsibilities Relating to Fraud in an Audit of a Financial Report (27 June 2011)
ASA 260 Communication with Those Charged with Governance (27 June 2011)
ASA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management (27 October 2009)
ASA 300 Planning an Audit of a Financial Report (27 June 2011)
ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment (27 June 2011)
ASA 402 Audit Considerations Relating to an Entity Using a Service Organisation (27 June 2011)
ASA 500 Audit Evidence (27 June 2011)
ASA 550 Related Parties (27 June 2011)
ASA 600 Special Considerations—Audits of a Group Financial Report (Including the Work of Component Auditors) (27 October 2009)
The amendments to the Australian Auditing Standards comprise consequential changes arising from:
The main proposals covered by the amendments are:
The Auditing and Assurance Standards Board (AUASB) makes this Auditing Standard ASA 2013‑2 Amendments to Australian Auditing Standards, pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001.
Dated: 11 November 2013 M H Kelsall
Chairman - AUASB
This Auditing Standard has been made for Australian legislative purposes and accordingly there is no equivalent International Standard on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Auditing Standard ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements.
This Auditing Standard differs in scope from ISQC 1 as it does not apply to related services engagements.
Compliance with this Auditing Standard enables compliance with ISQC 1, to the extent that ISQC 1 applies to audits and reviews of financial reports and other financial information, and other assurance engagements.
(a)-(c) …
(d) an audit or review other than of historical financial information; and
(e) other assurance engagements.; and
(f) related services engagements.
This Auditing Standard, ASQC 1 (the Standard), deals with the firm’s responsibilities for its system of quality control for audits and reviews of financial reports, and other financial information, and other assurance engagements and related services engagements. This Standard is to be read in conjunction with relevant ethical requirements. Relevant ethical requirements are defined in ASA 102.*
This Standard applies to all firms of assurance practitioners in respect of audits and reviews of financial reports and other financial information, and other assurance engagements and related services engagements. The nature and extent of the policies and procedures developed by an individual firm to comply with this Standard will depend on various factors such as the size and operating characteristics of the firm, and whether it is part of a network.
This Standard includes, under the heading “Definitions,” a description of the meanings attributed to certain terms for purposes of this Standard. These are provided to assist in the consistent application and interpretation of this Standard, and are not intended to override definitions that may be established for other purposes, whether in law, regulation or otherwise. The AUASB Glossary (October 2009) relating to AUASB Standards, and issued by the AUASB includes the terms defined in this Standard. It also includes descriptions of other terms found in this Standard to assist in common and consistent interpretation and translation.
Assurance practitioner means a personan individual, firm, or another organisation, whether in public practice, industry, and commerce, or the public sector, providingconducting assurance servicesengagements, or related services engagements (including engagements to perform agreed-upon procedures).
Engagement partner means the partner or other person in the firm who is responsible for the assurance engagement and its performance, and for the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. Engagement partner should be read as referring to a public sector equivalent where relevant.
Engagement team means all partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform audit procedures on the engagement. This excludes external experts engaged by the firm or a network firm.[Deleted by the AUASB. Refer Aus 12.6]3, #
Footnote 3 reads: [Footnote deleted by the AUASB.]
Footnote # reads: See ASA 610 Using the Work of Internal Auditors, paragraph Aus 1.2. The use of internal auditors to provide direct assistance is prohibited in an audit or review conducted in accordance with the Australian Auditing Standards.
Engagement team means all partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform procedures on the engagement. This excludes an auditor’s external expert engaged by the firm or by a network firm.
Partner means any individual with authority to bind the firm with respect to the performance of an audit, review, or other assurance engagement or related services engagement. Partner should be read as referring to a public sector equivalent where relevant.
AUASB Standards means standards issued by the AUASB, comprising:
Suitably qualified external person means an individual outside the firm with the competence and capabilities to act as an engagement partner. For example:
The firm shall comply with each requirement of this Standard unless, in the circumstances of the firm, the requirement is not relevant to the services provided in respect of audits and reviews of financial reports, audits and reviews of other financial information, and other assurance engagements and related services engagements. (Ref: Para. A1‑Aus A1.1)
The firm shall establish policies and procedures requiring, for appropriate engagements, an engagement quality control review that provides an objective evaluation of the significant judgements made by the engagement team and the conclusions reached in formulating the report. Such policies and procedures shall:
The firm is required to comply with relevant ethical requirements, including those pertaining to independence, when performing audits, and reviews, and other assurance engagements and related services engagements, as defined in ASA 102.
These other matters, depending on the circumstances, may also be applicable for engagement quality control reviews for audits of the financial reports of other entities, as well as reviews of financial reports, audits and reviews of other financial information, and other assurance engagements and related services engagements.
See ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements.
See ASA 610 Using the Work of Internal Auditors, paragraph 2.
See ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements, paragraph 11.
Engagement team means all partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform audit procedures on the engagement. This excludes an auditor’s external expert engaged by the firm or by a network firm.[Deleted by the AUASB. Refer Aus 7.3]3, #
See ASA 620 Using the Work of an Auditor’s Expert, paragraph 6(a).[Footnote deleted by the AUASB.]
See ASA 610 Using the Work of Internal Auditors, paragraph Aus 1.2. The use of internal auditors to provide direct assistance is prohibited in an audit or review conducted in accordance with the Australian Auditing Standards.
Engagement team means all partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform audit procedures on the engagement. This excludes an auditor’s external expert engaged by the firm or by a network firm.*
See ASA 620 Using the Work of an Auditor’s Expert, paragraph 6(a).
See ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements, paragraphs 32-33, 35-38, and 48.
See ASA 610 Using the Work of Internal Auditors, paragraph 2.
For those entities that have an internal audit function, the auditor shall make enquiries of internal audit appropriate individuals within the function to determine whether it hasthey have knowledge of any actual, suspected or alleged fraud affecting the entity, and to obtain its views about the risks of fraud. (Ref: Para. A18)
EnquiryEnquiries of the Internal Audit Function (Ref: Para. 19)
ASA 315 and ASA 610 establish requirements and provide guidance inrelevant to audits of those entities that have an internal audit function.15 In carrying out the requirements of those Auditing Standards in the context of fraud, the auditor may enquire about specific internal audit activities of the function including, for example:
See ASA 315, paragraphs 6(a) and 23, and ASA 610 Using the Work of Internal Auditors.
Internal control components are deficient as a result of the following:
Where the entity has an internal audit function, the extent to which the auditor will use the work of internal audit, and how the external and internal auditors can best work together in a constructive and complementary manner.[Deleted by the AUASB. Refer Aus A14.1]7
[Footnote deleted by the AUASB.]
Where the entity has an internal audit function, how the external auditor and internal auditors can work in a constructive and complementary manner, including any planned use of the work of the internal audit function.#
See ASA 610 Using the Work of Internal Auditors, paragraph 20.
Similarly, when the entity has an internal audit function, the auditor may discuss matters with the internal auditor appropriate individuals within the function before communicating with those charged with governance.
Further, ASA 315 identifies participation by those charged with governance, including their interaction with the internal audit function, if any, and external auditors, as an element of the entity’s control environment.11
See ASA 315, paragraph A70A77.
ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements - paragraph 30(a)
See ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements.
The auditor is also not required to repeat information about such deficiencies if it has been previously communicated to management by other parties, such as the internal auditors function or regulators.
See ASA 610 Using the Work of Internal Auditors, paragraph Aus 1.2. The use of internal auditors to provide direct assistance is prohibited in an audit or review conducted in accordance with the Australian Auditing Standards.
The risk assessment procedures shall include the following:
The auditor shall obtain an understanding of the major activities that the entity uses to monitor internal control over relevant to financial reporting, including those related to those control activities relevant to the audit, and how the entity initiates remedial actions to address deficiencies in its controls. (Ref: Para. A106‑A108)
If the entity has an internal audit function,1 the auditor shall obtain an understanding of the following in order to determine whether the internal audit function is likely to be relevant to the audit nature of the internal audit function’s responsibilities, its organisational status, and the activities performed, or to be performed. (Ref: Para. A109‑A116))
See ASA 610 Using the Work of Internal Auditors, paragraph 714(a).
Enquiries of Management, the Internal Audit Function and Others within the Entity (Ref: Para. 6(a))
A6A7. However, theThe auditor may also obtain information, or a different perspective in identifying risks of material misstatement, through enquiries of others within the entity and other employees with different levels of authority. For example:
See ASA 260 Communication with Those Charged with Governance, paragraph 4(b).
A8. As obtaining an understanding of the entity and its environment is a continual, dynamic process, the auditor’s enquiries may occur throughout the audit engagement.
Enquiries of the Internal Audit Function
A9. If an entity has an internal audit function, enquiries of the appropriate individuals within the function may provide information that is useful to the auditor in obtaining an understanding of the entity and its environment, and in identifying and assessing risks of material misstatement at the financial statement and assertion levels. In performing its work, the internal audit function is likely to have obtained insight into the entity’s operations and business risks, and may have findings based on its work, such as identified control deficiencies or risks, that may provide valuable input into the auditor’s understanding of the entity, the auditor’s risk assessments or other aspects of the audit. The auditor’s enquiries are therefore made whether or not the auditor expects to use the work of the internal audit function to modify the nature or timing, or reduce the extent, of audit procedures to be performed.6 Enquiries of particular relevance may be about matters the internal audit function has raised with those charged with governance and the outcomes of the function’s own risk assessment process.
A10. If, based on responses to the auditor’s enquiries, it appears that there are findings that may be relevant to the entity’s financial reporting and the audit, the auditor may consider it appropriate to read related reports of the internal audit function. Examples of reports of the internal audit function that may be relevant include the function’s strategy and planning documents and reports that have been prepared for management or those charged with governance describing the findings of the internal audit function’s examinations.
A11. In addition, in accordance with ASA 240,7 if the internal audit function provides information to the auditor regarding any actual, suspected or alleged fraud, the auditor takes this into account in the auditor’s identification of risk of material misstatement due to fraud.
A12. Appropriate individuals within the internal audit function with whom enquiries are made are those who, in the auditor’s judgement, have the appropriate knowledge, experience and authority, such as the chief internal audit executive or, depending on the circumstances, other personnel within the function. The auditor may also consider it appropriate to have periodic meetings with these individuals.
Considerations specific to public sector entities (Ref: Para 6(a))
The relevant requirements are contained in ASA 610.
See ASA 240, paragraph 19.
A.71 A78. Relevant audit evidence may be obtained ...
A79. The auditor may also consider how management has responded to the findings and recommendations of the internal audit function regarding identified deficiencies in internal control relevant to the audit, including whether and how such responses have been implemented, and whether they have been subsequently evaluated by the internal audit function.
The Entity’s Internal Audit Functions (Ref: Para.23)
A101. A109. The entity’s internal audit function is likely to be relevant to the audit if the nature of the internal audit function’s responsibilities and activities are related to the entity’s financial reporting, and the auditor expects to use the work of the internal auditors to modify the nature or timing, or reduce the extent, of audit procedures to be performed. If the auditor determines that the internal audit function is likely to be relevant to the audit, ASA 610 applies. If the entity has an internal audit function, obtaining an understanding of that function contributes to the auditor’s understanding of the entity and its environment, including internal control, in particular the role that the function plays in the entity’s monitoring of internal control over financial reporting. This understanding, together with the information obtained from the auditor’s enquiries in paragraph 6(a) of this Auditing Standard, may also provide information that is directly relevant to the auditor’s identification and assessment of the risks of material misstatement.
A102. A110. The objectives and scope of an internal audit function, and therefore the nature of its responsibilities and its status within the organisation, including the function’s authority and accountability, vary widely and depend on the size and structure of the entity and the requirements of management and, where applicable, those charged with governance. These matters may be set out in an internal audit charter or terms of reference.
A102. A111. The responsibilities of an internal audit function may include, for example, monitoring of internal control, risk management, and review of compliance with laws and regulations performing procedures and evaluating the results to provide assurance to management and those charged with governance regarding the design and effectiveness of risk management, internal control and governance processes. If so, the internal audit function may play an important role in the entity’s monitoring of internal control over financial reporting. On the other hand However, the responsibilities of the internal audit function may be limited to the review of focussed on evaluating the economy, efficiency and effectiveness of operations, for example, and accordingly, if so, the work of the function may not directly relate to the entity’s financial reporting.
A103. A112. If the nature of the internal audit function’s responsibilities are related to the entity’s financial reporting, the external auditor’s consideration of the activities performed, or to be performed by, the internal audit function may include review of The auditor’s enquiries of appropriate individuals within the internal audit function in accordance with paragraph 6(a) of this Auditing Standard help the auditor obtain an understanding of the nature of the internal audit function’s responsibilities. If the auditor determines that the function’s responsibilities are related to the entity’s financial reporting, the auditor may obtain further understanding of the activities performed, or to be performed, by the internal audit function by reviewing the internal audit function’s audit plan for the period, if any, and discussion discussing of that plan with the internal auditors appropriate individuals within that function.
A113. If the nature of the internal audit function’s responsibilities and assurance activities are related to the entity’s financial reporting, the auditor may also be able to use the work of the internal audit function to modify the nature or timing, or reduce the extent, of audit procedures to be performed directly by the auditor in obtaining audit evidence. Auditors may be more likely to be able to use the work of an entity’s internal audit function when it appears, for example, based on experience in previous audits or the auditor’s risk assessment procedures, that the entity has an internal audit function that is adequately and appropriately resourced relative to the size of the entity and the nature of its operations, and has a direct reporting relationship to those charged with governance.
A114. If, based on the auditor’s preliminary understanding of the internal audit function, the auditor expects to use the work of the internal audit function to modify the nature or timing, or reduce the extent, of audit procedures to be performed, ASA 610 applies.
A115. As is further discussed in ASA 610, the activities of an internal audit function are distinct from other monitoring controls that may be relevant to financial reporting, such as reviews of management accounting information that are designed to contribute to how the entity prevents or detects misstatements.
A116. Establishing communications with the appropriate individuals within an entity’s internal audit function early in the engagement, and maintaining such communications throughout the engagement, can facilitate effective sharing of information. It creates an environment in which the auditor can be informed of significant matters that may come to the attention of the internal audit function when such matters may affect the work of the auditor. ASA 200 discusses the importance of the auditor planning and performing the audit with professional scepticism, including being alert to information that brings into question the reliability of documents and responses to enquiries to be used as audit evidence. Accordingly, communication with the internal audit function throughout the engagement may provide opportunities for internal auditors to bring such information to the auditor’s attention. The auditor is then able to take such information into account in the auditor’s identification and assessment of risks of material misstatement.
For example, the auditor may intend to make use of the entity’s performance measures for the purpose of analytical procedures, or to make use of the entity’s information produced for monitoring activities, such as internal auditor’s reports of the internal audit function.
This may be the case when, for example, responses to enquiries of management, internal auditors, and others are inconsistent, or when responses to enquiries of those charged with governance made to corroborate the responses to enquiries of management are inconsistent with the response by management.
See ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and Related Services Engagements, paragraph 54.
Internal The internal audit function may be regarded as part of group‑wide controls, for example, when the internal audit function is centralised. ASA 61030 deals with the group engagement team’s evaluation of the competence and whether the internal audit function’s organisational status and relevant policies and procedures adequately supports the objectivity of the internal auditors, the level of competence of the internal audit function, and whether the function applies a systematic and disciplined approach where it plans the group engagement team expects to use their the function’s work.
See ASA 610 Using the Work of Internal Auditors, paragraphs 916-17.
[Footnote deleted by the AUASB.]
Aus 0.4 The ethical requirements that are relevant to the group audit and, in particular, the independence requirements. For example, since the use of internal auditors to provide direct assistance is prohibited in an audit or review conducted in accordance with the Australian Auditing Standards, it is relevant for the group auditor to address this prohibition in the communication to the component auditors, including those overseas.#
See ASA 610 Using the Work of Internal Auditors, paragraph Aus 1.2.