ob体育 is seeking feedback on its proposals to change its approach to the communication of audit quality findings identified from ob体育鈥檚 review of audit files to the directors of the entities audited.
Consultation Paper 352 Communicating audit findings to directors,聽audit committees or senior managers (CP 352) outlines ob体育鈥檚 proposal to communicate the findings directly to directors on a routine basis rather than communicating findings on the current exception basis and the circumstances in which that would apply.
ob体育 Commissioner Sean Hughes said, 鈥極ur proposal to communicate our audit review findings to directors of entities audited on a routine basis, rather than the current exception basis, will assist audit committees and directors to engage the auditor on the steps they are taking to address any issues and ensure that the audit is adequately resourced. This is important in supporting audit quality and broader market confidence in the quality of financial reports鈥�.
CP 352 proposes that ob体育 will routinely communicate findings from its review of audit files where ob体育:
- has formed the view that an auditor has not obtained reasonable assurance that the entity鈥檚 financial report is free of material misstatement;
- considers that audit work should be improved in future years, even though reasonable assurance was obtained that the financial report for the current year was free of material misstatement;
- has concerns that the auditor did not meet the independence requirements of the Corporations Act (including professional requirements), has not addressed the matter, and has not adequately reported the matter in an auditor鈥檚 independence declaration; or
- considers any other matter should be drawn to the attention of the directors or audit committee of the audited entity.
Submissions to CP 352 are invited by 11 February 2022.
Background
The聽Australian Securities and Investments Commission Act allows the direct communication of specific financial reporting and audit findings identified from ob体育鈥檚 reviews of audit files to directors, audit committees or senior managers of companies, responsible entities or disclosing entities to assist the entity to properly manage its affairs.
ob体育鈥檚 current guidance is contained Regulatory Guide RG 260 Communicating findings from audit files to directors, audit committees and senior managers (RG 260). The proposed consultation was first announced in late 2019 but has been held over due to potential pressures on audit firms and other stakeholders under COVID-19 conditions.
Information Sheet 196 Audit quality 鈥� The role of directors and audit committees provides more information on the ways in which directors and audit committees can support audit quality. We inform directors when we will be reviewing audit files and encourage directors and audit committees to ask audit firms for the results of our reviews of an entity鈥檚 audit files.