Developments in the accounting profession
Australian equivalents to International Financial Reporting Standards were adopted in 2005 and have become embedded in the financial reporting practices of private and public sector entities. The focus has now shifted to improving these standards and adding material to address issues specific to the public sector.
There were relatively few changes in the accounting standards applying in 2007–08. The most significant was AASB 7 Financial Instruments: Disclosures, which has required all entities to enhance disclosure of financial instruments and the risks arising from these instruments.
Looking forward, the trend toward globally harmonised financial reporting continues. The International Accounting Standards Board (IASB) and its US equivalent (FASB) have started work on a joint conceptual framework. When completed, this will provide a common basis for the development of accounting standards by these two major standard-setters.
While this IASB/FASB project is initially focussing on the needs of the private sector, others are acting to improve financial reporting by the public sector. The International Public Sector Accounting Standards Board is now developing a public sector conceptual framework.
The Australian Accounting Standards Board also has an ongoing project to address issues specific to the public sector. Some aspects of this project are well advanced. In a key development, reporting by the Australian, State and Territory governments is expected to be in accordance with the new standard AASB 1049 Whole of Government and General Government Sector Financial Reporting from 2008–09. This standard brings together the two accounting frameworks currently used by governments—Generally Accepted Accounting Principles (GAAP) and the Government Finance Statistics framework of the IMF. Australian governments are already using AASB 1049 as the basis for their 2008–09 budgets.
Another encouraging development has been the AASB’s decision to allow not-for-profit government bodies to use the forthcoming financial reporting standards for small and medium sized entities, currently under development by the IASB. Adoption of this standard by Australian Government entities will be a matter for decision by the Minister for Finance and Deregulation.
Auditing standards are also changing. The International Auditing and Assurance Standards Board (IAASB) is revising its standards to improve their clarity and aid consistency of application. This is a significant revision of these auditing standards, adding to the requirements that must be met by auditors in undertaking audits of financial statements. The Australian Auditing and Assurance Standards Board (AUASB) plans to review these IAASB standards for adoption in Australian with effect from reporting periods beginning on or after 1 January 2010.
The AUASB has also been giving priority to audit projects of relevance to the public sector, including developing standards on performance engagements and compliance engagements.
Quality assurance
We continued our program of quality assurance reviews of selected financial statement audits. The objective of our Quality Assurance Review Program is to ensure that we comply with ANAO Auditing Standards in the conduct of our audits. The Program is managed by Professional Services Branch under the authority of the Deputy Auditor-General.
For 2007–08, the quality assurance program for financial statement audits comprised the review of nine completed audits (both performed in-house and contracted out) and seven in progress. The main areas highlighted by the review that required attention related to planning and documentation and the valuation of significant liabilities, particularly involving actuarial advice.
The results of these reviews are considered by the senior executive and action is taken to implement an appropriate response so that our audit practices benefit from the quality assurance program.