The Auditor-General Act establishes the position of the Independent Auditor, who may conduct a performance audit of the ANAO at any time. The ANAO is also committed to increasing external oversight and scrutiny over the ANAO Quality Framework, including external reviews of the quality framework and completed audits, as considered appropriate.

Australian Securities and Investments Commission Audit Inspection Report of the ANAO

ASIC Audit Inspection Report – 12 months to 30 June 2020

The ANAO maintains a strong and ongoing focus on its quality assurance framework as a core business investment. A sound quality framework supports delivery of high-quality audit work and enables the Auditor-General to have confidence in the opinions and conclusions presented in our reports to the Parliament. This in turn facilitates the Parliament’s confidence that the ANAO operates with independence, and that the audit approach meets the auditing standards set by the Auditor-General. The ANAO is committed to external oversight and scrutiny over the ANAO Quality Assurance Framework.

The ANAO engages the Australian Securities and Investments Commission (ASIC) to conduct an annual review of the ANAO quality assurance framework and financial statements audit files, in a similar way to the review work conducted by ASIC on external auditors in the private sector.

ASIC conducted the reviews using the ASIC methodology used in its review of audit files and quality frameworks of private sector audit firms. The ANAO sees the methodology applied by ASIC as robust and fit-for-purpose and values the feedback and good practice recommendations that ASIC provide from its experience.

ASIC is a Commonwealth entity audited by the ANAO. ASIC and the ANAO determined that the following safeguards mitigated the threats to independence created by that relationship:

  • staff in ASIC’s Financial Reporting & Audit team who are not involved in financial reporting by ASIC undertook the reviews;
  • these staff reported to the Auditor-General in relation to the reviews, not the Commissioners of ASIC; and
  • the ASIC Senior Executive Leader overseeing the review does not provide accounting advice to the Commission.

ASIC provided the Auditor-General with a report on the results of its review of:

  • key areas in three audits of financial reports for the year ended 30 June 2019; and
  • aspects of the ANAO’s quality control processes and quality assurance framework relating to audits of financial reports.

ASIC identified findings within the audit files reviewed and assessed them using its own rating categories used in the file reviews of private sector audits. The ANAO performed an additional review on the areas identified as ‘risk of material misstatement’ by ASIC in its review of three 2018–19 financial statements audits. ANAO reviews provided assurance to the Auditor-General that the conclusions in the audit reports issued were appropriate despite deficiencies identified in ASIC’s review.

As the Commonwealth’s statutory auditor, maintaining a focus on quality in our work is a key priority for the ANAO. Compliance with mandated rules, such as those in audit standards and methodology, is necessary for good governance. Further, the ANAO recognises the important role that openness to evaluation plays in building a culture focused on quality, learning and continuous improvement. The ANAO accepts the findings from ASIC’s review of the financial statements audit files and will address the findings in the conduct of the 2019–20 financial statements audits. To enhance organisation-wide learning from the review, senior ANAO staff have discussed the findings with all financial statements audit staff to ensure that all teams implement improvements in audit documentation and compliance with the ANAO audit methodology.

ASIC identified no areas where the design of the quality assurance framework did not satisfy the requirements of ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, Other Assurance Engagements and Related Services Engagements (ASQC 1) within the scope of its review. In 2020, the review of the ANAO quality framework included a high-level review of the ANAO’s policies and processes for the pilot root cause analysis program conducted on quality assurance findings from internal monitoring programs. ASIC made one good practice recommendation to continue the root cause analysis program and expand the population and sources to enhance the program as the program matures. The ANAO values the good practice recommendation and will address through enhancing the root cause analysis program, incorporating the ASIC recommendations, in the development of methodology and processes in future years.

The ANAO will complete this action item for the root causes analysis as set out in the Quality Assurance Framework and Plan 2020-21 scheduled for completion by 30 June 2021.

ASIC did not have any findings arising from the review of the ANAO’s responses to ASIC’s prior year good practice quality control recommendations.

Listed below are the ASIC reports from reviews conducted since 2018:

Peer reviews

The ANAO and the New Zealand Office of the Auditor-General have a long standing arrangement to conduct reciprocal performance audit peer-reviews annually, on a rotating basis. The scope of the review is not a comprehensive examination of the ANAO’s performance audit practices. Instead, this arrangement seeks to strengthen performance auditing, through the provision of constructive feedback and sharing of better practices. The peer review methodology includes examining two published audit reports against agreed criteria, drawing on information from related planning documents, audit working papers and discussion with ANAO staff. Download the most recent peer review: New Zealand Office of Auditor-General Quality Assurance Review Report December 2018.

    The ANAO has considered the observations made in the peer review and assured itself that the issues raised reflect deficiencies in documentation.  The ANAO is satisfied that the findings and conclusions in the audit reports are supported by sufficient and appropriate audit evidence and are appropriate in the circumstances. The ANAO has considered the better practice recommendation made in the report. Many of the recommendations are in areas where the ANAO has identified opportunities for improvement through our internal quality assurance reviews and have commenced or completed follow up actions to address these recommendations. The observations and recommendations have been shared with all performance audit staff to ensure that all teams can implement improvements in audit documentation.

    Listed below are peer review reports conducted by the New Zealand Office of the Auditor-General since 2016.

    External audits

    Section 41 of the Auditor-General Act 1997 establishes the position of the Independent Auditor. Under section 45(1) of the Act, the Independent Auditor may at any time conduct a performance audit of the ANAO. The Independent Auditor is appointed by the Governor-General on the recommendation of the Minister with the approval of the Joint Committee of Public Accounts and Audit (JCPAA). The Act requires a vacancy in the position of Independent Auditor to be filled as soon as practicable, with a term of at least three but not more than five years.

    In performing or exercising their functions or powers, the Independent Auditor must have regard to the audit priorities of the Parliament for audits of the Audit Office, as determined by the Joint Committee of Public Accounts and Audit under paragraph 8(1)(n) of the Public Accounts and Audit Committee Act 1951.

    The current Independent Auditor is Ms Eileen Hoggett.

    The most recent Independent Auditor report, Performance Audit of Internal Budgeting and Forecasting Processes and Practices, was tabled in Parliament on 24 September 2020.

    Listed below are performance audits conducted by the Independent Auditor since April 2000.