This page lists status updates about the ANAO's progress on recommendations from the Australian Securities and Investments Commission (ASIC) audit inspection reports

Status updates

Status updates for the ASIC audit inspection reports of the ANAO

ASIC Better practice recommendation

ANAO response

Status — August 2022

ASIC Audit Inspection Report — 12 months to 30 June 2021

Non-audit services — The ANAO should ensure that documents describing non-audit services to be provided by contracted firms and the ANAO’s assessment of whether providing those services are consistent with auditor independence requirements are sufficiently clear on the nature of the services and evidence that a proper evaluation was made to support the conclusion reached

The ANAO will consider how documentation of the approval process can be enhanced.

Completed — March 2022.

Judgements are now documented in the request and approval form.

ASIC Audit Inspection Report — 12 months to 30 June 2020

Root cause analysis — The pilot program should be made permanent and expanded to cover:

  • all findings on non-outsourced audits;
  • findings on outsourced audits;
  • audits where there have been subsequent restatements of financial reports; and
  • findings from ‘hot’ reviews

The ANAO is committed to continuing the root cause analysis program as demonstrated in the ANAO Quality Assurance Framework and Plan 2020–21. The ANAO will enhance the root cause analysis program, incorporating the ASIC recommendations, in the development of methodology and processes in future years.

Completed — September 2021.

The ANAO has made root cause analysis a permanent activity under the ANAO Quality Assurance Framework and Plan and is incorporating the ASIC recommendations in a staged approach over future years.

ASIC Audit Inspection Report — August 2019

Engagement resourcing — The ANAO’s policy is to rotate executives after 5 years of involvement on an audit in a signing and/or quality review role. As a matter of good practice, the ANAO may wish to consider also rotating staff below signing officer level (eg engagement manager) who have been involved in an audit for a significant number of years.

The ANAO considers the time an audit manager has spent on the same job when undertaking resource allocations, however this is not formalised or documented in the same formal way as is done for key personnel. The ANAO will consider whether its current processes are sufficient to mitigate the risk of long involvement, including the allocation of staff below signing officer level to audits.

Completed — December 2019.

A table has been added to the independence procedure in the planning section of the financial statements audit file. The table documents the consideration of the rotation of senior team members. The table includes inputs for recording the names of the relevant staff, the number of years of their involvement, and the maximum length of involvement applicable.

There is also an audit file step to confirm that the assignment of the senior team members complies with the ANAO rotation policy.

Rotation tracking — The ANAO tracks executive rotation using a spreadsheet. To avoid inadvertent breaches, it is recommended that an automated system with alerts be considered.

The ANAO will investigate whether monitoring of rotation can be automated as part of its transition to TeamMate+ in November 2019.

Completed — September 2021.

Monitoring was not able to be automated in a cost-effective manner. To address the recommendation the ANAO included a table within the financial statements audit file for teams to document how long each key audit team member has had involvement in the engagement and confirming that they had not exceeded the maximum. While this is not automated, it improves the monitoring of rotation at the engagement level as well as the service group level.

The ANAO independence policy was revised to include a requirement for internal consultation in respect of rotation of executives for public interest entities.

Engagement planning sign-off date — In three engagement files reviewed by us, planning was formally signed off by the engagement leader during the year end fieldwork. The ANAO should consider introducing and monitoring compliance with a mandatory or target milestone, for overall planning to be signed off by the engagement leader at a date before the commencement of any interim or year-end fieldwork. The ANAO will consider this recommendation in two parts — firstly whether a mandatory or target milestone should be set for signing off planning and, secondly, how compliance with the set milestone is monitored. The monitoring will be considered as part of the ANAO’s transition to TeamMate+ in November 2019.

Completed — September 2020.

The first part of this recommendation for introducing compliance with a target milestone was completed in the revised ANAO Audit Manual released in May 2020. The revised ‘Documentation’ policy requires Engagement Executives or Audit Managers, responsible for financial statement audits, to review and sign-off planning audit procedures, in the financial statement audit file, prior to commencement of the interim field work.

The ANAO’s internal quality assurance program and annual internal audits of compliance with the ANAO Audit manual assess compliance with this policy.

ASIC Audit Inspection Report — June 2018
Risk rating of audits — A relatively small number of audits were rated as high risk or material to government consolidated statements, and thus requiring a second reviewer. Consideration could be given to rating all public interest entities as high risk or appointing a second reviewer. The ANAO will review the policies and processes for determining and approving engagement risk ratings and guidance on the application of the concept of Public Interest Entities (PIEs) in the public sector. This will include consideration of whether audits of PIEs should be considered as high risk and therefore subject to a second reviewer.

Completed — March 2019.

The ANAO revised its policy regarding engagement risk ratings and PIE assessments. The revised policy requires:

  • the FSASG GED to determine which entities should be classified as PIEs; and
  • appointment of an Engagement Quality Control Reviewer to entities classified as PIEs.
Quality reviews — Consideration could be given to reviewing and challenging audit judgements in internal reviews of audits. In the review of the financial statements audit QA test program prior to the 2017–18 QA review, the ANAO will consider which steps in the program can be more focused on audit judgements.

Completed — December 2018.

The ANAO revised the Quality Assurance test program for financial statements audits reviews to assess significant auditor judgements made to ensure that they were reasonable and supported with appropriate rationale.