1.1 The Australian National Audit Office’s (ANAO) purpose is to support accountability and transparency in the Australian Government sector. This is achieved through independent reporting to the Parliament and thereby contributing to improved public sector performance.

1.2 The ANAO defines audit quality as the provision of timely, accurate and relevant audits, performed independently in accordance with the Auditor-General Act, ANAO Auditing Standards and methodologies, and which are valued by the Parliament. Delivering quality audits results in improved public sector performance through accountability and transparency.

1.3 Our sixth Annual Quality Report covers our audit quality program for the year ended 30 June 2025. As the audits of financial statements and performance statements are finalised between August and December each year, the results for those audit products refer to audits for the 2023-24 financial year as they were performed in the 2024-25 financial year.

2024–25 Quality Snapshot

Our Quality Framework

1.4 The quality of ANAO audit work is reliant on the strength of its independence and system of quality management. The ANAO system of quality management aligns with the requirements of Auditing Standard ASQM1 Quality Management for firms that perform audits or reviews of financial reports and other information, or other assurance or related services engagements (ASQM 1) and enables the Auditor-General to have confidence in the opinions and conclusions contained in the reports prepared for the Parliament. This facilitates the confidence of the Parliament that the ANAO operates with independence and that the audit approach meets the auditing standards set by the Auditor-General.

1.5 Reviewed annually, the system of quality management is set out in the Quality Management Framework and Plan 2025-26 and is designed to provide the Auditor-General with reasonable assurance that:

• the ANAO and its staff fulfill their responsibilities in accordance with the ANAO Auditing Standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and
• reports issued by the ANAO are appropriate in the circumstances

1.6 This Audit Quality Report provides transparency in respect of the processes, policies, and procedures that support each element of audit quality as described in the ANAO Quality Management Framework 2024-25, and reports ANAO performance against the 2024–25 audit quality indicators.

Auditor- General’s conclusion on the system of quality management effectiveness

As Auditor-General, I am responsible for the evaluation of the Australian National Audit Office (ANAO) Quality Management Framework. My evaluation is based on the matters outlined in the accompanying ANAO Audit Quality Report 2024–25.

Based on my evaluation, I have concluded that the ANAO Quality Management Framework was operating effectively for the year ending 30 June 2025, and provides reasonable assurance that:

• The ANAO and its personnel fulfill their responsibilities in accordance with AUASB standards and applicable legal and regulatory requirements, including the Auditor-General Act 1997 and the Australian National Audit Office Auditing Standards 2024, and conduct engagements in accordance with such standards and requirements; and
• Engagement reports issued by the ANAO are appropriate in the circumstances.

The ANAO has implemented appropriate remedial actions in relation to identified non-compliance with ANAO independence policies (see Table 3.3). Remediation procedures have been undertaken where the quality assurance review program identified significant findings deemed to be a departure from the ANAO Auditing Standards (see paragraph 3.119), with the ANAO satisfied, as a result of review of the remediated work, that audit conclusions subject to monitoring were appropriate in the circumstances. The ANAO has also designed and implemented remedial actions that strengthen the quality management framework in response to opportunities for improvement identified, including in our quality assurance review program and through root cause analysis. Through the completion of remediation procedures, I am satisfied that the deficiencies have been appropriately remediated at the time of this evaluation.

Dr Caralee McLiesh, PSM
Auditor-General
14 October 2025

2.1 The ANAO tabled 48 reports in Parliament in 2024–25. This included:

• 44 performance audits;
• two reports on the financial statements of Australian Government entities;
• the Major Projects Review;
• 2 information reports that consolidated lessons, analysis and themes from performance audit work; and
• one report on the audits of performance statements for the reporting period 2023–24, which included audit opinions for 14 Commonwealth entities in accordance with a request from the Finance Minister.

2.2 In addition to this, in 2024–25 the ANAO issued 244 opinions on mandated financial statements audits and completed a further 52 audits by arrangement.

2.3 Work also commenced for performance statements audits of 21 entities for 2024–25, an increase of seven entities from the 2023–24 performance statements audit program.

2.4 The ANAO published six Insights products, which included four Audit Lessons publications to make it easier for the Australian public sector to apply insights from ANAO work, and two Insights: Audit Practice publications to explain ANAO methodologies to help entities prepare for an ANAO audit.

2.5 The financial statements audit and performance statements audit cycle for 30 June year end reports is 1 October to 30 September. Commonwealth entities, with a small number of exceptions, all have financial years ending on 30 June. This results in financial statements audit and performance statements audits peak periods occurring between July and December annually. This results in compressed timeframes which creates a risk to audit quality needs to be managed by the ANAO.

2.6 The quality of ANAO audit work is reliant on the strength of its independence and quality framework. The ANAO’s Quality Management Framework and Plan articulate the ANAO’s system of quality management (SoQM), established to support the delivery of high-quality audit work, and to enable the Auditor-General to have confidence in the opinions and conclusions in the reports prepared for the Parliament.

2.7 The Quality Management Framework and Plan 2024-25 set out 28 key deliverables to support continuous improvement in high-quality audit delivery. Deliverables are aligned with the ANAO’s Quality Objectives, with specific focus on:

2.8 The detailed status of deliverables as at 30 June 2025 is detailed in Chapter 4.

2024–25 Audit quality indicator results

2.9 Audit quality indicators (AQIs) are reliable quantitative measures regarding the audit process. AQIs are considered alongside relevant qualitative information to provide insights into factors that may influence audit quality.

2.10 Measuring AQIs can strengthen audit quality through assisting in understanding the root causes of quality inspection findings and informing discussions about auditing processes and appropriate benchmarks. This in turn leads to improved audit planning, execution, and communication and, where root causes are identified, improved remediation procedures that address the drivers of quality deficiencies.

2.11 In 2024–25, the ANAO identified benchmarks for 10 AQIs against which our performance is considered. The benchmarks are not targets, however provide context for consideration of the results of the AQIs along with qualitative information and prior year results.

2.12 Five AQIs are measures from the Australasian Council of Auditors-General (ACAG) annual macro benchmarking survey in which most Australian audit offices¹, including the ANAO, participate. The purpose of the survey is to provide comparable information and benchmarks to audit offices across Australasia. ANAO benchmarks for the AQIs derived from the ACAG macro benchmarking are developed using past results of comparable audit offices² taken from this survey and adjusted to calculate a three-year rolling average. This may cause variation in the benchmarks from year to year.

2.13 The remaining AQIs and related benchmarks are derived from ANAO Audit Manual policy requirements, the ANAO Workforce Plan and leadership expectations regarding independence and audit quality. The Quality Management Framework and Plan 2024-25 outlines the source of each of the benchmarks.

2.14 Table 2.1 summarises the 2024–25 ANAO outcomes against each AQI and indicates whether the ANAO considers the result presents a potential risk to audit quality.

2.15 The ANAO has considered the AQI results alongside results from other quality assurance activities as part of its evaluation of its system of quality management. While potential risks to audit quality were identified across three audit quality indicator domains, the associated remediation strategies were assessed as effective, and the risks were appropriately mitigated at the time of the 2024–25 evaluation. As a result, the Auditor-General has concluded that the ANAO Quality Management Framework was operating effectively for the year ended 30 June 2025.

Table 2.1: Summary of 2024–25 ANAO results against each Audit quality indicator

*AQI measures derived from ACAG Macro Benchmarking survey.

^ Consistent or not consistent status simply indicates the ANAO result is above or below the benchmark and is a matter of professional judgement. It does not imply underperformance.

~ The potential risk status indicates where the ANAO has considered quality risks as part of its evaluation of the system of quality management.

2.16 The ANAO’s 2024–25 results against the identified benchmarks indicate that there are opportunities to improve the implementation of the quality management framework. The ANAO has assessed each of the areas where the results were not consistent with the benchmark to understand the drivers for the results and develop action items to strengthen the framework. The assessment and actions are summarised below:

• Compliance with independence requirements is not consistent with the benchmark (above), with four independence breaches identified (including one ANAO detected breach, two detected by the contract out firm and one staff member self-identification). Remediation was undertaken including intervention by relevant Group Executive Directors (GEDs) for two first time firm breaches; Auditor-General and relevant GED intervention for a firm with previous breaches; and relevant GED intervention in consultation with relevant staff member. The ANAO maintains a zero-tolerance approach for Independence breaches and detection confirms ANAO monitoring processes remain effective.
• Material restatements resulting from a prior period error. The cause of material restatements is assessed by the ANAO to determine whether they are errors that should have been identified in the previous year’s audit. This can also indicate whether there are risks to audit quality that need to be addressed. In 2024–25, the ANAO conducted a root cause analysis over the prior period errors identifying the main drivers of the errors, including consideration of the nature of the errors and how they were identified. The ANAO identified actions to respond to the drivers of the errors, including delivering targeted technical training on auditing leases, key management personnel remuneration, non-financial assets and revenue recognition. The ANAO has also communicated with the Department of Finance on potential changes to guidance documents to support improvements in financial statement preparation.
• Turnover of audit personnel across the ANAO is consistent with the benchmark as attrition rates have reduced across the service groups and does not indicate a risk to audit quality. In 2024–25, the ANAO focused on attracting and retaining staff, resulting in a reduced turnover rate of 14.8 per cent (2023–24: 22.3 per cent). At a group level, performance statements and performance audit groups demonstrate below benchmark attrition results, whilst financial statements and SADA remain within the benchmark. The 2025–26 strategy, outlined in the ANAO Corporate Plan, similarly emphasises sustaining a skilled and diverse workforce through capability building, leadership development, and preparation for climate change disclosures.
• Training hours per audit professional increased in 2024–25 and remains not consistent (above) with the benchmark for all service groups, however, does not indicate a risk to audit quality. Training hours for financial and performance statements staff increased driven by strategic improvements in technical training and leadership development. Performance audit staff training hours decreased due to lower numbers of graduates and new starters in 2024-25, with less hours assigned to technical and non-technical training and mentoring and coaching.
• Staff audit workload for all audit products remains not consistent with the benchmark however is not assessed as indicating a risk to audit quality. FSASG and PSASG hours decreased, attributable to increased training, coaching and mentoring efforts that are not captured in audit work hours. PASG hours increased by three per cent, attributable to stabilised resourcing in 2024–25 with more experienced staff and fewer new starters reducing training requirements and increasing available audit work hours.
• Technical accounting and auditing resources are assessed as consistent with the benchmark. While slightly above the benchmark at 2.3 per cent, the ANAO has additional technical resources in comparison to other audit offices as it has a greater range of products, including the Major Projects Report, performance statements audit and standardised data analytics solutions which require methodology and quality assurance.
• Quality assurance review coverage³ is not consistent with the benchmark and does not indicate a risk to audit quality. The ANAO is comfortable with the coverage of Engagement Executives for in-house and contract-out audits as selections were made in line with or exceeding the policy requirements.
• To address the significant findings identified in the ANAO’s internal quality review program, the ANAO conducted a root cause analysis and designed targeted action items to address the drivers of the findings. Implementation of the action items is monitored by the Quality Committee. The ANAO is comfortable that the risk to audit quality is mitigated by the implementation of these action items, which are designed to remediate the identified deficiencies and strengthen the system of quality management.

2.17 Chapter 3 outlines the results of the 2024–25 AQIs under each element of the ANAO Quality Management Framework with further explanations of the results and the potential impacts on audit quality.

2.18 The ANAO’s quality focus in 2025–26 will enable continual refinement of the system of quality management to enhance and embed a culture of quality, with particular emphasis on:

• enhanced operationalisation of the Quality Management Framework, including implementation of service group Quality Plans to support quality outcome ownership, and strengthening of stakeholder collaboration;
• applying an auditing to risk lens to the quality assurance program to ensure resources are appropriately allocated according to higher risk areas in audits;
• implementing a sustainability assurance methodology for audits of Commonwealth entity climate disclosures; and
• improving quality monitoring and reporting through enhanced metrics, data analytics and exploring use of emerging technologies.

3.1 This chapter outlines the activities conducted by the ANAO in 2024–25 under each element of the ANAO Quality Management Framework. It also includes the results of the 2024–25 AQIs against benchmarks.

Responsibilities for the system of quality management

3.2 The Auditor-General is ultimately responsible and accountable for the system of quality management in place for all assurance and related activities undertaken by the ANAO.

3.3 The Deputy Auditor-General is operationally responsible for ensuring that the system of quality management satisfies the requirements of the ANAO Auditing Standards. In 2024–25 the Deputy Auditor-General was assisted with this role by the Group Executive Directors (GEDs) of each of the ANAO’s six business groups:

• Financial Statements Audit Services Group (FSASG);
• Performance Audit Services Group (PASG);
• Performance Statements Audit Services Group (PSASG);
• Systems Assurance and Data Analytics Group (SADA);
• Professional Services Group (PSG); and
• Corporate Management Group (CMG).

3.4 The GED of PSG is responsible for the design, implementation and maintenance of the Quality Management Framework and for monitoring compliance with the Framework. The PSG GED is also responsible for compliance with independence requirements, including the ANAO independence policies in the ANAO Audit Manual and the approval of non-audit services to auditees by contracted firms and for the monitoring and remediation processes. PSG reports to the ANAO Executive Board of Management (EBOM), Quality Committee and Audit Committee on the results of these monitoring activities.

3.5 The Auditor-General is supported and advised by the EBOM in achieving the ANAO’s purpose. The Deputy Auditor-General, the GEDs of the six business groups and the Chief Financial Officer (CFO) are members of EBOM.

The Quality Committee

3.6 Governance for audit quality is provided through the Quality Committee, a sub-committee of EBOM. Comprised of representatives from across ANAO business groups and chaired by the PSG GED, the Quality Committee’s role includes monitoring the implementation of the ANAO’s Quality Management Framework and Plan.

3.7 The Quality Committee met five times during 2024–25, reporting on its activities to EBOM quarterly. This included four standard Committee meetings and a special meeting to support the 2023–24 evaluation of the System of Quality Management (SOQM). In 2024–25 the Quality Committee, in accordance with its terms of reference:

• reviewed the findings of internal and external reviews in relation to quality and monitored the ANAO’s progress in addressing the findings and recommendations made;
• monitored and reported to EBOM on the implementation, operating effectiveness and efficiency of the Quality Management Framework, having regard to the findings of external and internal reviews and the audit quality indicators;
• advised the Auditor-General on whether the operation of the Quality Management Framework provides reasonable assurance that the ANAO’s quality objectives are being achieved;
• monitored the strategic and operational risks associated with quality; and
• considered and endorsed proposed amendments to the ANAO Audit Manual that substantially impact the conduct of an audit prior to the Auditor-General’s approval.

3.8 A summary of the Quality Committee membership and meetings attended in 2024–25 is provided in Table 3.1.

Table 3.1: Quality Committee membership and meetings attended 2024–25

S = a Special Quality Committee meeting was held to discuss evaluation of ANAO Quality Management Framework.

P = Proxy, the Quality Committee member was unable to attend the Committee meeting; a nominated proxy attended on their behalf.

The ANAO’s risk assessment process

3.9 The ANAO has designed and implemented a risk management framework which shapes our strategic direction, contributes to evidence-based decision-making and is embedded into business-as-usual practices.

3.10 Risk management is a critical component of the ANAO’s approach to good governance, and is integrated into our strategic planning framework, governance, work practices and culture. It is supported by the Enterprise Risk Register, which sets out the ANAO’s strategic and operational risks.

3.11 The ANAO has established the quality objectives required by ASQM 1 and one additional ANAO-specific quality objective.⁴ The ANAO Quality Risk Assessment identifies and assesses risks that may affect the achievement of those quality objectives and supports the design and implementation of responses to address those risks. The Quality Risk Assessment is informed by the Enterprise Risk Register. While all enterprise risks are considered through a quality lens, Risk 4 - the ANAO issues an incorrect audit opinion, or an audit opinion not supported by sufficient evidence relates specially to quality and monitoring is a focus for Quality Committee.

3.12 The process of risk assessment is iterative. The ANAO’s quality objectives and quality risks are reviewed on an annual basis to support the annual review of the Quality Management Framework. The annual review considers the Auditor-General’s evaluation of whether the Quality Management Framework provides reasonable assurance that the ANAO’s quality objectives are being achieved.

3.13 In 2024–25 as part of the EBOM risk ‘deep dives’ series, the risk rating for Enterprise Risk 4 was reduced from high to medium. The reduction followed Quality Committee review of the quality objectives and quality risks, including completion of targeted initiatives to address the number of significant findings identified in the FSASG quality assurance reviews conducted during 2022–23.

3.14 In 2025–26 to mitigate risk, support prompt identification of emerging issues and monitor control effectiveness, each service group will establish a forward Quality Plan with regular updates against activity progress provided to the Quality Committee.

Governance and leadership

Commitment to quality through culture, actions and behaviours

3.15 The Auditor-General sets the tone at the top and demonstrates leadership commitment to audit quality and culture. This occurs through articulating the importance of quality in ANAO Executive discussions, monthly EBOM meetings, and in all staff communications including town hall meetings and the Auditor-General’s monthly messages. In doing so, the Auditor-General promotes the expectation that all ANAO staff have a shared responsibility for quality and view monitoring activities as an opportunity to continuously improve.

3.16 ANAO strategic and operational documents, including the Corporate Plan and group business plans, consider the delivery of high-quality and trusted audit products and enabling services. Quality is a key capability area the ANAO continually invests in to support the ANAO in achieving its purpose. Audit quality is a shared responsibility for all staff and is emphasised in group business plans. In 2024–25, audit service groups included the ‘quality’ capability and outlined the activities, and measures of success it was responsible for leading or supporting. The quality capability was also considered in SADA and PSG business plans as enabling services groups, particularly through collaborative activity delivery with service groups.

3.17 GEDs further reinforce the Auditor-General’s expectations and focus on audit quality through group staff meetings, cohort forums and communications. Engagement Executives support quality in their audit portfolio through providing direction to audit teams, in reviewing audit work, and through increased involvement in critical areas of judgement, significant risk and difficult or contentious matters.

Leadership responsibility, and roles and responsibilities

3.18 The ANAO Audit Manual assigns specific responsibilities for quality to senior leaders.

• The PSG GED is responsible for the ANAO audit methodology, which supports compliance with the ANAO Auditing Standards.
• The FSASG, PASG, PSASG and SADA GEDs are responsible for the delivery of quality audit services within their respective business units.
• The FSASG, PASG, PSASG and SADA Engagement Executives are responsible for quality within their portfolio of audits and supporting the GEDs in the delivery and management of quality audit services.
• The CMG COO is responsible for the design, execution and maintenance of policies supporting the Quality Management Framework in respect of human resources, IT security and support, external communications, legal advice, learning and development and the design and implementation of the ANAO Academy.

3.19 The ANAO organisational structure is consistent with the assignment of roles and responsibilities for quality set out above, and in the ANAO Audit Manual and Quality Management Framework.

3.20 The fulfilment of leadership responsibilities is assessed in quality assurance (QA) reviews through review of Engagement Executive involvement in an audit. Any issues in leadership responsibilities are highlighted in the reports to EBOM on results of the QA review program. The results of QA reviews conducted in 2024–25 are set out from paragraph 3.110 onwards.

Resource needs consistent with commitment to quality

3.21 The ANAO takes a strategic approach to resourcing and workforce management to position and strengthen its workforce to achieve its purpose, which includes delivery of high-quality audits. Investment in our people occurs through capability recruitment; developing our people through facilitating and encouraging ongoing learning and development; and retaining high-performing staff through managing, leading and supporting employees. The ANAO’s policies on human resources are further discussed below from paragraph 3.56 onwards.

Relevant ethical requirements

3.22 ANAO staff act in accordance with the Australian Public Service (APS) values and the Code of Conduct set out in the Public Service Act 1999.

3.23 The ANAO holds itself to high standards to ensure independence and accountability across all levels of the organisation. The ANAO core values are respect, integrity and excellence — values that align with the APS values and address the unique aspects of the ANAO’s business and operating environment. The ANAO values promote audit quality by encouraging staff to perform their duties objectively, impartially and in the best interests of the Parliament.

Independence

3.24 In audit engagements, it is in the public interest and required by the ANAO Auditing Standards that auditors are independent of the entity subject to audit. Independence comprises both independence of mind and independence in appearance and is fundamental to the ANAO’s ability to act with integrity, to be objective and to maintain an attitude of professional scepticism. The Auditor-General emphasises the importance of maintaining the independence and integrity of the ANAO in staff communications, including town hall meetings and the Auditor-General’s monthly messages to staff.

3.25 Under the ANAO independence policies, suspected or actual contraventions of the independence requirements of legislation, APES 110 Code of Ethics for Professional Accountants (including Independence Standards) or ANAO policy requirements must be reported immediately to the responsible GED.

3.26 Independence breaches captured in this AQI represent instances where APES 110 requirements and ANAO independence policies, excluding documentation deficiencies, have not been met.

3.27 During 2024–25, four independence breaches were reported.

Table 3.2: Audit Quality Indicator – Compliance with independence requirements

3.28 These breaches are an increase on the 2023–24 result and not consistent with the benchmark. Three of the four breaches occurred with firms delivering contract-out audits, with the fourth reported through internal ANAO audit independence processes. A summary of the identified breaches and outcomes are at table 3.3 below.

Table 3.3: Independence breaches and outcomes

3.29 As part of the evaluation of the system of quality management, the ANAO considered the potential risk to audit quality arising from the breaches. Investigations into the breaches indicated that while the breaches are serious in nature, they are not pervasive (i.e. isolated to unique instances) and did not result in inappropriate audit conclusions being issued. Remedial actions were implemented, with detection of the breaches demonstrating that ANAO monitoring processes are working as intended.

3.30 As part of our quality assurance program, the ANAO monitors compliance with independence policies, including independence documentation requirements. Compliance with independence documentation requirements is also monitored annually by ANAO Internal Audit. The results of the quality assurance program are reported to the responsible Engagement Executive, EBOM and the Quality Committee.

3.31 Table 3.4 provides the results from the monitoring of compliance with the ANAO independence documentation requirements. Documentation deficiencies include instances where the audit file does not demonstrate that there are no threats to independence or if there are threats identified how they have been mitigated. When detected these instances are considered and assessed to ensure that the documentation deficiencies do not constitute actual breaches of independence.

Table 3.4: Compliance with ANAO independence documentation requirements

3.32 In 2024–25 monitoring of independence requirements as part of the QA program and internal audit identified two instances where required individual audit team member declarations had not been completed. Overall, instances of non-compliance with independence documentation requirements in examined audit files remained low and consistent with the prior year.

3.33 The two identified instances of non-compliance occurred in the internal auditor’s review of compliance with ANAO independence documentation. Additionally, internal audit made observations related to:

• the timing of independence declaration completion by audit teams, identifying five instances where individual independence declarations were completed after commencing audit work; and
• two instances where independence declarations were not reviewed by the responsible Engagement Executive.

3.34 These instances, while non-compliant with ANAO policy, are not considered a pervasive issue, with root cause analysis indicating that the reason for the non-compliance was administrative oversights that did not impact audit quality. The ANAO has a strong focus on independence and ensuring that the audit file contains a complete record of auditor independence and will continue to strive for full compliance with completion of independence declarations.

Rotation of key audit personnel

3.35 The ANAO independence policies set key audit personnel rotation requirements to safeguard against the threat to independence that may arise from a long association with an auditee. All ANAO staff participating in audits must comply with independence requirements in respect of long association with the auditee.

3.36 In addition to cooling off period requirements, staff rotation requirements are additionally considered through a quality risk lens. More frequent rotation of key personnel, including rotation being required due to staff turnover, may impact quality through loss of audit portfolio knowledge and insights that are built over time.

3.37 Key audit personnel rotation was undertaken in 2024–25 in accordance with the ANAO’s independence policies. The ANAO’s rotation requirements are more demanding than the requirements of APES 110, and all extensions for Engagement Executives were compliant with APES 110.

• For financial statements audits, all Engagement Executives and Engagement Quality Reviewers qualifying for rotation were rotated, with one extension approved by the FSASG GED in line with the ANAO independence policies.
• Rotation requirements were introduced for performance statements audits key personnel in 2024–25. PSASG executives have not yet reached the five-year rotation threshold. As a result, no rotations were required or occurred in 2024–25.

Other services

3.38 Where the ANAO resources the performance of an audit, or part of an audit, through contracting a private sector firm, that firm is required by ANAO policy to request approval from the ANAO to provide other services to auditees.

3.39 In 2024–25 the ANAO approved 26 requests from private sector firms to provide other services to ANAO auditees. The proposed services included undertaking grant program audits and acquittals, advice on the application of climate related disclosures, provision of managed services, and general training on new AASB standards.

3.40 As identified in table 3.3, two firms were delivering other services to an auditee without seeking prior approval of the ANAO. In one instance, had approval to deliver the other services been sought, the ANAO would have declined the request.

Gifts and benefits monitoring

3.41 ANAO employees must report any offered gift or benefit (whether accepted or refused) in the gifts and benefits register. The data collected through the internal gifts and benefits register is reported to EBOM, and deidentified information is reported publicly on the ANAO website to promote transparency.

3.42 In 2024–25, 132 gifts or benefits were reported on the ANAO Gifts and Benefits Register. Of these 114 gifts were retained, 16 were declined, and two returned to sender. Seventy-seven per cent were declared within the required timeframe of 10 days, with a median of seven days and range of 122.

Audit mandate and selection

3.43 The Auditor-General publishes an Annual Audit Work Program (AAWP) in July each year which outlines the proposed audit activities to be undertaken in the financial year. From the 104⁵ potential topics included in the 2024–25 AAWP, 40 audits were commenced.

3.44 Analysis of audits tabled in the final quarter of a financial year can signal potential risks to audit quality. A key quality factor is ensuring there is sufficient time for Engagement Executives and audit managers to oversee audit work, where excessive audit team workload during this period may limit their ability to provide the focused attention necessary for maintaining audit quality. In 2024–25, 20 out of the 44 completed performance audits (45 per cent) were tabled in quarter four (2023–24: 28 out of 45 (62 per cent)). The decrease is attributable to the ANAO’s focus on smoothing timelines for audits across the year to maintain the high quality and reliability of audit work and ensure there are no compromises to the wellbeing and talent of our people.

3.45 The ANAO provided a draft of the 2025–26 AAWP to the Parliament for consultation through the Joint Committee of Public Accounts and Audit (JCPAA), consistent with the Auditor-General’s requirement in the Auditor-General Act 1997 to have regard to the audit priorities of the Parliament. The JCPAA did not identify any audit priority topics or identify new topics for the program, with the Committee supporting the proposed work program.

Engagement performance

Consultation

3.46 The ANAO Audit Manual includes policies requiring consultation on difficult or contentious matters. The Engagement Executive is responsible for ensuring the appropriate consultation is undertaken, including with the responsible GED, Engagement Quality Reviewers, PSG GED and the ANAO’s Qualifications and Technical Advisory Committee (QTAC) as appropriate.

3.47 The QTAC provides a forum for Engagement Executives to consult on difficult or contentious matters and, where necessary, resolve differences of opinion on audit related matters.

3.48 In 2024–25, QTAC was consulted on 26 matters. The number of matters consulted on in 2024–25 remains consistent with the prior year (26 matters in 2023–24). There were no notable changes in the nature of QTAC matters during 2024–25.

3.49 The number and impact of restatements for errors are generally considered a signal of possible areas of concern in the audit process. This indicator places restatements in context by focusing on their magnitude and overall impact on the financial statements. The restatements are assessed for materiality at the individual engagement level. The measure includes all financial statements audits, including non-mandated audits. Restatements that were below materiality or related to reclassifications or disclosures with no net impact on the financial result or position have not been included in the totals.

Table 3.5: Audit Quality Indicator – Material restatements resulting from a prior period error

Note a: The financial statements audit cycle for 30 June year end reports is 1 October to 30 September. Therefore the 2024–25 results in the table above record the number of restatements identified in 2023–24 financial statements audits which are finalised within the 2024–25 reporting period.

3.50 The number of restatements of financial statements resulting from prior period errors was not consistent with the benchmark. The largest restatement related to the valuation of non-financial assets. The auditee engaged a new independent expert to provide advice on the fair value of its assets. The valuation identified errors in previous assumptions regarding the useful lives of certain assets that had resulted in the understatement of departmental and administered asset values.

3.51 Identification of prior period errors can be a reflection of improved quality and highlights the critical role of the audit process in upholding the integrity and reliability of an entity’s financial information. To maintain confidence of the Parliament, the ANAO evaluates the root cause of identified material restatements to determine whether these are errors that should have been identified in the previous year audit and if so, whether there are risks to audit quality that need to be addressed.

3.52 In response to the significant increase in prior period errors identified in 2024–25, the ANAO conducted a root cause analysis to understand the underlying drivers of the errors, including an assessment of the nature of the errors. Some prior period errors were detected following improvements to audit processes including the standard use of a data analytics tool to assist in auditing appropriations note disclosures; and the sharing of insights and learnings through technical training that identified inconsistent application of accounting standards by auditees. The ANAO identified actions to respond to the drivers of the errors, including delivering targeted technical training on auditing leases, key management personnel remuneration, non-financial assets and revenue recognition and development of further work programs to improve consistency in audit approaches. The ANAO has also communicated with the Department of Finance on potential changes to guidance documents to support improvements in financial statement preparation.

Engagement quality review policies and monitoring of compliance

3.53 An Engagement Quality Reviewer (EQR) is required under ANAO Audit Manual policy to be appointed to certain audits, including high risk audits and audits of entities determined to be public interest entities (PIEs)⁶. The EQR provides an objective evaluation of the significant judgements made by the audit team and conclusions reached in formulating the audit report.

3.54 Reviews conducted as part of the ANAO Quality Assurance Program consider compliance with the EQR policy including assessments of whether an EQR was required to be appointed, if an appointed EQR met the eligibility criteria and if the documentation of that involvement throughout the audit was in accordance with the ANAO Audit Manual requirements.

3.55 In 2024–25:

• Ten financial statements engagements were rated as high risk and an EQR was appointed;
• Fourteen financial statements engagements were conducted over auditees assessed as PIEs, with three of these engagements also assessed as high-risk (including the Consolidated Financial Statements). EQRs were appointed to all engagements of PIEs, with the exception of one audit where Auditor-General approval was obtained to appoint a second reviewer rather than an EQR. This exception was made as the Auditor-General was the signing officer;
• Four performance statements audits were rated as high-risk audits and an EQR was appointed; and
• One performance audit tabled in 2024–25 was rated as a high-risk audit and an EQR was appointed.

Resources

Human resources

Qualified personnel

3.56 The ANAO’s human resources policies and procedures support the selection of employees who have the necessary integrity, capability and competence to perform the work required.

3.57 The ANAO employed 471 ongoing staff as at 30 June 2025. ANAO staff come from diverse disciplines, including commerce, accounting, finance, economics, public policy, law, science, social sciences, and information technology.

3.58 The degree and nature of the changes in an audit team from year to year are an input in determining the readiness and ability of the team to perform a high-quality audit. Some level of attrition is expected, however a comparatively high rate of turnover or frequent auditor transfers within the office may adversely affect audit quality. The benefit of retaining an audit team’s experience with a particular auditee needs to be carefully balanced with the benefit of adding new auditors who may provide a fresh look at audit issues.

Table 3.6: Audit Quality Indicator – Turnover of audit personnel

Note: Movement between business areas within the ANAO is not counted as turnover in this table; only departures of on-going staff leaving the ANAO are reported.

Note a: This is an ANAO wide benchmark for on-going staff.

3.59 In 2024–25, the ANAO-wide turnover rate was consistent with the benchmark. Across FSASG, PASG, and SADA, staff departures decreased from prior year, while departures for PSASG increased. The results for FSASG and SADA are now consistent with the benchmark, whilst PASG and PSASG are not consistent with the benchmark. Attrition in the profession, whether in public or private sector auditing, is typically high. Excessive turnover can impact the ANAO’s ability to deliver timely, accurate and effective audits through loss of critical experience and knowledge, disruption in operations and impact on our culture.

3.60 Considering prior year attrition rates, attracting and retaining high-performing staff was a key focus in 2024–25. This included improvements in recruitment processes, enhancements to the graduate development and intern programs, and ensuring the wellbeing of our people. Additionally, the ANAO has placed emphasis on building capability through investments in technical capability development, strengthening leadership and management skills, and targeted learning to enable professional growth. This strategy has resulted in lower turnover, with the ANAO attrition rate falling in 2024–25 to 14.8 percent (2023–24: 22.3 percent), reflected in the results at Table 3.6.

3.61 Quality Committee monitors resourcing matters that impact on audit quality, including turnover, with a focus on understanding opportunities and barriers to developing and sustaining a highly skilled workforce. The lower rates of turnover in 2024–25 indicate a stabilisation in the ANAO resource profile, and coupled with the increased learning and development investment, particularly in FSASG, reduces the potential adverse effect of knowledge loss on audit quality.

Performance and career development

3.62 The ANAO recognises that its reputation relies on high performing individuals. It is important that our people are trusted for their expertise, are effective at engaging others, and contribute to maintaining a supportive and productive workplace. The ANAO’s Performance and Career Development Policy and Procedures have been designed to facilitate high performance across the ANAO, which in turn supports the ANAO to achieve its business and quality objectives and support high quality audit delivery.

3.63 The ANAO performance assessment cycle is from 1 November to 31 October. For the performance cycle ending 31 October 2024, 99 per cent of ANAO staff were rated as meeting expectations or higher (31 October 2023: 99 per cent).

Learning and development

3.64 As a learning organisation with a focus on audit quality, the ANAO supports staff with continuous learning and development. Learning and development opportunities include mandatory e-learning, mandatory attendance at technical updates and contractor webinars, external training opportunities and on-the-job training, mentoring and coaching.

Table 3.7: Audit Quality Indicator – Training hours per audit professional

Note: The ANAO minimum training hours requirements is set at 20 hours in the ANAO audit manual policy. The benchmark of 90 hours (an increase from 80 hours in 2023–24) is from the results of comparable ACAG audit offices. A rounded average of financial, performance statements and performance auditor training hours has been used to determine one ANAO-wide benchmark for average training hours per audit professional.

3.65 The training hours per audit professional for all audit groups is above the benchmark for 2024–25. The total training hours reported for financial statements and performance statements staff has increased compared to the prior year, however training hours reported for performance audit staff has decreased slightly relative to the prior year.

3.66 The increase in this measure for FSASG and PSASG is attributable to the strong progress in 2024–25 in building capability through investment in technical development, strengthening leadership and management skills, and delivering targeted learning to support professional growth. The refreshed learning and development program ensured all staff developed and maintained essential technical and non-technical skills required to deliver quality audit outcomes. This included a focus on ensuring all new staff had undertaken the required fundamental audit training to deliver to expected ANAO standards. The enhanced program and increase in training hours in 2024–25 were responsive to emerging training needs, including in response to QA reviews and recent recruitment, to support audit quality.

3.67 The slight decrease in performance audit training hours is attributable to a reduction in the number of graduates in PASG in 2024–25. Typically, specific training is required for new performance auditors given the absence of formal qualifications in the auditing profession for this type of auditing. The lower number of graduates, and stabilisation of PASG resourcing resulted in a decrease in the number of internal training (both technical and non-technical) and mentoring/ coaching hours required.

3.68 The benchmark for professional development for 2024–25 of 90 hours is derived from the average training hours of comparable ACAG audit offices. The training hours benchmark will increase from 90 hours to 100 hours of professional development per audit professional as outlined within the Quality Management Framework and Plan 2025–26.

ANAO induction and Mandatory eLearning modules

3.69 Completion of mandatory training is essential to maintaining integrity and public trust at the ANAO. As part of a pro-integrity culture, mandatory training reinforces the ANAO’s commitment to high ethical standards, accountability and transparency.

3.70 On commencement at the ANAO, all staff must complete the ANAO Induction Learning Pathway which includes mandatory eLearning courses, and the ANAO Induction Workshop. This pathway equips new staff with the knowledge needed to work lawfully, ethically and safely at the ANAO. Attendance is monitored to confirm completion, and all staff must then complete the mandatory refresher training annually.

3.71 As at 30 June 2025, 94 per cent of new starters had completed mandatory new starter induction training, four per cent attended in July 2025, and one per cent were exempt from attending. An overview of mandatory training completed is provided below.

Table 3.8: Overview of mandatory training

3.72 Due to varying due dates based on staff commencement date, initial mandatory training completion date, and the date refresher training is completed, it is difficult to provide an accurate overall staff completion result at a single point in time. The ANAO has a comprehensive system in place to communicate mandatory training requirements, track completion, and address instances of non-compliance. Key support and monitoring activities include:

• reminders on commencement and ahead of refresher deadlines
• access to modules via the intranet and Learning Management System,
• performance management communications,
• biannual compliance surveys to confirm training is up to date,
• monthly reporting to and discussion at EBOM and with the GEDs on non-compliance; and
• individual follow up on non-compliance, where required.

Technical updates

3.73 Regular technical update training sessions are provided to audit staff. Technical updates cover new auditing and accounting standard requirements, financial reporting framework developments, and changes in audit policy and methodology. Quality considerations are incorporated throughout technical updates, including communication of QA program results, relevant audit quality findings and reminders where applicable.

3.74 In 2024–25, nine technical update sessions were held for FSASG staff, five for PASG staff, 10 for PSASG staff and eight for SADA staff.

Contractor webinar

3.75 In 2024–25, the ANAO again made available a webinar recording to staff of firms that conduct financial statements audits on behalf of the ANAO to communicate public sector specific audit considerations and lessons learnt from quality assurance reviews

On-the-job training, mentoring and coaching

3.76 The ANAO has focused on implementing mentoring and coaching for all staff including lateral hires, particularly at the audit manager level. In 2024–25, the ANAO refreshed and formalised the Learning and Development Strategy for audit personnel. This includes training responding to emerging needs, more effective and collaborative cross-business group training, increased attention on coaching and mentoring of individuals and small groups (including graduates and interns), and targeted technical training driven by learnings from quality assurance reviews.

3.77 From 2023–24, the ACAG Macro benchmarking survey amended the definition of training hours to incorporate on-the-job coaching and mentoring hours. The training hours captured in this AQI include all forms of learning and development, including internal and external training, the graduate development program, the ANAO Talent Management Program, and on-the-job coaching and mentoring hours.

3.78 Including on-the-job training, mentoring and coaching in the measure aims to provide a comprehensive measure of all training and development activities occurring within ANAO. Additionally, acknowledging mentoring and coaching as training hours affirms the value of continuous learning and development within the ANAO’s culture, enabling audit teams to build and enhance relevant capabilities.

3.79 The financial statements and performance statements personnel average training hours increased compared to the prior year, due in part to the inclusion of on-the-job development activities. Key activities include the FSASG and SADA Peer Review Program (PRP) that promotes the transfer of key on-the-job learning particularly within the Executive Level (EL) cohort and individual and small group coaching and mentoring, including graduates and interns. While inclusion of on-the-job learning into the training hours per professional in the AQI calculation saw a higher result in 2024–25, it is reflective of the ANAO’s response to potential audit quality risks, including to QA review results and recent recruitment, to ensure longer term audit quality.

Staff workloads

3.80 ANAO polices for the allocation of Engagement Executives and staff to audits ensure that engagement teams have the appropriate level of expertise and time to perform their role. Under these policies the workload and availability of Engagement Executives is monitored to ensure they have sufficient time to adequately discharge their responsibilities. The following audit quality indicator provides information about the time FSASG and PSASG Engagement Executives spend on in-house audits.

Table 3.9: Audit Quality Indicator – Staffing leverage

3.81 The engagement leader is the Engagement Executive who has direct responsibility for the conduct of an audit, and who is either the signing officer or who makes recommendations to the signing officer in respect of the audit opinion. Engagement leaders are responsible for oversight of the audit and the audit team, which will include less experienced staff. Sufficient time to oversee the work of the audit staff is critical to quality.

3.82 In 2024–25, the total ratio of engagement leader hours for FSASG and PSASG was consistent with the ANAO benchmark and remained consistent with the previous year. This indicates that engagement leaders are spending sufficient time overseeing audit work, supporting effective audit supervision, timely review of judgments, and overall audit quality. The ANAO benchmark is based on the ACAG benchmarking survey data, which currently does not capture data for PASG. The ANAO is exploring the inclusion of PASG results in future reporting to enhance comparability and transparency.

3.83 Table 3.9 sets out the percentage of time spent by the senior members of the audit team including Engagement Executives, Audit Managers and Engagement Quality Reviewers. Excessive workloads could prevent Engagement Executives and audit managers from giving adequate and focused attention to an audit engagement. This measure can provide perspective on the involvement of senior personnel in audits. The lower the amount of senior time, the greater the risk that senior staff will have insufficient time to supervise and review staff work and evaluate audit judgements. Inadequate levels of supervision raise the risk of less effective audit procedures and a reduction in audit quality.

Table 3.10: Audit Quality Indicator – Engagement Executive and manager audit workload

Note *: In line with the three-year rolling average, AQI benchmarks for 2024–25 decreased from the prior year, FSASG and PSASG decreased from 22 per cent to 21 per cent and PASG decreased from 40 per cent to 38 per cent.

3.84 The Engagement Executive and manager workload for financial statements, performance statements and performance audit staff has increased comparative to 2023–24 and is assessed as higher than the benchmark.

3.85 While PASG Engagement Executive and audit manager workload decreased compared to the prior year, the result remained above the benchmark due to more complex audits being conducted in 2024–25, including a new topic not previously covered in the emerging field of Artificial Intelligence.

Table 3.11: Audit Quality Indicator – Staff audit workload

Note a: Chargeable hours refers to the number of hours charged to audits.

3.86 In 2024–25, ANAO staff audit workload decreased for financial statements and performance statements audit staff and increased for performance audit staff compared to the prior year. All audit types are below the benchmark.

3.87 An excessive workload – for Engagement Executives, Audit Managers and audit staff- increases the risk that staff may have insufficient time to appropriately perform the necessary audit procedures and steps that deliver a quality audit. Staff may become less effective when working long hours. The requirement that audit team members have sufficient time to perform a quality audit is set out in the Australian Quality Management Standards, including ASQM 1. The objective of the ANAO resourcing model and policies is to ensure that staff have sufficient capacity to undertake a quality audit, and Engagement Executives and audit managers have sufficient time to not only undertake appropriate review and supervision, but also to coach and mentor staff to improve staff capability and development.

3.88 The increase in FSASG and PSASG training hours, including the increase in coaching and mentoring by experienced staff, impacts on the staff audit workload, as the time spent coaching and mentoring new starters is not captured in the audit time. FSASG closely monitor staff audit workload alongside training completion to ensure delivery of quality audit products and assure ongoing staff wellbeing. Conversely, stabilisation in PASG resourcing is noted, with more experienced audit teams available. The decrease in the number of new starters also resulted in a decrease in training performed by new starters and consequently impacted hours (increase) charged to audit.

Internal and external specialists and technical resources

3.89 PSG provides internal professional services such as technical accounting and audit support, and quality assurance services. Access to technical accounting and auditing resources enables audit teams to consult on complex matters identified during an audit. As set out in paragraphs 3.46 and 3.47, QTAC also provides a forum for consultation on complex matters, with PSG delivering secretariat services for QTAC.

3.90 Table 3.12 shows the ANAO expenditure on technical accounting and auditing resources, including PSG accounting and audit technical, methodology support and training expenditure.

Table 3.12: Audit Quality Indicator – Technical accounting and auditing resources

3.91 The expenditure on technical resources in 2023–24 has decreased from prior year and while slightly above the benchmark, is assessed as consistent with the benchmark. The ANAO has additional technical resources in comparison to other audit offices as it has a greater range of products, including the Major Projects Report, performance statements audit and standardised data analytics solutions which require methodology and quality assurance.

3.92 In addition to the resources captured in the AQI above, to further support the delivery of quality audits, the ANAO also uses external subject matter and technical experts where a specific need has been identified, including:

• the engagement of audit firms to conduct financial statements audits when specialist industry knowledge is not readily available in-house; and
• the engagement of auditor experts in both financial statements and performance audits as required.

Technological resources

3.93 The ANAO’s SADA group supports audit evidence-gathering and analysis through providing Information Technology (IT) and data specialists with audit capability for analysing the IT environment, IT general and application controls, system-generated reports, and data. SADA is responsible for the development of standardised data analytics solutions to provide a standard, data-driven approach to some of the common areas of financial statements audit testing to improve the efficiency of audit procedures, while enhancing audit quality.

3.94 In 2024–25, SADA:

• continued to deliver three existing standardised solutions for employee expenses, general ledger journals, appropriations;
• continued to deliver a data analytics solution for the use of centralised transactional data to support audit testing;
• undertook a feasibility analysis for solutions in other common audit testing areas; and
• continued to pilot a solution for data-driven IT general controls testing for SAP.

3.95 The standardised data analytics solutions have been designed to support teams in executing the procedures by providing standardised data requests and templates and identifying exceptions and risk areas for further investigation. This allows teams to spend more time focusing on judgements and conclusions rather than developing their own processes. The ANAO Quality Committee approves the development of standardised solutions. PSG approves that the standardised solutions align with the ANAO’s audit methodology.

Intellectual resources

3.96 ANAO auditors apply a robust methodology which includes the ANAO Audit Manual and standardised tools and templates to assist in the consistent application and documentation of audit procedures. Application of this methodology ensures compliance with the ANAO Auditing Standards and provides for consistent quality across audits.

3.97 The ANAO Audit Manual, methodology and supporting tools and templates are reviewed on an annual basis. The review process incorporates any improvements or amendments arising from changes in the ANAO auditing standards, responses to findings from quality monitoring processes and audit staff consultation.

3.98 In 2024–25, the ANAO continued to refine its methodology to ensure alignment to changed practices and the ANAO’s operative environment. This included:

• development of a sustainability assurance services implementation plan for Commonwealth entities required to prepare a sustainability report under the Corporations Act 2001, and collaboration with Australasian Council of Auditors-General peer audit offices to determine a suitable sustainability assurance methodology; and
• enhancements to the performance statements audit methodology related to risk assessments and test programs, focusing on auditing to risk and the development of templates and guidance to facilitate and document reliance on IT specialists.

Information and communication

Information systems

3.99 The ANAO uses a number of information systems which supports its system of quality management and the performance of engagements, including:

• TeamMate – the ANAO’s project management software, which is used to retain an electronic version of the audit file;
• E-Hive – the ANAO’s enterprise document management system;
• Saviom – the ANAO’s enterprise resource management and workforce planning system;
• Aurion Timekeeper – the ANAO’s time recording system;
• Learning Management System;
• SharePoint – the ANAO intranet;
• ANAO website;
• data analytics tools and e-discovery tools; and
• Microsoft applications such as Excel and Teams.

3.100 As the information systems owner, CMG is responsible for resolving issues affecting systems used to support the ANAO’s system of quality management.

3.101 Change across the ANAO is supported by a structured approach to strategic planning, governance, risk management and change management. Changes implemented in 2024–25 included:

• cyber security initiatives including the implementation of increased controls, the ANAO’s security position and cyber resilience; and
• The implementation of the ANAO Security Management Framework and uplift and renewal of associated protective security policies.

3.102 In 2024–25, the ANAO conducted an organisational trial of AI (Copilot) for non-audit purposes to assess its suitability for use within the ANAO. The trial was limited to CMG and PSG staff, with Copilot use in audit activities explicitly prohibited.

3.103 In response to developments in the AI landscape, the ANAO additionally updated relevant policies and procedures to address mandatory Commonwealth requirements, and is considering future developments, including:

• publishing the AI transparency statement;
• the implementation of the ANAO Artificial Intelligence Usage Policy; and
• expansion of the Copilot trial across the ANAO, including use of AI in audit procedures.

Communication within the ANAO

3.104 The ANAO encourages collaboration and information-sharing between staff in accordance with the Auditor-General Act and the Protective Security Policy Framework. ANAO audit manual policies and processes support collaboration between audit service groups.

3.105 New starter and induction training programs are designed to provide new starters with all necessary information relevant to their duties. For ANAO staff more generally, regular technical updates inform staff about any changes to aspects of the system of quality management, including changes to Audit Manual policies, methodology and templates (see paragraphs 3.73 and 3.74).

Communication with external parties

3.106 The ANAO communicates with external parties including auditees, service providers, Parliament, the Australasian Council of Auditors General⁷ and the International Organisation of Supreme Audit Institutions⁸.

3.107 The ANAO communicates with Financial Statements and Performance Statements preparers and Audit Committee Chairs by holding two forums for each of these groups annually.

3.108 ANAO representatives attend, as observers, audit committee meetings of Commonwealth entities and Commonwealth companies. Engagement Executives are also responsible for communicating with the accountable authority of an entity.

3.109 The ANAO provides all relevant ANAO policies and templates to private sector firms that are contracted to resource the performance of audits, or parts of audits, via the GovTeams community page. Additionally, annual webinars communicate changes to policies, templates and requirements (see paragraph 3.75) and regular notifications communicate the release of new information. For individual contract staff, onboarding processes include mandatory online modules specifically designed to set out expectations for contractors. Additionally, the ANAO Audit Manual makes clear that the requirements which apply to individual contractors are consistent with those which apply to ANAO staff.

Monitoring and remediation process

Internal and external quality assurance reviews

3.110 A key element of the ANAO Quality Management Framework is the monitoring of compliance with policies and procedures through internal and external QA reviews of the ANAO’s audits and other assurance engagements. The monitoring program is designed to provide the Auditor-General with assurance that engagements comply with the ANAO Auditing Standards, relevant regulatory and legal requirements, and ANAO policies; and that reports issued are appropriate in the circumstances. PSG is responsible for delivering the monitoring program, including the coordination of external reviews. PSG reports to EBOM, the Quality Committee and the ANAO Audit Committee on the results of each quality assurance review and other monitoring activities.

3.111 Monitoring activities conducted in 2024–25 were:

• annual quality assurance reviews of completed audits (seven financial statements audits, two performance audits and two performance statements audit reviewed); and
• real-time quality reviews of four in-progress financial statements audits and two in-progress performance statements audits; and
• an annual internal audit of compliance with selected requirements of the ANAO Audit Manual.

Internal quality assurance reviews

3.112 The ANAO selects audits and other engagements for QA review in accordance with the requirements of the ANAO Audit Manual to provide coverage of all responsible Engagement Executives at least once every three years.

3.113 The 2024–25 results in relation to quality assurance review coverage are provided in Table 3.13. The results reflect internal quality assurance reviews, including complete real-time reviews, and external reviews (where undertaken), but does not include focused real-time reviews and internal audit compliance reviews.

Table 3.13: Audit Quality Indicator – Quality assurance review coverage

3.114 In 2024–25 the coverage of Engagement Executives for contracted firms for financial statements audits were in line with or exceeded the policy requirements which form the basis of the ANAO’s AQI benchmark. The coverage for in-house financial statements audits and performance audits was not consistent with the benchmark due to completing a higher number of quality assurance activities and exceeding the benchmark in the prior year.

3.115 From 2025–26 the Quality assurance review coverage - percentage of Engagement Executives AQI will no longer be reported against. The benchmark of Engagement Executives and firms selected for review annually was set in accordance with the ANAO Audit Manual. However, while the AQI measures whether the selection of QA reviews is even across years, it does not indicate policy compliance, as the ANAO QA review selections are risk based and can change from year to year. The ANAO will provide commentary on compliance with ANAO policy and how quality risks are targeted in 2025–26.

3.116 In 2023–24, to more effectively focus audit teams and EBOM on the quality risks indicated in the QA program, the ANAO ceased rating files based on individual findings in quality assurance reviews. To reflect the change in focus, the 2024–25 AQI was changed to assess the number of significant findings identified in the ANAO’s QA program. Table 3.14 sets out these results.

Table 3.14: Audit Quality Indicator – Internal quality review results

3.117 The number of significant findings identified in the ANAO’s Annual Inspection Program increased compared to 2023–24. Three significant findings were identified in two financial statements audit files related to audit work completed by two contracted firms. The significant findings related to deficiencies in testing over key management personnel remuneration, and revenue.

3.118 Remediation procedures were completed to address the significant findings and to determine that the audit conclusion was appropriate despite the procedural deficiencies identified. The remediation procedures included:

• preparing documentation of the procedures performed over key management personnel remuneration disclosures in line with the ANAO Minimum Audit Requirements;
• testing an extended number of revenue items to ensure sufficient and appropriate evidence was obtained over all material revenue streams; and
• the redesign and execution of the sampling approach to ensure that the sample was selected from the appropriate population.

3.119 Following review of the remediated audit procedures and results of the work performed, the ANAO is satisfied that all audit conclusions subject to monitoring were appropriate. As a result, in 2024–25, the ANAO met the target for performance measure 17⁹ as reported in the ANAO Annual Report.

Table 3.15: Summary of quality assurance review findings in the annual inspection program

Note a: The three real time reviews were complete reviews. No focused review was conducted. A complete review assesses the audit file as a whole, whereas a focused review is targeted at a particular type of procedure.

Note b: Of the four real time reviews, three were complete reviews and one was a focused review.

Note c: In the finalisation of the real-time review report 2023–24, it was agreed that ratings would no longer be assigned to findings identified in a real-time review. Findings are reported as ‘non-rated matters’.

Note d: Of the two real time reviews, one was a complete review, and one was a targeted review.

3.120 A high number of findings from quality reviews, particularly when these are repetitive, indicates issues with audit quality. Timely identification and appropriate remediation of issues is necessary to facilitate improvements in audit quality.

3.121 The completed financial statements audit inspection results saw an increase in the number of significant findings raised, with a decrease in moderate and minor findings compared to the previous year. The identified areas for improvement in financial statements audits related to the extent of audit procedures over material by nature balances (Key Management Personnel remuneration and appropriations), auditing accounting estimates and sampling and selection of items for testing. A root cause analysis was undertaken to address these areas of improvement, in which further actions were identified (refer paragraph 3.129 below).

3.122 The real-time financial statements audit inspection results saw a decrease in the overall number of matters identified (previously reported as rated findings). The key matters raised related to using the work of another ANAO audit team, audit accounting estimates, and sampling. Potential root causes were identified to address these areas of improvement, and proposed remedial actions were identified.

3.123 In November 2024, in parallel to the internal real-time quality assurance review, the ANAO conducted a special monitoring program focused on specific aspects of the financial statements audit methodology. This included consideration of using the work of another ANAO auditor to identify areas for improvement and ensure the work performed and documentation in audit files was consistent, effective and efficient. The special monitoring program identified that overall, the ANAO’s methodology is fit-for-purpose and aligns with the requirements of relevant ANAO auditing standards.

3.124 Inspection results for performance audits in 2024–25 identified no significant findings and a decrease in moderate findings. While there were a reduced number of audit files selected for review, and a number of low-risk compliance requirements were removed from the test program, the audit evidence, judgements and conclusions in files reviewed were evaluated as high quality.

3.125 The identified areas for improvement in performance audits related to observations regarding language consistency and the non-finalisation of audit files in TeamMate. Due to the low number of findings, no thematic findings were identified, and a root cause analysis was not conducted. Observations made during the conduct of the review led to follow-up actions including improvements to the ANAO Audit Manual – PASG Specific and the PASG TeamMate Library files.

3.126 The performance statements audit inspection results saw an increase in the overall moderate findings raised in reviewed performance statements audits compared to the prior year. There was a small decrease in the number of minor findings was noted. The file sample was increased to the prior year, and while no thematic or repetitive trends were identified, areas for improvement related to engagement between the PSASG and FSASG audit teams, including enhancing the effectiveness of Engagement Quality Reviewers, documentation of data testing and reliance on another auditor’s work.

3.127 The real-time performance statements audit inspection results saw a decrease in the overall number of matters identified (previously reported as rated findings). The key matters raised related to internally generated reports and relying on the work of financial statements audits. Proposed remedial actions were identified.

Root cause analysis

3.128 The conduct of root cause analysis on deficiencies to determine their nature, severity and effect on the system of quality management is a requirement of ASQM 1.¹⁰ The ANAO has been undertaking root cause analysis of deficiencies identified in in-house financial statements audit files for several years prior to the entry into force of ASQM 1.

3.129 In 2024–25, the ANAO continued to use root cause analysis of significant and thematic findings from the inspections of 2023–24 financial statements audit files to identify the root cause of findings and determine the most appropriate remedial actions. Follow-up actions arising from the analysis included development of a working paper that demonstrates work performed in accordance with Minimum Audit Requirements including sharing of resources across service groups, sharing lessons learned regarding deficiencies with signing officers and in contractor webinars and re-design of and implementation of audit procedures.

3.130 Findings arising from the quality assurance review of 2023–24 performance statements audits were also subject to root cause analysis. Follow-up actions arising from the analysis included development of training to support Engagement Quality Reviewers (EQR)s, and improvements to the ANAO Audit Manual – Shared Content with changes communicated during mandatory training.

External and internal audits and external quality assurance and peer reviews

3.131 The Act establishes the position of the Independent Auditor, who may conduct a performance audit of the ANAO at any time. The most recent Independent Auditor report, Performance Audit of Attraction, Development and Retention of Capability, was tabled in Parliament on 15 August 2022. The Independent Auditor found that the ANAO had effective strategies, plans and processes in place to identify, quantify, attract, develop and retain the necessary capability required, and that there were appropriate governance arrangements in place. The Independent Auditor also made four recommendations to the ANAO. The ANAO publishes the status of recommendations made in Independent Auditor reports on the ANAO website.

3.132 The ANAO values reviews that provide external scrutiny and recognises the important role that openness to evaluation plays in building a culture focused on quality, learning and continuous improvement. In addition to the Independent Auditor, the ANAO has engaged with ASIC to deliver an annual review of a sample of ANAO financial statements audits, and in collaboration with the Office of the Auditor-General New Zealand (OAG-NZ) a biennial peer review of a sample of completed performance audits.

3.133 In 2024–25, due to potential conflicts of interest and resourcing constraints, the ANAO executive agreed to pause ASIC’s external annual review of the ANAO’s financial statements audit files review. The OAG NZ last completed a peer review in 2023–2024, and no review was scheduled for 2024–25. Previous reports from the ASIC annual review and peer review program are published on the ANAO website.

3.134 In 2024–25 the ANAO’s internal auditor conducted a review on compliance with selected ANAO Audit Manual policies, including:

• completion and evaluation of independence declarations;
• sign-off of planning documentation prior to interim work;
• use of risk assessment and test program templates;
• sign-off of planning meeting minutes and discussion of fraud risks; and
• agreement of scope of work undertaken with other ANAO audit teams.

3.135 Two low risk recommendations were made regarding completion of independence declarations at the engagement level, and sign-off of planning documentation prior to the interim audit phase. Additional audit observations were made relating to standardisation of independence templates and review procedures, formalisation of independence requirements for Practice Management teams providing administrative audit support, and clarifications on the roles and responsibilities of the SADA executive in audit review and sign off processes.

Remediation

3.136 The results of internal and external quality assurance reviews, root cause analysis, external and peer reviews, and relevant internal and external audits are reported to EBOM. The reports include the recommended follow-up actions to address any identified findings, recommendations or observations. The follow-up actions are assigned to responsible officers with timeframes for completion.

3.137 The ANAO Quality Committee is responsible for monitoring the ANAO’s progress in addressing the findings and recommendations arising from external or internal quality assurance reviews, including assessing the prioritisation of active follow-up actions, and reports on this to EBOM. Table 3.16 details the status of findings arising from internal and external reviews.

Table 3.16: Summary of recommendations from quality assurance reviews in the annual inspection program

Note a: To maintain accurate records and changes in responsibilities, one ANAO item has shifted to PASG.

3.138 The ANAO Audit Committee reviews the outcomes of internal and external quality assurance reviews. The Audit Committee also monitors the progress of ANAO action items to address recommendations from external reviews and internal audits.

3.139 In 2024–25, the Audit Committee reviewed the 2023–24 Audit Quality Report, eight internal quality assurance review reports (including root cause analysis), the ASIC review report, and internal audit reports.

3.140 Findings from monitoring processes are communicated to ANAO audit staff and contract firms, through technical updates (see paragraph 3.73) and the annual contractor webinar (see paragraphs 3.75 and 3.109), to allow all staff to implement lessons learnt and to foster continuous improvement.

Complaints and allegations

3.141 The ANAO Audit Manual sets policies and processes for the formal management of any complaints or allegations that the work performed by the ANAO does not comply with applicable standards, requirements, systems of quality management or independence policies.

3.142 During 2024–25, the ANAO received three complaints or allegations, including:

• one matter raised by an external stakeholder related to the content of a report;
• one matter related to an ANAO staff members’ conduct in undertaking work and supervising staff; and
• one integrity related matter.

3.143 Investigations identified that while the matters may have breached internal ANAO HR policies, the matters did not breach ANAO auditing standards or independence policies, and as isolated incidents, had no significant bearing on the ANAO’s system of quality management.

4.1 The key deliverables for 2024–25 were set out in the Quality Management Framework and Plan 2024–25. The status of the deliverables are set out below.

Table 4.1: 2024–25 Quality Assurance Framework and Plan deliverables