1.1 ASSURANCE ENVIRONMENT International auditing standard setting bodies (pg. 6 – 7) Australian • independent statutory agency unde
Introduction (pg. 4 – 5) Body Description Auditing and ASIC Act.
Assurance services are independent professional services International • Global organisation for accountancy Assurance • AUASB’s mandate requires it to con
that aim to improve the quality, relevance and reliability of Federation of profession comprising of more than Standards Board revisions and improvements to the
Accountants 175 member associations (including (AUASB) pronouncements initiated by the IA
information necessary for decision making.
(pg. 6) CPA Australia). (pg. 9)
An audit is a specific type of assurance engagement that
• It serves the public interest by The Companies • Statutory body initially established
focuses on historical financial information. Auditors Companies Auditors and Liquidator
enhancing the value, relevance and
That is, an audit is a subset of assurance engagements. Disciplinary Board Disciplinary Board (CALDB) in 1990.
reputation of the accountancy
Population of assurance services (pg. 5) profession. (CADB) (pg. 9) • Hears applications from ASIC to det
International • Forum of independent audit whether auditors or liquidators hav
Forum of regulatory authorities (including ASIC) breached the Corporations Act.
Independent that have oversight of the auditing The • operates as the main national secur
Audit Regulators profession. Australian exchange for equities, derivatives a
Securities interest securities.
(pg. 6) Exchange • facilitates capital raisings and tradin
International • Independent standard setting body (ASX) (pg. 9) listed companies, settlement and ca
Ethics Standards that serves the public interest by matching, and provides comprehen
Board for setting ethic standards for market data and information to a ra
Accountants professional accountants worldwide. users.
• Members are appointed by Professional • CPA Australia
(pg. 6)
Accounting • Chartered Accountants Australia Ne
Auditing and assurance are governed by two separates but International • Standard setting body under IFAC that
Bodies Zealand
closely related sets of standards: auditing standards that Auditing and sets international standards for
(pg. 9 – 10) • Institute of Public Accountants.
are for audits of historical fin info; assurance standards Assurance auditing, quality control, review, other
Standards assurance and related services. Equivalent Australian pronouncements (pg. 9)
relates to all other types of assurance engagements.
Board (pg. 7) • Develops and issues standards for
THE INTERNATIONALISATION OF AUDITING (pg. 5 – 7)
following assurance engagements:
Pronouncements issued by the IAASB (pg. 6 – 7) – FIRST EG 1. International Standards on Auditing
(ISAs) — to be applied to the audit of
historical financial information.
2. International Standards on Review The AUASB standard-setting process (simplified) (pg.
Engagements (ISREs) — review of
historical financial information.
3. International Standards on Assurance
Engagements (ISAEs) — assurance
engagements dealing with information
other than historical financial
information
REGULATION OF AUDITING IN AUSTRALIA (pg. 7 – 10)
Australian regulators and institutions (pg. 7 – 10)
Body Description
Financial • independent statutory agency that was
, Safeguard Example of safeguards client’s commitment to address the ISQM 1 establishes basic principles and essential
Environment questionable behaviours. procedures for firms to establish and maintain a system
/ Context Second Opinions Intimidation threat threatens objectivity when a quality management for assurance engagements
Profession, • Quality standards (pg. 15) client obtains a second opinion favourable to
legislation or • member education their position
ISQM 1 - Elements of Quality Management (pg. 18 – 2
regulation • establishment of a code of ethics Safeguards include the accountant who is asked
(pg. 14) • enactment of legislation such as the to provide the second opinion seeking client Elements Description
Corporations Act and the ASIC Act. permission to contact existing accountant, Risk Required to design and implement risk
Work • when the client’s management appoints the describing limitations surrounding the opinion Assessment assessment processes including establ
environment of auditor, people other than management with the client as well as providing the existing Process quality objectives, identifying and asse
the assurance ratifying or approving the appointment accountant with a copy of the second opinion (pg. 18 – 19) risks, and subsequently designing and
client (pg. 14) • client having competent employees to make implementing its response to address
managerial decisions Fees and Other Self-review threat threatens professional identified.
• policies and procedures emphasising the Types of competence and due care from quoting fees Governance and The structure of the firm and the assig
client’s commitment to fair financial Remuneration that are too low may make it difficult for the Leadership roles, responsibilities and authority is e
reporting (pg. 15) auditor to perform the assurance engagement (pg. 19) to allow the design, implementation a
• internal procedures ensuring objective in accordance with the applicable technical and operation of quality management.
choices in commissioning non-audit work professional standards. Relevant Ethical The assurance firm should develop, do
• strong corporate governance, including an Threats to objectivity from contingent fees Requirements and implement policies and procedure
effective audit committee. Safeguards include an appropriate reviewer (pg. 19 – 20) guide and reinforce ethical behaviour
review the work performed or obtaining a Acceptance and The acceptance and continuance decis
Work • systems and procedures to ensure
environment of written agreement with the client on the basis Continuance of should focus on independence conside
compliance with ethical standards (e.g. rules
the audit firm of remuneration prior to commencement of Client Relationships possible conflicts of interest and the a
on share ownership, relationship with clients,
work may address such self-interest risks and Specific provide requisite skills to conduct the
(pg. 14) client acceptance procedures)
Inducements — Inducements to influence their behaviour, Engagements
• partner rotation policies to enhance audit
Gifts and include: (pg 20)
partner independence
Hospitality • Gifts •Hospitality. • Entertainment. Engagement Refer to the quality objectives that sho
• peer review policies to provide other
(pg. 15 – 16) • Political or charitable donations. Performance address the performance of quality
partners with feedback.
• Appeals to friendship and loyalty. (pg. 20) engagements
In exercising judgement on the significance of threats and Direction, Supervision and Review
• Employment or other commercial
safeguards, accountants must consider what a reasonable (pg. 20 – 21)
opportunities.
and informed third party would likely conclude on whether The responsibility for the direction and
• Preferential treatment, rights or privileges
compliance with the fundamental principles has been Create self-interest, familiarity or intimidation supervision of the team members shou
compromised. threats to integrity, objectivity or professional with the partner and the work would a
Part 3 of Code - Professional Accountants in Public Practice behaviour to be reviewed by the partner
(pg. 14 – 18) Custody of Client Accountant should not take ‘custody of client Consultation (pg. 21)
Part 3 of the Code, ‘Professional accountants in public Assets (pg. 16) money or other assets unless permitted to do Refer to following requirements:
practice’, provides guidance on applying the conceptual so by law’ • Take responsibility for the engagem
Create a self-interest threat to the professional • Determine that members of the eng
framework from Part 1.
behaviour and objectivity team have undertaken appropriate
Relevant Description – also addressed in consultation during the audit engag
issues Module 2 (pg. 81 – 82) Responding to A professional accountant may encounter or be
Non-Compliance made aware of non-compliance or suspected • Determine that the nature and scop
Conflicts of Threatens objectivity and other fundamental conclusions resulting from, such
with Laws and non-compliance with laws and regulations.
Interest (pg. 14) principles’ Such threats may be created consultations
Regulations Independence (pg. 16 – 17) - Code stresses that
Introduction (pg. 4 – 5) Body Description Auditing and ASIC Act.
Assurance services are independent professional services International • Global organisation for accountancy Assurance • AUASB’s mandate requires it to con
that aim to improve the quality, relevance and reliability of Federation of profession comprising of more than Standards Board revisions and improvements to the
Accountants 175 member associations (including (AUASB) pronouncements initiated by the IA
information necessary for decision making.
(pg. 6) CPA Australia). (pg. 9)
An audit is a specific type of assurance engagement that
• It serves the public interest by The Companies • Statutory body initially established
focuses on historical financial information. Auditors Companies Auditors and Liquidator
enhancing the value, relevance and
That is, an audit is a subset of assurance engagements. Disciplinary Board Disciplinary Board (CALDB) in 1990.
reputation of the accountancy
Population of assurance services (pg. 5) profession. (CADB) (pg. 9) • Hears applications from ASIC to det
International • Forum of independent audit whether auditors or liquidators hav
Forum of regulatory authorities (including ASIC) breached the Corporations Act.
Independent that have oversight of the auditing The • operates as the main national secur
Audit Regulators profession. Australian exchange for equities, derivatives a
Securities interest securities.
(pg. 6) Exchange • facilitates capital raisings and tradin
International • Independent standard setting body (ASX) (pg. 9) listed companies, settlement and ca
Ethics Standards that serves the public interest by matching, and provides comprehen
Board for setting ethic standards for market data and information to a ra
Accountants professional accountants worldwide. users.
• Members are appointed by Professional • CPA Australia
(pg. 6)
Accounting • Chartered Accountants Australia Ne
Auditing and assurance are governed by two separates but International • Standard setting body under IFAC that
Bodies Zealand
closely related sets of standards: auditing standards that Auditing and sets international standards for
(pg. 9 – 10) • Institute of Public Accountants.
are for audits of historical fin info; assurance standards Assurance auditing, quality control, review, other
Standards assurance and related services. Equivalent Australian pronouncements (pg. 9)
relates to all other types of assurance engagements.
Board (pg. 7) • Develops and issues standards for
THE INTERNATIONALISATION OF AUDITING (pg. 5 – 7)
following assurance engagements:
Pronouncements issued by the IAASB (pg. 6 – 7) – FIRST EG 1. International Standards on Auditing
(ISAs) — to be applied to the audit of
historical financial information.
2. International Standards on Review The AUASB standard-setting process (simplified) (pg.
Engagements (ISREs) — review of
historical financial information.
3. International Standards on Assurance
Engagements (ISAEs) — assurance
engagements dealing with information
other than historical financial
information
REGULATION OF AUDITING IN AUSTRALIA (pg. 7 – 10)
Australian regulators and institutions (pg. 7 – 10)
Body Description
Financial • independent statutory agency that was
, Safeguard Example of safeguards client’s commitment to address the ISQM 1 establishes basic principles and essential
Environment questionable behaviours. procedures for firms to establish and maintain a system
/ Context Second Opinions Intimidation threat threatens objectivity when a quality management for assurance engagements
Profession, • Quality standards (pg. 15) client obtains a second opinion favourable to
legislation or • member education their position
ISQM 1 - Elements of Quality Management (pg. 18 – 2
regulation • establishment of a code of ethics Safeguards include the accountant who is asked
(pg. 14) • enactment of legislation such as the to provide the second opinion seeking client Elements Description
Corporations Act and the ASIC Act. permission to contact existing accountant, Risk Required to design and implement risk
Work • when the client’s management appoints the describing limitations surrounding the opinion Assessment assessment processes including establ
environment of auditor, people other than management with the client as well as providing the existing Process quality objectives, identifying and asse
the assurance ratifying or approving the appointment accountant with a copy of the second opinion (pg. 18 – 19) risks, and subsequently designing and
client (pg. 14) • client having competent employees to make implementing its response to address
managerial decisions Fees and Other Self-review threat threatens professional identified.
• policies and procedures emphasising the Types of competence and due care from quoting fees Governance and The structure of the firm and the assig
client’s commitment to fair financial Remuneration that are too low may make it difficult for the Leadership roles, responsibilities and authority is e
reporting (pg. 15) auditor to perform the assurance engagement (pg. 19) to allow the design, implementation a
• internal procedures ensuring objective in accordance with the applicable technical and operation of quality management.
choices in commissioning non-audit work professional standards. Relevant Ethical The assurance firm should develop, do
• strong corporate governance, including an Threats to objectivity from contingent fees Requirements and implement policies and procedure
effective audit committee. Safeguards include an appropriate reviewer (pg. 19 – 20) guide and reinforce ethical behaviour
review the work performed or obtaining a Acceptance and The acceptance and continuance decis
Work • systems and procedures to ensure
environment of written agreement with the client on the basis Continuance of should focus on independence conside
compliance with ethical standards (e.g. rules
the audit firm of remuneration prior to commencement of Client Relationships possible conflicts of interest and the a
on share ownership, relationship with clients,
work may address such self-interest risks and Specific provide requisite skills to conduct the
(pg. 14) client acceptance procedures)
Inducements — Inducements to influence their behaviour, Engagements
• partner rotation policies to enhance audit
Gifts and include: (pg 20)
partner independence
Hospitality • Gifts •Hospitality. • Entertainment. Engagement Refer to the quality objectives that sho
• peer review policies to provide other
(pg. 15 – 16) • Political or charitable donations. Performance address the performance of quality
partners with feedback.
• Appeals to friendship and loyalty. (pg. 20) engagements
In exercising judgement on the significance of threats and Direction, Supervision and Review
• Employment or other commercial
safeguards, accountants must consider what a reasonable (pg. 20 – 21)
opportunities.
and informed third party would likely conclude on whether The responsibility for the direction and
• Preferential treatment, rights or privileges
compliance with the fundamental principles has been Create self-interest, familiarity or intimidation supervision of the team members shou
compromised. threats to integrity, objectivity or professional with the partner and the work would a
Part 3 of Code - Professional Accountants in Public Practice behaviour to be reviewed by the partner
(pg. 14 – 18) Custody of Client Accountant should not take ‘custody of client Consultation (pg. 21)
Part 3 of the Code, ‘Professional accountants in public Assets (pg. 16) money or other assets unless permitted to do Refer to following requirements:
practice’, provides guidance on applying the conceptual so by law’ • Take responsibility for the engagem
Create a self-interest threat to the professional • Determine that members of the eng
framework from Part 1.
behaviour and objectivity team have undertaken appropriate
Relevant Description – also addressed in consultation during the audit engag
issues Module 2 (pg. 81 – 82) Responding to A professional accountant may encounter or be
Non-Compliance made aware of non-compliance or suspected • Determine that the nature and scop
Conflicts of Threatens objectivity and other fundamental conclusions resulting from, such
with Laws and non-compliance with laws and regulations.
Interest (pg. 14) principles’ Such threats may be created consultations
Regulations Independence (pg. 16 – 17) - Code stresses that
