Australian audit inspections have discovered much tighter quality control in firms that were inspected previously when compared to firms being examined for the first time.
The Australian Securities and Investment Commission (ASIC) released the latest results of its audit inspection programme from 1 July 2006 to 31 December 2007. This included inspections of 19 firms – nine of which were inspected for the first time, six that had been inspected once before and four were inspected for the third time.
ASIC chief accountant Lee White noted that most firms inspected more than once had committed resources and further enhanced quality control systems and processes to ensure compliance with the legislative requirements for auditor independence and audit quality.
The firms that had been inspected before had made improvements in relation to previous observations, including: the creation of quality control policies and procedures; employment of dedicated technical resources; employment of external experts to conduct monitoring activities; changes of auditor in relation to a small number of listed audit clients; and registration by partners on specified training courses. By contrast, some firms visited for the first time had not taken a proactive approach to planning and implementing effective policies, systems and processes to ensure compliance with the legislative requirements and professional and ethical standards.
The regulator suggested more action could have been taken as the legislative requirements have been in effect for three years, there have been two previous public reports on the results of the inspection programmes and Australian professional accounting bodies have run awareness raising campaigns on inspections.
White said the future focus of ASIC’s inspections will include firms who audit significant public interest entities and investigate how firms are complying with the legally enforceable auditing standards.
He added: “Specific areas of focus in the next inspection period will include technical consultations, using the work of experts, particularly in relation to fair value measurements, sectors that are at risk given the current market turbulence and using the work of other auditors.”