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.”