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March 31, 2010

Lack of audit evidence concerns Oz watchdog

Nearly 20% of audit engagements
carried out by large Australian firms did not contain sufficient
appropriate evidence to support key audit conclusions, Australian
Securities Investment Commission (ASIC) inspections have found.

National firms, such as the Big
Four, carried out better-documented audits, with 91% of engagements
providing sufficient evidence. Only 71% of engagements carried out
by networks of firms provided enough evidence to satisfy
inspectors.

The regulator and audit watchdog,
ASIC, inspected 88 audits and seven review engagements carried out
by 19 firms between 1 January 2008 and 30 June 2009.

Problems relating to documentation
and evidence were the major concern, being picked up in a quarter
of engagements. Audit areas that required improvement were
documentation (identified in 17% of engagements), risk assessment
and response (13%) and engagement quality control (11%).

ASIC said Australian audit quality
compared favourably internationally.

The watchdog also noted that inspections identified a number of
cases requiring improvements in areas related to the global
financial crisis, such as the appropriate use of experts in testing
asset valuations.

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