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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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