Firms of all sizes will benefit from closely reviewing ASIC's 2024 Audit Inspection Report, says Chartered Accountants ANZ Reporting and Assurance Leader Amir Ghandar FCA, as it's risk-based methodology delivers valuable insights for auditors on critical areas of concern.
"The report clearly emphasises that financial reporting and audit quality are a product of the whole financial reporting supply chain, and all of the component roles must be working effectively to delivery integrity for our businesses and capital markets," said Mr Ghandar.
"Naturally, the risk-based approach and small sample size enable the report to home in on the most challenging aspects of financial reporting and auditing.
"While the findings won't necessarily be representative of reporting and auditing in Australia as a whole, they are hugely valuable in terms of really digging into the most challenging areas."
Key areas include focusing on the balance in operating and financial reviews, impairment and asset valuation, Non-IFRS profit information and clearly for auditors to focus on the implementation of their audit quality management systems.
"It's helpful that ASIC has set out what they expect in terms of action from directors, preparers and auditors. In November, Chartered Accountants ANZ will host a session with ASIC and New Zealand's equivalent, the FMA, to delve deeper into these expectations," continued Mr Ghandar.
Notably, ASIC has foreshadowed its work on sustainability and climate reporting ahead of the new regime commencing next year. Accountants and auditors have a key role to play in this.
The report also comes in the wake of multiple reviews and inquiries into audit regulation, including a recent Treasury consultation, and the definitive parliamentary audit inquiry in 2019-2020.
"It was disappointing that the Government deemed 2020's audit inquiry findings as too old to merit a formal response."
The bipartisan inquiry report included several critical recommendations aimed at improving ASIC's oversight program, bolstering audit quality, independence and integrity in company financial reporting and related internal controls.
"As laid out in our recent 'Going Further' Roadmap, we continue to recommend the Government focus on providing the funding, resources and powers necessary for a strong, consistent audit regulatory environment.
"It is positive that ASIC is planning to step up some of its audit focused activities, following several very small years of around 15 files reviewed, but this does also point to the need for consistency.
"Relevantly, we support the 2020 inquiry's recommendations for a formal review of ASIC's audit inspection program including transparency and relative severity of identified audit deficiencies" concluded Mr Ghandar.
