04 July 2012

IFAC: Response to ACRA consultation on accountants act

IFAC agrees with the view of ACRA that stakeholders should be entitled to expect a consistent standard of quality from an audit, regardless of whether the audit is required by law or by interested stakeholders. Such consistency is enabled through the use of high-quality, internationally-accepted standards for all audit engagements, including standards for quality control.

Whether all audits of financial statements and information (statutory audits, and those undertaken voluntarily; audits of public interest entities (PIEs) and non-PIEs) are subject to identical requirements with respect to matters such as auditor registration, qualifications and public oversight, is a matter for each national jurisdiction to determine. As noted previously, IFAC supports the notion of public oversight for auditors of PIEs. However, it is of the view that professional accountancy organisations (PAOs) can play a critical role in ensuring that the quality of audit and assurance services is maintained and enhanced.

IFAC supports the global adoption of high-quality international auditing and quality control standards for all audits. However, it recognises that each individual jurisdiction needs to consider and assess the merits of having other requirements, such as registration and inspection requirements, identical for all auditors and audit engagements, or whether—from an efficiency and effectiveness perspective, and on the basis of the differing impact that such requirements might have on accountancy practices of varying sizes—a system that imposes different requirements, based on suitably determined criteria, might be preferred. In such circumstances, a distinction may be made on the basis of suitably agreed criteria, for example, whether the auditors perform audits of PIEs. Where arrangements are shared between a public oversight body, and a PAO, it is incumbent on the PAO to ensure that it has suitable arrangements in place to execute an appropriately high standard of quality assurance.

In terms of regulatory coverage of public accountants providing review engagement services, IFAC notes that in applying the relevant International Standards on Review Engagements (ISREs), there is a requirement that practitioners undertake such engagements having applied the standard on quality control, ISQC1. Typically, reviews engagements are conducted by the auditor of an entity, and where that is the case, the public accountant would already be subject to requirements imposed by ACRA. In circumstances where a public accountant undertaking a review engagement is not also the auditor of an entity, IFAC is of the view that they should be subject to the same requirements as an auditor (taking into account whatever criteria is applied by ACRA when determining the requirements for auditors; that is, for example, whether distinctions are made between engagements for PIEs and non-PIEs.)

It is possible that there will be circumstances where jurisdictions may wish to impose different inspection requirements for auditors, depending on some form of suitably agreed criteria, such as whether or not the client entity is a PIE. However, even where different requirements are imposed, IFAC is of the view that, from a public interest perspective, matters such as competence, qualifications, and quality assurance and review, are relevant for all professional accountants providing audit and assurance services.

In establishing suitable regulatory arrangements, it is not clear that the reliance by third parties on the work being performed should be the sole determinant of whether public accountants, or the services they provide, are subject to regulation. The fact that services are being provided as a “public” or “practising” accountant—i.e. offering professional services to the public—should be sufficient to consider a matter important enough for there to be some form of regulation, whether by an oversight body, or a PAO in its own right, or on behalf of an oversight body.

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