Auditing Standards

Overview of Australian Auditing Standards

The AUASB sets auditing standards in line with international best practices. Australian auditing standards closely align with those issued by the International Auditing and Assurance Standards Board (IAASB) and undergo regular review.

Key Australian auditing standards include:

• ASA 100 Preamble to AUASB Standards – Outlines the scope, authority and application of the standards
• ASA 200 Overall Objectives of the Independent Auditor – Fundamental auditor responsibilities
• ASA 210 Agreeing the Terms of Audit Engagements – Audit scope and terms
• ASA 220 Quality Control for an Audit of a Financial Report – Firm quality requirements
• ASA 230 Audit Documentation – Audit file contents
• ASA 240 The Auditor's Responsibilities Relating to Fraud – Fraud risk assessment
• ASA 250 Consideration of Laws and Regulations – Compliance procedures
• ASA 260 Communication with Those Charged with Governance – Audit committee communications
• ASA 265 Communicating Deficiencies in Internal Control – Reporting control weaknesses
• ASA 300 Planning an Audit of a Financial Report – Audit planning and strategy
• ASA 315 Identifying and Assessing the Risks of Material Misstatement – Risk assessment process
• ASA 320 Materiality in Planning and Performing an Audit – Materiality judgments
• ASA 330 The Auditor's Responses to Assessed Risks – Detailed audit testing and evidence standards
• ASA 500 Audit Evidence – Requirements for supporting audit conclusions
• ASA 510 Initial Audit Engagements – Procedures for new audits
• ASA 520 Analytical Procedures – Guidance on use of analytical tests
• ASA 530 Audit Sampling – Sampling methodology
• ASA 540 Auditing Accounting Estimates and Related Disclosures – Review of judgments and estimates
• ASA 550 Related Parties – Related party identification and transaction testing
• ASA 560 Subsequent Events – Procedures to identify subsequent events
• ASA 570 Going Concern – Assessment of going concern basis
• ASA 580 Written Representations – Management representations
• ASA 700 Forming an Opinion and Reporting on a Financial Report – Audit report requirements
  

Application to Different Entity Types

Specific variations of the standards apply to audits of different entity types and jurisdictions, including:

• Public sector auditing standards – Tailored for federal, state and local government agencies
• Standards on assurance engagements – Applying to non-audit assurance reviews like ASAE 3500 on performance engagements
• Standards on review engagements – Guiding review of half-year or quarterly financial statements
• Standards on related services – Applicable for compilations and other special purpose financial information

Adherence to relevant industry-specific standards is also expected where applicable. For example, registered company auditors must comply with standards made under the Corporations Act 2001.

Mandatory Compliance

Compliance with auditing standards is legally required for all audits under the Corporations Act 2001. Auditors must lodge annual declarations with ASIC attesting to compliance. Specific Australian standards aligned to international standards are legally enforceable.

Professional accounting bodies in Australia reinforce compliance obligations. Members of CPA Australia and Chartered Accountants Australia and New Zealand are expected to follow relevant auditing standards and exposure drafts when performing audit work.

Driving Audit Quality

Adhering to auditing standards aims to achieve high quality, independent audits upholding public confidence in financial reporting. Key mechanisms within the standards for delivering quality include:

Independence – Mandating auditor independence, objectivity and ethics compliance.

Risk assessment – Requiring appropriate audit risk assessment procedures tailored to the entity.

Materiality – Guiding materiality judgments to focus on material misstatements.

Reporting – Expectations for clear, informative audit reporting to stakeholders.

Documentation – Specifying minimum audit file contents demonstrating evidence gathering and conclusions.

Planning – Emphasizing appropriate planning, supervision and review over the audit team and process.

Evidence – Determining adequate appropriate audit evidence gathered through testing and evaluation.

Judgment – Mandating exercising appropriate professional judgment and professional skepticism.

Quality control – Embedding ongoing quality monitoring procedures and review processes.

When properly applied, these mechanisms work together to achieve consistent, high quality delivery of audit assurance.

Evolution of Australian Auditing Standards

Australia’s adoption of international standards from 2004 represented a major shift to align with global best practices. Ongoing convergence work by the AUASB aims to continuously improve and remain synchronised with international benchmarks.

Recent enhancements to auditing standards include:

• Enhanced auditor reporting requirements effective from 2016 to provide more informative reports.
• Updated quality control standards effective from 2016 emphasizing firm governance.
• Clarified reporting requirements for other information in documents containing audited financial statements.
• Expanded requirements regarding accounting estimates and related disclosures.

Further changes are regularly in development by AUASB to maintain relevance of Australian auditing standards. Exposure drafts are released for public consultation before new or revised standards are officially issued.

Benefits for Stakeholders

Relevant, high quality auditing standards create shared value for multiple stakeholders:

Organisations: Support reliable independent assurance over financial reporting.

Investors: Enhance confidence in financial statement integrity and transparency.

Regulators: Reinforce compliance with legal reporting obligations.

Auditors: Provide clear professional responsibilities and obligations.

Audit committees: Assist effective oversight of external audits.

The general public: Uphold accuracy and accountability across public and private sector financial reporting.

Conclusion

Auditing standards underpin quality and confidence across financial statement auditing in Australia. Keeping standards current through continuous review and alignment to international benchmarks enables reinforcement of financial reporting integrity.

Mandatory compliance combined with professional enforcement ensures auditing standards remain the authoritative guidance source for Australian audit practitioners. Ongoing enhancement of standards continues to drive improvements in audit quality and value for businesses, regulators and the public.