Auditing Standards in Australia the Term Paper

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(Nicoll, 2005)

IV. MIXED ECONOMY

The work of Nicoll (2005) relates that the economy of Australia is one that is mixed "with separate audit legislation for the public and private sectors." The Auditor-General audits both private and public entities although there is separate legislation relating to their operation and establishment. There are however, different requirements of public and private sector auditing in that due to the legislative requirements of the Auditor-General to:

1) Conduct performance of audits of particular kinds of government agencies and report findings to Government and Parliament; and 2) Report to Parliament on any matter. (Nicoll, 2005)

Internal controls that are required by auditors include:

1) a senior executive group, which meets on a regular basis;

2) an audit committee;

3) an effective internal audit function;

4) a current corporate plan, business risk assessment and management plan and fraud control plan;

5) Clearly specified systems of authorization, recording and procedures;

6) Sound organizational business practices;

7) Financial and accounting skills commensurate with responsibilities; and 8) a timely reporting regime. (Nicoll, 2005)

V. STANDARDS REFORM and INCREASING of AUDIT COSTS EXPLORED

It was believed that the revised Auditing Standards of Australia would increase both the costs and expense associated with audits although it was expected that the reforms would increase the quality of audits and public confidence in financial reporting. McCollum (2006) reports that eighty accounting, business and financial professionals and academics were interviewed by CPA Australia at a series of Auditing Standards briefings and findings show that seventy-percent of the respondents in the survey state that "the new standards will increase audit costs." (McCollum, 2006) Another seventy-five percent states that "they expect the amount of time needed to complete audits to increase." (McCollum, 2006) the reason for this is stated to be "the more defined audit process and need for greater documentation..." (McCollum, 2006)

Approximately two-thirds of respondents state that those who will benefit most from the revisions of the Auditing Standards are "regulators, auditors and directors.

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" (McCollum, 2006) it is related that the standards "establish a more legally defined role for the Australian Securities and Investment Commission (ASIC)" (McCollum, 2006) and participants state a belief that the revised standards will result in the creation of "more consistency between auditors as well as make the audit process more transparent. Nearly 80% of respondents say the updated standards will improve audit quality." (McCollum, 2006) Additionally respondents in the survey state that the II CLERP 9 reforms, which are related to auditing, would serve to enhance quality of auditing although it was not held by respondents that the initiatives would serve to increase public confidence in financial reporting.

SUMMARY & CONCLUSION

This study has examined and reviewed the Australian Auditing Standards in terms of the objectives of auditing, the auditor's opinion within the standard and has related how the Auditing Standard of Australia conforms with the International Standard on Auditing ISA 200 Objective and General Principles Governing an Audit of Financial Statements (2005) and as well has listed the separate divisions of the Auditing Standard as shown in the mapping of auditing standards in Australia in Figure 1 of this study. The work of Paul Nicoll has been reviewed which related that adoption of auditing standards in Australia and that this adoption was ensued for the enhancement of consistency in approaches and issues of auditing in both the public and private sectors. The economy is Australia is one that is mixed with both public and private sectors although the Auditing Standard is for the most part, the same in both sectors of Australia in terms of standards and requirements of auditing. This work has as well identified the internal controls that are expected by auditors to be present in the entities whether they are private or public sector entities. The Auditing Standard has undergone recent reform in 2006, which has been found to very likely drive up the costs and expenses associated with.....

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