Q1 |
How satisfied were you with your external auditor's focus, approach and risk assessment? |
Our Assessment
ACCs are satisfied with their auditor's focus, approach and risk assessment.
Risk assessment is fundamental to performing an audit focused on the right things and the foundation of a high quality audit.
Good risk assessment is based on a deep understanding of the business and its environment, its control environment and financial reporting framework.
Good risk assessment requires auditors, management and audit committees, to work together and challenge each other to ensure risk assessment is robust.
Survey Results
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Overall compared with the UK
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ASX 300 Responses
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What we heard: Audit Committee Chair commentary
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Understanding of the business
"Very considered approach after broad consultation across the business and with the board. Also brings a commercial lens to their approach."
"The audit focus, approach and risk assessment appear appropriate and demonstrates a good understanding of the business."
"Their approach was tailored to the important risk / judgement areas … "
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Frequent and open communication
"Very good communication between the audit firm and the audit committee and board to ensure that the focus, approach and risk assessment are appropriate for our organisation."
"Identifies any issues early."
"Very good communication of plan and risk focus from the outset."
"Strong open communication throughout the year … means I am very happy with the auditor focus, approach and risk assessment".
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Challenging management
"The Audit Committee has worked with both management and the auditor to ensure that each knows what the Committee expects the auditor to be challenging in their assessment of risk."
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Observations for improvement
One ACC commented that their auditor "appears to think they work for management".
"Focus is primarily financial risk. Could add value by looking beyond just financial risk".
Q2 |
How satisfied were you that your external auditor has adopted an appropriate approach to quality management for your engagement? |
Our Assessment
ACCs are satisfied with their auditor's approach to quality management.
Quality management is important and includes the internal processes that the auditor has in place to result in compliance with relevant legislation and high audit quality.
There are extensive legislative requirements in relation to an audit firm's quality management systems, as well as procedures required at the individual audit engagement level.
Specific procedures at the individual audit engagement level include supervision and review of the team by the Engagement Partner, and for listed entities the involvement of an Engagement Quality Review Partner.
Survey Results
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Overall compared with the UK
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ASX 300 Responses
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What we heard: Audit Committee Chair commentary
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Quality management processes
"… it is clear that there is a level of internal quality review by the firm."
"Very good and transparent QA process within the audit firm."
"Auditor appears to be careful about following requirements of the auditing standards."
"Expressed in serious tones but detail really behind the scenes."
"I felt the auditor made good use of the broader skills and technology within its firm to enhance the overall audit for us."
"I don't see their audit papers but from discussions on their approach, the conversations with key individuals, the breadth of the business audited and the depth with which they execute their engagement, I'm comfortable."
"I see a significant advantage in having the same manager and partner on the assignment for consecutive years. It gives them much stronger understanding of the company's operations."
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Role of the Engagement Quality Review Partner
A few ACCs highlighted the Engagement Quality Review Partner (EQRP) and their importance on quality management:
"Quality control partner appointed who was highly experienced."
Q3 |
How satisfied were you with the way in which your external auditor demonstrated that they had adopted an appropriate mind-set and culture, and acted with appropriate professional scepticism? |
Our Assessment
ACCs are satisfied with the professional scepticism demonstrated by their auditor.
Professional scepticism is an attitude that includes a questioning mind and being alert to possible misstatements.
Auditors are explicitly required by the Auditing Standards to use professional scepticism throughout the performance of the audit. It underpins audit quality.
Auditors should ensure they demonstrate their professional scepticism, as this gives audit committees confidence in the robustness of the audit. Ways auditors can demonstrate this include communicating to audit committees how they have challenged risk assessment, key assumptions in estimates, accounting policies used, and considered alternatives etc.
Auditors can also demonstrate their professional scepticism when reporting key audit matters in the auditor's report.
Survey Results
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Overall compared with the UK
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ASX 300 Responses
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What we heard: Audit Committee Chair commentary
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Demonstrate professional scepticism
"Regularly presents evidence of challenge to the views of management."
"Good communication including when they have sought specialist advice."
"Demonstrated appropriate constructive challenge to management."
"We gave feedback to our auditor that the AC could not tell if the auditor had been sceptical or had considered / held alternate views. The auditor was encouraged to communicate these either verbally or in writing. The auditor has accepted this 'invitation' and has improved their communication to us."
"We have encouraged our auditor to communicate matters and the auditor has improved in this area."
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Observations for improvement
"…could have been more proactive in bringing issues from its global practice to the attention of the Audit Committee".
"Enough scepticism yes, but a higher degree of scepticism would be better. That is true for audit committee members also."
Q4 |
To what degree did the external auditor exhibit independence and objectivity? |
Our Assessment
This was the highest rated question by the ACCs. Independence and objectivity was identified as one of the most important features of a quality audit by ACCs.
Objectivity and independence of the auditor underpins the integrity of the independent auditor's report, and the confidence it provides to the market.
The Auditing Standards, ethical requirements and the Corporations Act 2001 have strict rules to protect auditor's independence, including the prohibition of some types of other services to audit clients. Audit committees have a responsibility to oversee their auditor's independence.
Survey Results
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Overall compared with the UK
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ASX 300 Responses
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What we heard: Audit Committee Chair commentary
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Independence and objectivity in mind set
"Not afraid to raise areas where they had a different perspective."
"Clearly showed independence in bringing any issues."
"A two partner model enables greater objectivity and breadth of challenge."
"Independence and objectivity is addressed by both the auditor and the company and I have no concerns…"
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Non-audit services
"High level of focus on non-audit services, with the auditor checking in with me that I was aware of and had approved use of the firm for non-audit services."
"Companies often prefer the auditor to undertake some assignments because of their knowledge of the company. Independence has and always will be a grey area … auditing your own work is crystal clear. Others such as supply chain reviews, strategic planning or leadership coaching are not always so clear. There is also the question of public perception … "
"We have separated and outsourced non-audit accounting services to other firms."
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Observations for improvement
"Too close to management"
"I would encourage external audit firms to look for areas of non-audit services which in turn assist with audit quality – for example IT assurance or risk work, rather than consulting which may challenge independence."
Q5 |
How satisfied were you with the communication / interaction between the external auditor and the Audit Committee? |
Our Assessment
ACCs are satisfied with the communication / interactions with their auditor.
Audit committees play an important role in the oversight of the audit. To do this communication between the auditor and the audit committee is integral.
ACCs want proactive communication of issues as they emerge. They also want strong written and verbal communication in relation to these issues.
Whilst many ACCs said the communication was good, some said they want more. Some ACCs encouraged their auditor to meet more frequently, including out of reporting season.
Some ACCs referred to the value provided by the one-on-one meetings with their auditor.
Survey Results
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Overall compared with the UK
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ASX 300 Responses
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What we heard: Audit Committee Chair commentary
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Clear, high quality communication
"Yes, always found communication to be clear and communicates the auditor's view.
"Proactive about speaking out of cycle of meetings for any emerging issues."
"The auditor provides views on management's estimates and directionally how it compares to the previous period. Both written and oral communication is strong."
"Extremely high quality formal and informal reporting."
"As ACC I have a role to play in ensuring that the communication / integration is of high-quality."
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Private sessions with the auditor and ACC
"Always prior to AC meetings I have a discussion with the auditors."
"As Chairman of the audit committee, I always have a separate and independent dialogue with the auditors before each meeting and on every occasion that the need arises. Further the audit committee always has a closed session with the external auditors in the absence of management."
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Areas to focus on
"Communications are somewhat stifled by the requirements of what must be communicated."
"My auditor does not provide individual assessments on how conservative or optimistic each of management's material judgements are."
"Does not seek to meet with the ACC prior to audit committee."
Q6 |
How satisfied were you with the extent to which the external auditor demonstrated innovation in their audit approach and methodology used? |
Our Assessment
This question received the lowest rating from ACCs which indicates that while satisfied, innovation in the audit is an area where ACCs believe improvement can be made.
Some ACCs said the use of innovation, in particular technology is good, however many commented that whilst it was discussed, and was increasingly being used, they would like to see more.
A common theme was the importance of technology to assist with the effectiveness of the audit, for example providing business intelligence, new insights, streamlining work and identifying trends and outliers.
Survey Results
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Overall compared with the UK
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ASX 300 Responses
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What we heard: Audit Committee Chair commentary
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Use of technology is good
"Data analytics is used well and increasingly."
"Very high levels of innovation, especially in data analytics and how technology could not only help the audit but help management and the board."
"Use of contemporary technology excellent. Utilisation of specialist disciplines within firm also very good."
"There is a good balance of using data analytics tools in particular without compromising the integrity of the audit process."
"Auditor using data analytics increasingly across our data. This has helped identify potential issues and enable timely focus. In other boards (for non-ASX 200) I have seen the auditors also do this and intelligently applied it helps audit efficiency (and fees) and has also led to management considering how to better use such analytics themselves."
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They want to see more innovation
"Greater use of data analytics for business intelligence and future proofing."
"Accountants should use data analytics extensively. They are coming into this century gradually but we train bookkeepers these days rather than accountants."
"This area needs more focus – data analytics is used, but there is potentially a higher level of innovation available. I would like to see global best practice brought to the table."
"Auditors are constrained by safety/PI … There is little reward for innovation but a high risk if you get it wrong."