20th January 2014

1. This Charter

This Charter sets out the functions and responsibilities of the FRC Audit Quality Committee (Committee).

2. Objective

Having regard to:

  • strategic issues and structural trends within the audit profession from the perspective of public interest; and
  • the legal requirements of accessing and using information on audit quality issues;

the Financial Reporting Council established the FRC Audit Quality Committee (AQC) in order to assist the FRC performance of its statutory functions under the section 225 of the Australian Securities and Investments Commission Act 2001. The primary objective of the FRC Audit Quality Committee is to assist the FRC in its role as the peak body responsible for providing strategic advice on audit quality in Australia.

2. Functions

The functions of the Committee are to:

  • Make recommendations to the FRC on how to:
    • monitor and advise on strategic issues and structural trends within the audit profession; and
    • address non-case specific systemic audit quality issues.
  • Provide input to the FRC on:
    • broad international developments in audit quality and related professional standards;
    • the overall adequacy, scope and extent of audit practice, auditing standards and professional standards; and
    • the professional bodies' investigation and disciplinary procedures for Australian auditors.
  • Assist the FRC in providing support to Treasury in its Ministerial advice role, as required.
  • Prepare a calendar of activities to be undertaken at appropriate FRC meetings for each year, including reviews of regulatory and professional body inspection reports.
  • Monitor the teaching of ethics by professional accounting bodies and by educational institutions as they relate to audit quality.

3. Responsibilities

The Committee will:

  • Engage in periodic meetings with ASIC, the professional bodies (CPA Australia, ICAA, IPA), CALDB, APESB,APRA and the ASX;
  • Have regard to high-level ASIC information provided to the FRC regarding auditor compliance with audit quality requirements
  • Periodically assess and monitor the auditing systems and processes in place; and
  • Prepare an annual report for consideration by the FRC.

4. Membership of the Committee and Quorum

The Committee will comprise no more than seven members, such members to be FRC Members and up to two selected non-members (or such other number as may be approved by the FRC Chair) who have high level expertise and interest in financial reporting. The appointment of non-members, where payment of sitting fees is involved, is subject to approval by the responsible Treasury General Manager, and will require demonstration that the skills and/or experience of the member are essential to the work of the Committee and are additional to the resources available within the FRC. Payment of any expenses to non-members will be subject to the same approval requirement. Appointments to the Committees will be made by the FRC acting through its Chair and Deputy Chair.

  • FRC Members will be appointed to Committees for a 3 year term (or such shorter time as they remain in the office of FRC Member) and are eligible to be reappointed at the end of their term.
  • Non-members will be appointed to Committees for a 1 year term and are eligible to be reappointed.

The Chair of the Committee will be appointed by the Chair and Deputy Chair of the FRC. Members will advise the Committee of any potential or actual conflicts of interest at the commencement of any meeting. If a Member becomes aware outside a meeting of a potential or actual conflict that may give rise to questions being asked over a Member's role/involvement on the Committee, the Member will raise the matter with the Committee Chair and/or the FRC Chair. As appropriate, the Committee may invite other relevant persons to attend meetings and provide input as necessary, including as an observer only.

5. Meetings

The Committee will meet at least every quarter, and more frequently as required. A simple majority of Committee Members will constitute a quorum, and a simple majority of Members present at the meeting a majority for voting purposes. Minutes of the meetings of the Committee will be drafted and confirmed at the following meeting and will be made publically available thereafter.

6. Reporting

The key matters discussed at each Committee meeting are to be reported by the Committee Chair to the FRC at the next scheduled FRC meeting. The report will include all matters that are relevant to the function and responsibilities of the Committee.

7. Other matters

The Committee shall also perform any other activities consistent with this Charter that the Committee or the FRC deem appropriate.

8. Review

The Committee will review its Charter on a regular basis, at least once a year.