The Financial Reporting Council (FRC) is the peak body responsible for overseeing the effectiveness of the financial reporting system in Australia to which audit quality is integral. Accordingly, the FRC has a legislative mandate to monitor the quality of audits carried out by Australian auditors.
Audit quality can be challenging to define, measure and quantify.
The FRC is engaging with users of financial reports to better understand their views on audit quality, and to help identify if any actions are required.
Audit Committee Chairs (ACCs) play an integral role in the oversight of financial reporting and the performance and quality of their external auditor. In recognition of this, the FRC - in conjunction with the AUASB - conducted a second survey of ACCs (following the first in 2018) which is designed to gather their perspectives on audit quality. The survey was undertaken in November 2020, thus permitting insights into ACCs perceptions of audit quality in a year significantly impacted by the COVID-19 pandemic.
This report details the results of this survey. It aims to assist audit committees and auditors as they work together with the goal of improving audit quality, and ultimately the integrity of financial reporting.
We thank the ACCs who completed this survey and for generously sharing their views and experiences.
Seventy ACCs completed this survey (ninety-one completed the survey in 2018), comprising listed entities, including those in the ASX300, not-for-profits (NFPs), public sector entities and superannuation funds. ACCs provided comments to share further insights into the factors they considered when assessing their auditor.
This enabled us to capture insights into why they rated audit quality as it is, best practice examples, as well as areas for improvement.
This is the second survey of this type that we have conducted in Australia, with the first undertaken in 2018. In order to achieve a direct comparison to perceptions of audit quality in prior years, we elected to replicate specific questions from the 2018 survey. In light of the current focus on audit quality, it is our intention to continue to conduct these surveys periodically as a means of continuing to track the views of ACCs.