An entity’s audit committee and directors have an important role in maintaining the quality of financial audit engagements. An awareness of this role and its function of reinforcing the confidence of investors and other stakeholders in their financial information is required for the appointment of a suitable audit committee capable of facilitating a successful assurance engagement. Corporate entities with complex financial reporting requirements often delegate management of the reporting process to an audit committee, staffed by members of the entity’s board of directors.
Appointing an informed, committed audit committee is an important way of demonstrating best practice to investors, regulators, and other key stakeholders. Growing scrutiny of the financial management practices that characterise Australian companies and corporate entities is part of doing business in the modern world. This focus on internal policies and systems should be embraced as a means of demonstrating the entity’s competitiveness and relative risk in relation to its operational environment.
Besides obvious motivations such as improved audit quality and more efficient financial reporting, certain types of listed entity are required to appoint an audit committee to comply with the ASX Listing Rules. Whether or not an audit committee is appointed, however, the entity’s directors always maintain responsibility for the content and presentation of financial statements. Directors may demonstrate their acceptance of this responsibility by exercising good judgement when appointing an audit committee to oversee financial audit engagements.
The highest standard of audit quality in all financial audit and assurance engagements represents an ongoing commitment to best practice by the team at Kingston & Knight Audit. Our role as independent, external auditors is to enhance the overall quality of client entities’ financial reports and their usefulness to investors, regulators, and the entity itself. Our ability to achieve the objective of a financial audit engagement is promoted when the entity’s directors and / or audit committee share our objective of delivering reasonable assurance to users of the financial statements.
The ASIC guide to audit quality and respective responsibilities encourages entities to consider the following factors known to influence audit quality during financial audit engagements:
- The culture and professional experience of the appointed auditor or audit firm, especially in relation to standards of audit quality, characterised by degrees of consultation and preservation of auditor independence.
- Expertise and experience of internal components of the financial audit engagement. This includes the appointment and development of an entity’s audit committee, the availability of specialists or consultants with expert industry knowledge, and an overall awareness and acceptance of the audit process by management.
- The level of insight held by the appointed auditor into the operations and circumstances of the entity, its business, and its unique risk of errors in financial reporting.
- The effectiveness of audit quality control and supervision procedures conducted by the appointed auditor during a financial audit engagement.
- Systems of auditor / audit firm accountability to engagement partners regarding audit quality. Examples of auditor accountability measures include internal quality reviews, supervision of financial audit engagements by senior members of the audit firm, and alteration of remuneration where audit quality review findings fall short of expected standards.
At Kingston & Knight Audit, we understand the bilateral direction of responsibility with regards to maintaining audit quality. Our auditors can assure engagement parties that we are aware of the factors most likely to influence audit quality, and we will work with our partners accordingly to address the influence of their unique circumstances on the quality of our financial audit services.
The audit process depends on the entity’s ability to document its financial information in accordance with an approved accounting framework, and to communicate relevant data in financial reports of sufficient quality.
Strict standards and regulatory oversight determine what reasonably constitutes appropriate audit process in financial audit engagements of varying scope. All audit and assurance engagements begin with consultation between the prospective auditor / audit firm and the entity’s audit committee or other relevant representation, with the result being an agreement to terms of the engagement. The following terms are to be accounted for prior to commencement; a timeframe, audit cost, preliminary agreement of the scope and nature of the audit, and formal recognition by the entity’s directors of their responsibility for the content and presentation of the financial statements under the relevant laws and regulations.
Beyond the commencement and planning phase of the audit process, the audit committee and / or directors of the engagement partner should remain actively engaged in the promotion of audit quality. Even the most experienced and technically adept financial auditors cannot deliver reasonable assurance without cooperation and relevant input from the engagement partner. If it is brought to the audit committee’s attention that a process or procedure is being conducted in a way that threatens the engagement’s audit quality, they should consult with the appointed auditor and the entity’s governance to resolve the matter.
Kingston & Knight Auditors Melbourne continue to demonstrate the promotion of and commitment to audit quality that is vital to the success of any financial audit engagement. Our audit transparency reports deal with audit quality and are subject to regular review by the firm’s management and the audit committees of engagement partners. This acts as a demonstration of the commitment our financial auditors Melbourne employ to deliver quality assurance to stakeholders, allowing them to make the decisions that count for your enterprise.
Learn more about our commitment to audit quality in financial audit engagements by getting in touch with Kingston & Knight Auditors Melbourne via your audit committee on 1800 283 471 or email firstname.lastname@example.org.