Auditing standards in Australia are developed and administered by the Auditing and Assurance Standards Board (AAUSB). The AAUSB oversees the Australian Auditing Standards, the framework containing the standards and conduct which independent auditors are obliged to follow during financial audit engagements. The Australian Auditing Standards are designed to reflect the requirements of the Corporations Act 2001, as well as the International Standards on Auditing (ISAs) administered by the International Auditing and Assurance Standards Board (IAASB).
The Australian and international auditing standards both aim to set out a rigorous and comprehensive set of accepted practices and required procedures in relation to the audit of financial statements by an independent auditor. In general, the auditing standards set out the responsibilities of an independent auditor, with independent auditors such as Kingston & Knight Audit therefore being professionally accountable to these standards. These standards define audit engagements as those where the entity’s management and/or governance acknowledge their responsibility to engage an independent auditor for an audit of financial statements, and that engaging an auditor does not relinquish this responsibility.
The objective of the auditing standards is, broadly, to ensure that stakeholders may readily obtain reasonable assurance as to whether an entity’s financial statements offer a true and fair view of its financial position and are free of material misstatements. It is the auditor’s responsibility to test the assertions made in the financial statements for any material misstatements, whether they be due to simple error or fraudulent conduct, and to express an independent opinion on whether the prepared financial statements comply with the applicable accounting principles and reporting framework. At the conclusion of the financial audit engagement, the appointed auditor must communicate their findings and opinion in an auditor’s report that complies with the standards.
Overview of the Auditing Standards
The auditing standards are compiled as a comprehensive and detailed list of individual standards to be adhered to throughout the financial audit process. The standards set out the required conduct of the appointed auditor from beginning to end of the audit process, for example, agreement on the terms of an audit engagement right through to the form and content of an auditor’s report.
The standards begin with the respective responsibilities of parties to the financial audit, including the requirement for acknowledgement of the objectives and purpose of the audit, as well as the auditor’s responsibilities, by the parties. Quality control standards are also set out to ensure that the audit process remains capable of delivering reasonable assurance to users of the financial statements, as well as documentation which must be kept during the audit engagement. In short, the following are covered in the standards:
- Respective responsibilities – agreement upon the terms of the audit engagement, requirements for quality control and the keeping of documentation, communication requirements, and the consideration of relevant laws and regulations affecting the audit of financial statements.
- Audit planning – creating an initial plan for the financial audit, with scope determined by the identification and assessment of risks in relation to the auditor’s understanding of the client entity and its operating environment.
- Internal control testing – assessment of the entity’s internal control systems and identification of any areas that may contribute to the risk of material misstatements in the financial statements.
- Audit evidence – what constitutes reasonable and sufficient evidence that may be used when forming an opinion about the entity’s financial statements and means of testing information to obtain evidence.
- Using the work of other experts – standards governing use of work completed by internal auditors, auditor’s experts, and component auditors of group financial statements.
- Conclusion and report – how to form and opinion and document conclusions in an auditor’s report, including the communication of emphasis of matter, modified opinion, and other matter paragraphs in the auditor’s reports.
At Kingston & Knight Auditors Melbourne, our team of assurance professionals are willingly accountable to the applicable auditing standards and standards on assurance engagements. As independent professionals we strive for transparency in our work with the aim of providing reasonable assurance to your stakeholders and other users of the financial statements. By gaining an understanding of the auditing standards that affect financial audit engagements, you are better prepared to assist us as your appointed auditor in completing the process efficiently.
Our responsibilities to you, as the client entity under audit, are extensive and designed to protect the public interest. We remind clients that the auditing standards are what allow modern, developed financial markets to thrive, and encourage you to learn more about the audit and assurance process by exploring the other resources on this website. For more detailed information, you can contact Kingston & Knight Audit directly on 1800 283 471 or via email at firstname.lastname@example.org. Ask our team about the auditing standards or what your responsibilities will be during the financial audit process, as a mutual understanding of the respective responsibilities is key to a successful audit.