ASIC has released information to help directors and audit committees develop robust standards as part of its commitment to improve audit quality.
Information Sheet 196 Audit quality: The role of directors and audit committees (INFO 196)explains:
why audit quality is important
the responsibilities of the auditor
the roles of directors and audit committees
the responsibilities of directors for auditor independence
who should manage the appointment of auditors
what matters should be considered in setting audit fees, and
what directors and audit committees can do to promote audit quality.
ASIC Commissioner John Price said: ‘The quality of the independent audit process supports confidence in the quality of financial reports.
‘Audit is important to companies, so they can raise capital and conduct business, and so that investors are confident and informed. The quality of audits is also important to a wider group of stakeholders, such as creditors.
‘Directors and audit committees play a crucial supporting role, along with regulators, standard setters, and the accounting bodies, to audit firms in ensuring audit quality.
‘ASIC will continue to work with directors and audit committees – and audit firms themselves – on how they can improve audit quality. We will monitor execution of any larger audit firm plans to improve audit quality, and their effectiveness.’
INFO 196 suggests directors and audit committees consider:
non-executive directors recommending auditor appointments and setting audit fees
assessing the commitment of the auditors to audit quality
reviewing the resources devoted to the audit, including the amount of partner time and the use of experts
accountability within the audit firm for quality
support by company management for the audit process
two-way communication with the auditor on concerns and risk areas
ensuring independence of the auditor, and
reviewing audit firm responses to findings from ASIC audit inspections