FMA releases Audit Quality Review Report

FMA releases Audit Quality Review Report

The Financial Markets Authority (FMA) says its latest Audit Quality Review Report confirms the majority of the profession is meeting minimum compliance standards. However, the findings in 2014 are similar to last year’s report, with significant room for improvement identified among the firms that were monitored.

The 2014 Audit Quality Review Report assessed the individual audit files and internal systems, policies and processes of 17 audit firms.

Elaine Campbell, FMA’s Director of Compliance, said the overall level of audit quality for the majority of audit firms was either good or acceptable, however improvement is still required.

“While some firms have started to invest time and resources into improving their audit quality processes since last year’s report, we recognise that these efforts are unlikely to be visible in this year’s report due to the auditing and financial reporting cycle. Thirty-three percent of the audit files we monitored do require significant improvements to ensure they meet minimum standards,” she said.

Ms Campbell said auditing firms play a significant role in ensuring investors have confidence in financial statements and supporting good governance processes within a business. She also encouraged directors and the audit committees on boards of issuers to engage with their auditor and ensure they were involved in the quality control of the auditing process.

The key areas for firms that need attention are:

• monitoring of audit quality
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• auditor independence
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• professional scepticism
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• going concern statements
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• use of management or audit experts
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• auditing of revenue
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• audit sampling
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• analytical procedures
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• level of audit evidence for audit opinion.
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The FMA is required to deliver a report on its quality review of audit firms each year under the Auditor Regulation Act. These reports help professionals understand the FMA’s compliance expectations and are designed to help improve standards among auditing firms.

Ms Campbell said the FMA would work closely with the small number of audit firms that had unsatisfactory audit measures to ensure they met the standards. “We encourage firms that have not yet been subject to a review to consider this report and any areas for improvement.”

The Audit Quality Review Report can be found here.

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