NZAuASB Meeting Highlights 9 February 2017
Here is an outline of the main matters considered.
The NZAuASB continued its deliberations on how the proposed long association provisions of the International Ethics Standards Board will be included in PES 1 (Revised).
For all public interest entities, the international finalised provisions include:
- increasing the cooling-off period for the key engagement partner from two to five years;
- requiring a time off period of 3 years for the engagement quality control reviewer; and
- adding additional restrictions on the activities that can be performed during the cooling-off period.
The NZAuASB expects to approve a New Zealand exposure draft at its April meeting detailing a New Zealand response to the international provisions, and to consult extensively on this matter.
Assurance Standard on Compliance Engagements
The NZAuASB approved the standard on compliance engagements SAE 3100 Assurance Engagements on Compliance. The standard establishes requirements and provides application and other explanatory material regarding the conduct of and reporting on assurance engagements on compliance.
The NZAuASB has collaborated with the Auditing and Assurance Standards Board of Australia in developing this standard. In considering the submissions received on last year’s exposure draft, the NZAuASB agreed that further guidance should be developed to address concerns raised by some of the submissions.
We will issue a separate communique to advise when the standard and guidance are available on the XRB website.
Consideration of IAASB discussion papers
In September 2016 the IAASB issued a Request for Input Exploring the Use of Technology in the Audit, with a focus on Data Analytics.
We issued a request for comment on the paper from New Zealand constituents late last year.
Although only one submission was received, the NZAuASB considers this is a topic of increasing relevance to all assurance practitioners in New Zealand, not only the larger firms which are already familiar with data analytic techniques.
The NZAuASB discussed and approved its submission to the IAASB’s request for input. The Board’s view is that the use of data analytics provides significant opportunities for audit quality and efficiency, but it also accepts that there are significant challenges as outlined in the discussion paper.
Agreed Upon Procedures
The NZAuASB discussed and approved its submission to the IAASB’s recently issued Discussion Paper Exploring the Demand for Agreed Upon Procedures Engagements and Other Services, and the Implications for the IAASB’s International Standards, subject to any further comments from New Zealand constituents.
We have sent a separate Communique requesting feedback by 13 March 2017.
Although the Board’s mandate is confined to issuing auditing and assurance standards, and agreed upon procedures do not involve the provision of assurance, the Discussion Paper nevertheless raises significant issues of relevance to the auditing process.
The Board encourages submissions and comments from New Zealand constituents on the full range of issues discussed in the Paper.
Emerging Forms of External Reporting
The NZAuASB noted the completion of its submission to the IAASB’s discussion paper Supporting Credibility and Trust in Emerging Forms of External Reporting: Ten Key Challenges for Assurance Engagement. The Board thanks those who contributed for your comments.
Frequently Asked Questions on the new auditor’s report
The enhanced auditor reporting requirements came into mandatory effect for audits of financial statements for periods ending on or after 15 December 2016.
The changes impact all auditors’ reports for audits conducted in accordance with the International Standards on Auditing (New Zealand).
Listed issuer auditors’ reports have additional requirements effective for the December 2016 reporting season (including the need to report key audit matters), with delayed mandatory application of those requirements to auditors’ reports of all FMC reporting entities considered to have a higher level of public accountability from 2018.
The NZAuASB approved for issue a set of Frequently Asked Questions (FAQs) on the new auditor’s report, to address some of the common questions relating to the enhanced reporting requirements.
These FAQs are intended to assist auditors, those charged with governance (including directors and audit committee members), chief financial officers, and other stakeholders in understanding the enhanced reporting requirements in New Zealand.
We will issue a separate communique to advise when the FAQs are available.
Guidance for funders of not-for-profit entities
The Board approved guidance that is to be issued for not-for-profit entities (NFPs) and their funders.
This gives an overview of when NFPs are required by laws and regulations to have an assurance engagement, and the different types of assurance engagement required and available.
The guidance will also explain who can perform those engagements, the NZAuASB’s role of setting standards intended to enhance the credibility of financial statements for their users and external stakeholders, and what types of assurance standards and methods are available.
The NZAuASB expects at its next meeting to finalise the arrangements for publishing and communicating the guidance.
We will issue a separate communique to advise when the guidance is available.
12 April 2017