Australian audit inspections have discovered much tighter
quality control in firms that were inspected previously compared
with firms being examined for the first time.

The Australian Securities and Investment Commission (ASIC)
released the latest results of its audit inspection programme,
encompassing 1 July 2006 to 31 December 2007.

This included inspections of 19 firms – nine of which were
inspected for the first time, six of which had been inspected once
before and four were inspected for the third time.

ASIC chief accountant Lee White noted that most firms inspected
more than once had committed resources and further enhanced quality
control systems and processes to ensure compliance with the
legislative requirements for auditor independence and audit

The firms that had been inspected before had made improvements
in relation to previous observations, including: the creation of
quality control policies and procedures; employment of dedicated
technical resources; employment of external experts to conduct
monitoring activities; changes of auditor in relation to a small
number of listed audit clients; and registration by partners on
specified training courses.

In contrast, some firms visited for the first time had not taken
a proactive approach to planning and implementing effective
policies, systems and processes to ensure compliance with the
legislative requirements and professional and ethical standards for
independence and audit quality.

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The regulator suggested more action could have been taken

• the legislative requirements have been in effect for three

• ASIC had issued two previous public reports on the results of
the inspection programmes;

• in a number of cases ASIC had previously visited another
member of the association to which the firm belonged; and

• Australian professional accounting bodies have run awareness
raising campaigns on the inspection programmes.

White said the future focus of ASIC’s inspections will include
firms who audit significant public interest entities and
investigations of how firms are complying with the legally
enforceable auditing standards.

He added: “Specific areas of focus in the next inspection period
will include technical consultations, using the work of experts,
particularly in relation to fair value measurements, sectors that
are at risk given the current market turbulence and using the work
of other auditors.”