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Audit reporting to directors

Wednesday 6 July 2022


The Australian Securities and Investments Commission (ASIC) will be sharing their negative  audit reports with directors as of the end  of June next year.

ASIC Commissioner Sean Hughes said in an official statement, “Communicating our negative audit review findings to directors of entities audited will assist audit committees and directors to ask the auditor about the steps they are taking to improve audit quality, and to ensure that the audit is adequately resourced.”

RG 260: Communicating findings from audit files to directors, audit committees or senior managers  states, “Directors cannot simply rely on the work of the auditor and should ensure that an entity has adequate systems and processes to ensure quality financial reports. Directors should also support and promote high-quality independent audits in the interests of investor and market confidence.”
ASIC shared the circumstances under which it would share the audit reports with directors:

  • we have formed the view that an auditor has not obtained reasonable assurance that the entity’s financial report is free of material misstatement; 
  • we have concerns that the auditor did not meet the independence requirements of the Corporations Act (including professional requirements), has not addressed the matter and/or has not adequately reported the matter in an auditor’s independence declaration; or 
  • we consider any other matter should be drawn to the attention of the directors, audit committee or senior management of the audited entity. 
These audit reports can be beneficial for directors and audit committees:

(a) take action to address deficiencies in an entity’s financial report;
(b) improve systems and processes supporting financial reporting; and
(c) engage with the auditor about steps the auditor will take to improve audit quality.
“Directors should support quality audits in the interests of investor and market confidence in the quality of financial reports.”