Auditing Standard ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements (reissued March 2018)

Overview

The Auditing and Assurance Standards Board (AUASB) has reissued Australian Auditing Standard ASA 102, titled "Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements," in March 2018. This standard is made under the Corporations Act 2001 and is intended to ensure that auditors, assurance practitioners, engagement quality control reviewers, and firms adhere to relevant ethical requirements, particularly those concerning independence, during audits, reviews, and other assurance engagements. ASA 102 references the latest version of APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board Limited, ensuring the ethical requirements remain current. The reissue aims to maintain the highest quality of auditing standards with a clear focus on public interest. The AUASB, established under section 227A of the Australian Securities and Investments Commission Act 2001, ensures these standards conform to the Australian regulatory environment and are capable of enforcement.

Scope and Application

ASA 102, Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements, applies to auditors, assurance practitioners, engagement quality control reviewers, and firms engaged in audit, review, and other assurance engagements in Australia. This standard ensures adherence to ethical requirements, including those related to independence, as outlined in the APES 110 Code of Ethics for Professional Accountants. It is applicable nationally across the Commonwealth, established under the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001, and operates for engagements with financial reporting periods ending on or after 31 March 2018. The Auditing and Assurance Standards Board (AUASB) ensures the standard remains current and relevant, aligning with international standards and maintaining a clear public interest focus. ASA 102 does not contain specific exclusions, exemptions, or thresholds, but its application may be extended or restricted through subordinate instruments or further amendments to ensure compliance with evolving ethical standards and regulatory requirements.

Key Provisions

The main operative sections of ASA 102 (Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements, reissued March 2018) include the requirement for auditors, assurance practitioners, engagement quality control reviewers, and firms to adhere to relevant ethical requirements, particularly those related to independence, when conducting audits, reviews, and other assurance engagements. This is articulated in section 1 of the standard, which specifies the necessity for compliance with these ethical standards. Section 2 outlines the need to consider the APES 110 Code of Ethics for Professional Accountants as issued by the Accounting Professional & Ethical Standards Board Limited, including its amendments up to May 2017, to determine if the ethical requirements have been met. The standard also mandates that ASA 102 be updated whenever APES 110 is amended to ensure that cross-references remain current. The obligations imposed by ASA 102 on the parties and entities it governs include ensuring that auditors, assurance practitioners, and firms maintain independence and comply with all relevant ethical requirements. Specifically, these professionals must adhere to the provisions of APES 110, which includes maintaining independence, avoiding conflicts of interest, and ensuring the integrity of financial reporting. Firms are also required to establish and maintain systems of quality control that ensure compliance with these ethical standards. Additionally, engagement quality control reviewers must evaluate the work of the auditor or assurance practitioner to ensure that the engagement was conducted in accordance with the relevant ethical requirements. The ASA 102 sets forth specific consequences for breaches of its provisions. Under the Corporations Act 2001, individuals who fail to comply with the ethical requirements set out in ASA 102 may face civil penalties. The maximum penalty for a body corporate can be significant, as outlined in section 1317H of the Corporations Act, which can include fines up to $210,000 for individuals and up to $1,050,000 for bodies corporate. Furthermore, directors or officers who are responsible for an entity's failure to comply with these standards may also face personal penalties. In addition to civil penalties, breaches of ethical requirements can also lead to criminal charges and potential imprisonment, particularly if the breach results in misleading or deceptive conduct under section 1041H of the Corporations Act 2001.