Auditing Standard ASA 2022-2 Amendments to Australian Auditing Standards

Explanatory Statement

ASA 2022-2 Amendments to Australian Auditing Standards

Issued by the Auditing and Assurance Standards Board

Obtaining a Copy of this Explanatory Statement

This Explanatory Statement is available on the Auditing and Assurance Standards Board (AUASB) website: www.auasb.gov.au

Contact Details

Reasons for Issuing Auditing Standard ASA 2022-2

The AUASB issues Auditing Standard ASA 2022-2 Amendments to Australian Auditing Standards pursuant to the requirements of the legislative provisions and the Strategic Direction explained below.

The AUASB is a non-corporate Commonwealth entity of the Australian Government established under section 227A of the Australian Securities and Investments Commission Act 2001, as amended (ASIC Act).  Under section 336 of the Corporations Act 2001, the AUASB may make Auditing Standards for the purposes of the corporations legislation.  These Auditing Standards are legislative instruments under the Legislation Act 2003.

Under the Strategic Direction given to the AUASB by the Financial Reporting Council (FRC), the AUASB is required, inter alia, to develop auditing standards that have a clear public interest focus and are of the highest quality.

Purpose of Auditing Standard ASA 2022-2 Amendments to Australian Auditing Standards

The purpose of the Auditing Standard is to make amendments to the requirements and application & other explanatory material of the following Auditing Standards:

ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity  (Issued 9 June 2020)

ASRE 2415 Review of a Financial Report: Company Limited by Guarantee or an Entity Reporting under the ACNC Act or Other Applicable Legislation or Regulation (Issued 30 June 2010 and amended to 5 November 2021)

Main Features

This Auditing Standard makes amendments to Australian Auditing Standards. The amendments arise from consequential and conforming changes arising from the issuance of ASQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements, ASQM 2 Engagement Quality Reviews, ASA 220 Quality Management for an Audit of a Financial Report and Other Historical Financial Information and ASA 315 Identifying and Assessing the Risks of Material Misstatement.

Operative Date

ASA 2022-2 Amendments to Australian Auditing Standards is operative for financial reporting periods commencing on or after 15 December 2022.

Process of making Australian Auditing Standards

The AUASB’s Strategic Direction, inter alia, provides that the AUASB develop Australian Auditing Standards that:

• have a clear public interest focus and are of the highest quality;
• use the International Standards on Auditing (ISAs) of the International Auditing and Assurance Standards Board (IAASB) as the underlying standards;
• conform with the Australian regulatory environment; and
• are capable of enforcement.

Consultation Process prior to issuing the Auditing Standard

The AUASB has consulted publicly as part of its due process in developing the Auditing Standard.  Exposure Draft ED 01/22 Proposed Conforming and Consequential Amendments to the Australian-Specific AUASB Standards as a result of the New and Revised Quality Management Standards was issued on 10 May 2022 with a 30-day comment period.

Submissions were received by the AUASB and these were considered as part of the development and finalisation of the Auditing Standard.

Regulatory Impact Statement

The amendments in this Auditing Standard arise from consequential and conforming changes arising from the issuance of ASQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements, ASQM 2 Engagement Quality Reviews, ASA 220 Quality Management for an Audit of a Financial Report and Other Historical Financial Information and ASA 315 Identifying and Assessing the Risks of Material Misstatement. A Regulatory Impact Statement (RIA) has been prepared in connection with the preparation of ASQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements, ASQM 2 Engagement Quality Reviews, ASA 220 Quality Management for an Audit of a Financial Report and Other Historical Financial Information and ASA 315 Identifying and Assessing the Risks of Material Misstatement.  The RIA has been cleared by the Office of Best Practice Regulation (OBPR).

Exemption from Sunsetting

Auditing Standards promulgated by the AUASB that are legislative instruments are exempt from the sunsetting provisions of the Legislation Act 2003 through section 12 of the Legislation (Exemption and Other Matters) Regulation 2015 (Item 18(a)). 

The AUASB’s Standards incorporate Standards set by the International Auditing and Assurance Standards Board.  The AUASB’s Standards are exempt from sunsetting because a more stringent review process than sunsetting applies to the Standards.  This review process ensures Australia’s Auditing Standards regime remains consistent with international standards.  Typically, the AUASB Standards are revised at least once within a ten-year period, with most of the Standards subject to revisions much more frequently than that.  Each revision follows the stringent review process (which includes the opportunity for public comment) in order to remain consistent with international Standards.  It is very unlikely that any AUASB Standard would not have been amended (or else considered for amendment) within a ten-year period through these review processes.  Therefore, if it applied, a ten-year sunsetting regime would have very limited practical application to AUASB Standards.  Parliamentary oversight is retained whenever a Standard is replaced or amended since the Standards are disallowable instruments and subject to the normal tabling and scrutiny process as required by the Legislation Act 2003.