Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity (June 2020)

Overview

The Auditing and Assurance Standards Board (AUASB) issued Auditing Standard ASRE 2410 in June 2020, replacing the existing ASRE 2410 from 2009, to establish requirements and provide application and explanatory material concerning the responsibilities of an auditor of an entity when engaged to undertake a review of a financial report, and the form and content of the auditor’s review report. The AUASB, established under the Australian Securities and Investments Commission Act 2001, was mandated by the Financial Reporting Council to develop auditing standards that focus on the public interest and are of the highest quality. ASRE 2410 conforms with the International Standard on Review Engagements 2410 and is intended to align the form and content of the auditor’s review report with the recently amended annual auditor’s report, as well as incorporating conforming amendments from the International Auditing and Assurance Standards Board's project on non-compliance with laws and regulations. The purpose of this re-issuance is to ensure consistency in the reporting format and to meet the updated regulatory requirements. The standard is effective for financial reporting periods commencing on or after 1 July 2020, with early adoption permitted.

Scope and Application

The Auditing and Assurance Standards Board (AUASB), a Non-corporate Commonwealth entity of the Australian Government, has issued Auditing Standard ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, which applies to auditors engaged to review financial reports of entities, and is intended to provide consistency in the form and content of review reports with the recently amended annual auditor’s reports. This Auditing Standard is a legislative instrument under the Legislation Act 2003 and it is compatible with human rights as it does not diminish or limit any applicable human rights or freedoms. ASRE 2410 replaces the existing ASRE 2410 issued in October 2009 and amended in July 2013 and conforms with the International Standard on Review Engagements ISRE 2410. The AUASB has developed this Auditing Standard in accordance with its Strategic Direction given by the Financial Reporting Council (FRC), which requires the development of auditing standards that have a clear public interest focus and are of the highest quality. This Auditing Standard is to be operative for financial reporting periods commencing on or after 1 July 2020 with early adoption permitted. The AUASB consulted publicly in the development of this Auditing Standard, issuing Exposure Draft ED 01/19 Proposed Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Auditor of the Entity in May 2019 with a 90-day comment period. Submissions were received and considered as part of the development and finalisation of the Auditing Standard.

Key Provisions

Auditing Standard ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity (sections 1-5) outlines the requirements and guidance for auditors when they are engaged to review a financial report prepared by the entity’s independent auditor. This standard is designed to ensure consistency in the form and content of the auditor’s review report, aligning it with recent amendments to the annual auditor’s report under ASA 700. The standard also incorporates conforming amendments from the International Auditing and Assurance Standards Board’s project on non-compliance with laws and regulations (NOCLAR). The primary aim of ASRE 2410 is to maintain the integrity and reliability of financial reporting by setting clear expectations for the review process and the content of the review report. The obligations imposed by ASRE 2410 on auditors include adhering to the specified procedures for conducting a review of the financial report, ensuring that the review report is appropriately structured and contains all necessary disclosures. Auditors must also comply with any relevant ethical standards and ensure that they are independent and objective in their review. Furthermore, auditors are required to perform sufficient procedures to obtain reasonable assurance that the financial report is free from material misstatements. This includes evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates, and the overall presentation of the financial report. Breaches of ASRE 2410 may result in significant consequences for the auditor and the entity. Under the Corporations Act 2001, failure to comply with the Auditing and Assurance Standards Board’s standards can lead to civil penalties. For instance, Section 1317E of the Corporations Act outlines that an auditor who fails to comply with an Auditing Standard may be liable for penalties, which can include fines of up to $1.8 million for individuals and substantially higher amounts for bodies corporate. Additionally, under Section 1317G, a person who is negligent in performing auditing services may be subject to compensation orders. The penalties for non-compliance are designed to ensure that auditors maintain high standards of professional conduct and integrity, thereby protecting the interests of stakeholders and the public.