(June 2009)
Explanatory Statement
Australian National Audit Office (ANAO) Auditing Standards
Issued by the Auditor-General
Explanatory Statement
Mandate of the Auditor-General
The Office of the Auditor-General is a statutory office created by the Auditor-General Act 1997 (the Act). The Auditor-General is appointed to audit, and report to the Parliament of the Commonwealth of Australia on, the activities and performance of the Australian Government and its agencies, authorities, companies and their subsidiaries.
The Act sets the terms and conditions of the Office of the Auditor-General and states the functions and powers of the Auditor-General. Functions and powers may also be conferred on the Auditor-General by other legislation.
The Act creates the Australian National Audit Office (ANAO), which consists of the Auditor-General and staff appointed under the Public Service Act 1999. The function of the ANAO is to assist the Auditor-General in performing Auditor-General functions. The Auditor-General may also engage people under contract to assist in the performance of an Auditor-General function.
Reasons for Setting ANAO Auditing Standards
The Auditor-General sets the ANAO Auditing Standards to meet the requirement of section 24 of the Act.
Section 24 provides as follows:
“The Auditor-General must, by notice in the Gazette, set auditing standards that are to be complied with by persons performing any of the following functions:
(a) an audit referred to in Division 1 or 2;
(b) an audit under Division 2 of Part 7;
(c) an audit under section 56 of the Financial Management and Accountability Act 1997.”
These Auditing Standards are legislative instruments under the Legislative Instruments Act 2003.
The functions referred to in paragraph (a) of section 24 are:
- financial statements audits of
- Agencies in accordance with the Financial Management and Accountability Act 1997 (section 11 of the Act),
- Commonwealth authorities and their subsidiaries in accordance with the Commonwealth Authorities and Companies Act 1997 (section 12 of the Act) and
- Commonwealth companies and their subsidiaries in accordance with the Commonwealth Authorities and Companies Act 1997 (section 13 of the Act), and
- performance audits of agencies, Commonwealth authorities and their subsidiaries, and Commonwealth companies and their subsidiaries, in accordance with sections 15 to 18 of the Act.
The functions referred to in paragraph (b) of section 24 are audits by the Independent Auditor of the ANAO’s annual financial statements under section 44 of the Act and any performance audits undertaken under section 45 of the Act.
The function referred to in paragraph (c) of section 24 is the audit required by section 56 of the Financial Management and Accountability Act 1997 of the Finance Minister’s annual financial statements. These financial statements are the annual consolidated financial statements of the Australian Government.
The persons performing the functions mentioned in section 24 of the Act will include the Auditor-General, the staff of the Australian National Audit Office, contractors appointed or engaged to assist in the performance of an Auditor-General function and the ANAO’s Independent Auditor.
Process of making the ANAO Auditing Standards
It is the intention of the Auditor-General that audits conducted by the ANAO should be conducted to the same standards required of the auditing profession in Australia, to the extent that they are not inconsistent with any provision of the Auditor-General Act or other relevant legislation.
The ANAO Auditing Standards therefore incorporate:
- by reference, the standards made by the Australian Auditing and Assurance Standards Board (AUASB) pursuant to section 227B(1)(a) of the Australian Securities and Investments Commission Act 2001 (the ASIC Act) and section 336 of the Corporations Act 2001 (the Corporations Act) that are current from time to time;
- by listing, standards formulated by the AUASB pursuant to section 227B(1)(b) of the ASIC Act; and
- by listing, standards issued by the Australian Accounting Research Foundation (AARF) up to 30 June 2004, on behalf of CPA Australia and The Institute of Chartered Accountants in Australia which remain operative.
AUASB standards formulated under section 227B(1)(b) of the ASIC Act and standards made by the former AARF which remain operative do not have the same legal status as the ANAO Auditing Standards or the AUASB standards made under section 336 of the Corporations Act.
A reference to an AUASB standard formulated under section 227B(1)(b) of the ASIC Act or to a standard made by the former AARF in the ANAO Auditing Standards can only refer to the Standard that existed when the ANAO Auditing Standards were issued. It cannot refer to any revised version that may exist at a later reporting date.
References in the ANAO Auditing Standards to an AUASB standard made under section 336 of the Corporations Act are ambulatory (automatically moving forward to refer to the most recently-issued version of the section 336 Standard).
AUASB standards
The primary functions of the AUASB under section 227B of the ASIC Act include:
- to make auditing standards (under section 336 of the Corporations Act) for the purposes of the corporations legislation; and
- to formulate auditing and assurance standards for other purposes.
Further information and explanation of the nature of AUASB standards can be found in the Foreword to AUASB Pronouncements by the AUASB. The AUASB has also issued ASA 100 Preamble to AUASB Standards, which sets out the AUASB’s intentions on how the AUASB Standards are to be understood, interpreted and applied. The AUASB standards contain both mandatory requirements, consisting of principles and essential procedures, and explanatory guidance, which assists auditors in the application of the mandatory requirements. The AUASB also issues Guidance Statements to assist auditors to fulfil the objectives of audits or assurance engagements. Guidance Statements do not, however, prescribe or create mandatory requirements.
Standards issued by the AARF
The establishment of the AUASB was the result of the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 ("CLERP 9"), which came into effect on 1 July 2004. CLERP 9 reconstituted the former Auditing and Assurance Standards Board (“AuASB”) of the AARF[1] as a statutory body under the oversight of the Financial Reporting Council.
A number of the standards (and various guidance statements) made by the AuASB survive its replacement by the AUASB, and have become the responsibility of the AUASB until such time as they are dealt with by the AUASB.
Purpose of ANAO Auditing Standards
The purpose of the ANAO Auditing Standards is to establish mandatory requirements and provide explanatory guidance for persons performing the functions specified in section 24 of the Auditor-General Act 1997.
AUASB Auditing Standard ASA 100 Preamble to AUASB Standards sets out the intentions of the AUASB on how the AUASB Standards are to be understood, interpreted and applied. However, in the event of an inconsistency between a provision in an ANAO Auditing Standard and a provision in the Auditor-General Act 1997 or other relevant legislation, the provision in the legislation prevails.
Operative Date
These ANAO Auditing Standards replace the ANAO Auditing Standards published in the Commonwealth of Australia Gazette GN40 of 11 October 2006.
The standards apply in accordance with the operative dates given or indicated in each individual standard.
Main changes from the ANAO Auditing Standards gazetted on 11 October 2006
The main change from the ANAO Auditing Standards of October 2006 is to update for changes in the standards formulated by the AUASB pursuant to section 227B(1)(b) of the ASIC Act and standards issued by the Australian Accounting Research Foundation (AARF).
Consultation prior to re-issuing the ANAO Auditing Standards
There has been no consultation prior to re-issuing the ANAO Auditing Standards. Persons to whom the Standards apply will be employees of or subject to the direction of the ANAO, contractors to the ANAO and the ANAO’s Independent Auditor, most of who will be familiar with AUASB Standards through membership of a professional accounting body.
The due process for the issue of AUASB Standards is set out in the Foreword to AUASB Pronouncements issued by the AUASB. That due process includes the issue of exposure drafts of proposed standards for public comment.
[1] The AuASB previously existed as a board of the Australian Accounting Research Foundation, which was jointly controlled and funded by The Institute of Chartered Accountants in Australia and CPA Australia.