Appendix A
FRC’s auditor independence functions
The FRC’s functions include monitoring the effectiveness of auditor independence requirements in Australia and giving the Minister reports and advice about those requirements. These functions are conferred on the FRC under paragraphs 225(1)(c) and (d) and subsection 225(2B) of the ASIC Act.
Under subsection 225(1) of the ASIC Act, the FRC is required to monitor the effectiveness of auditor independence requirements in Australia and to give the Minister reports and advice about those requirements.
In addition, the FRC has the following specific auditor independence functions conferred on it under subsection 225(2B) of the ASIC Act:
- monitoring and assessing the nature and overall adequacy of:
- the systems and processes used by Australian auditors to ensure compliance with auditor independence requirements;
- the systems and processes used by professional accounting bodies for planning and performing quality assurance reviews of audit work undertaken by Australian auditors to the extent that those reviews relate to auditor independence requirements;
- the action that Australian auditors who have been subject to such quality assurance reviews have taken in response to the reports prepared as a result of those reviews; and
- the investigation and disciplinary procedures of professional accounting bodies as those procedures apply to Australian auditors;
- monitoring the overall compliance by companies, registered schemes and disclosing entities with the audit-related disclosures requirements of the Corporations Act and the accounting standards;
- giving the Minister reports and advice about the matters referred to in the above paragraphs;
- giving the professional accounting bodies reports and advice about matters related to their quality assurance reviews and disciplinary procedures as detailed in the above paragraphs;
- monitoring international developments in auditor independence, assessing the adequacy of the Australian auditor independence requirements provided for in:
- the Corporations Act; and
- codes of professional conduct;
- promoting, and monitoring the adequacy of, the teaching of professional and business ethics by, or on behalf of, professional accounting bodies to the extent to which the teaching of those subjects relates to auditor independence.
To facilitate the performance of the audit independence functions by the FRC, section 225A of the ASIC Act sets out powers that may be used by the FRC for gathering information from Australia’s professional accounting bodies and Australian auditors.