Appendix B
FRC’s performance of its auditor independence functions
To facilitate the performance of the auditor independence functions, the FRC has:
- established an Audit Independence Subcommittee to deal with day-to-day matters associated with the performance of the function;
- signed MOUs with the professional accounting bodies, ASIC, ASX and APRA (MOU bodies);
- met with the MOU bodies and selected accounting firms;
- appointed a consultant to provide guidance and advice to the FRC in the performance of the function; and
- engaged a number of short-term consultants to perform specific tasks associated with its auditor independence functions.
Audit Independence Subcommittee
The Audit Independence Subcommittee held eight meetings during 2005-06.
Members of the Committee during the year were Ms Elizabeth Alexander AM (Chairman), Mr David Jackson, Mr Charles Macek, Mr Brian Scullin (until 10 June 2006) and Ms Catherine Walter AM.
The Subcommittee’s Charter provides that the Subcommittee will assist the FRC by:
- making recommendations to the FRC concerning the engagement of a person, or persons, to assist the FRC in the performance of the functions conferred on it under subsection 225(2B) of the ASIC Act (the auditor independence consultant);
- performing, either alone or in-conjunction with the auditor independence consultant, the work and other activities needed to ensure the FRC meets the obligations imposed on it by subsection 225(2B) of the ASIC Act;
- making recommendations to the FRC Chairman concerning the notices that should be given by the Chairman pursuant to section 225A of the ASIC Act; and
- preparing, for the consideration of the FRC, a draft of the report the FRC is required to prepare under section 235BA of the ASIC Act.
Memoranda of Understanding
The FRC has MOUs with the three professional accounting bodies (CPA, ICAA and NIA), ASX, APRA and ASIC in order to facilitate the efficient exchange of information between the MOU bodies and the FRC.
In addition, the FRC has a letter of understanding with the CALDB concerning the exchange of information.
Meetings with MOU bodies and accounting firms
During 2005-06, regular meetings were held with each of the MOU bodies and the CALDB.
Meetings were also held with the four major accounting firms (Deloitte Touche Tohmatsu, Ernst and Young, KPMG and PricewaterhouseCoopers).
Appointment of consultants
Mr William Bartlett’s contract to undertake the FRC’s auditor independence consultancy continued throughout 2005-06. In May 2006, the Treasury, at the request of the FRC, exercised its option to extend Mr Bartlett’s contract until December 2007.
The FRC’s 2005-06 work programme included an examination of the following matters falling within the scope of the Council’s auditor independence functions:
- quality review programmes of the professional accounting bodies;
- disciplinary procedures of the professional accounting bodies; and
- teaching of professional and business ethics by, or on behalf of, the professional accounting bodies.
During April 2006, the Treasury, acting on behalf of the FRC, entered into contracts with the following people for the provision of short-term consultancy services on these matters:
- Quality review programmes — Messrs Graeme MacMillan and Michael Cain of CiptaNet International Pty Ltd (represented by the International Accounting and Auditing Institute) (see Appendix C for more information);
- Disciplinary procedures — Mr William Bartlett in association with Ms Anne Dalton of Sparke Helmore (see Appendix D for more information); and
- Teaching of ethics — Ms Jane Walton of Henderson Walton Consulting Pty Ltd (see Appendix E for more information).