2. Introduction
Under section 225 of the Australian Securities and Investments Commission Act 2001 (ASIC Act), the FRC is responsible for monitoring the effectiveness of auditor independence requirements in Australia and giving the Minister reports and advice about those requirements. The FRC's functions also include monitoring overall compliance with the audit-related disclosure requirements and giving the professional accounting bodies reports and advice about aspects of their quality review programs and disciplinary procedures. A summary of the FRC's auditor independence functions appears in Appendix A of this report.
The FRC has put in place a number of administrative arrangements designed to facilitate its performance of the auditor independence functions. These arrangements include:
- the establishment of an Audit Independence Committee, which monitors the work program associated with the performance of the function; and
- a program of regular meetings, and the exchange of information, with the bodies with which the FRC has entered into MOUs and with selected audit firms.
More information about these arrangements, including the membership of the Committee and the names of the MOU bodies, is contained in Appendix B.
During 2007-08, the FRC addressed each of the core issues that comprise its auditor independence functions: systems and processes of audit firms, quality review programs and disciplinary procedures of the professional accounting bodies, the teaching of ethics by, or on behalf of, those bodies and compliance by companies with audit-related disclosure requirements.
The auditor independence work performed by the FRC during the period under review, including the findings and conclusions reached by the FRC in the performance of its functions, is described in later sections of this report. Appendix C lists the key matters arising from the 2006-07 independence report and the action that was taken by the FRC in respect of each of those matters during 2007-08.
For the year ahead it is envisaged that the FRC's auditor independence function work program will continue the work undertaken by the FRC in previous years. In addition to undertaking the ongoing work associated with 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 FRC also plans to continue to monitor trends in fees received by auditors for audit and non-audit services and liaise with the accounting bodes with a view to increasing professional awareness of ethics and training opportunities.
A detailed outline of the work program for 2008-09 is contained in Appendix D of this report.