Main changes from AUS 710 (May 1999) ComMain changes from AUS 710 (May 1999) Communicating with Management on Matters Arising from an Audit

Main changes from AUS 710 (May 1999) Communicating with Management on Matters Arising from an Audit

The main differences between this Auditing Standard and the Auditing Standard issued by the Auditing & Assurance Standards Board of the Australian Accounting Research Foundation, AUS 710 (May 1999) Communicating with Management on Matters Arising from an Audit, are that in this Auditing Standard:

1. The word ‘shall’, in the bold-type paragraphs, is the terminology used to describe an auditor’s mandatory requirements, whereas an auditor’s degree of responsibility is described in AUS 710 by the word ‘should’.
2. The explanatory guidance paragraphs provide guidance and illustrative examples to assist the auditor in fulfilling the mandatory requirements, whereas in AUS 710 some obligations are implied within certain explanatory paragraphs. Accordingly, such paragraphs have been redrafted to clarify that the matter forms part of the explanatory guidance.
3. The definition of “governance”, “audit matters of governance interest” and “those charged with governance” and the explanatory guidance on “relevant persons” replace the explanatory guidance on the different levels of management and the definitions of “report to management” and “operational management” in AUS 710.
4. The mandatory requirement and explanatory guidance paragraphs on “Audit Matters of Governance Interest to be Communicated” replace “Identification of Significant Matters” and “Reporting Significant Matters” in the existing AUS 710 with the following revised and/or additional requirements:

(a) The auditor shall consider audit matters of governance interest that arise from the audit of the financial report and communicate them with those charged with governance (paragraph 15).

(b) The auditor shall inform those charged with governance of those uncorrected misstatements aggregated by the auditor during the audit that were determined by management to be immaterial, both individually and in the aggregate, to the financial report taken as a whole (paragraph 17).

5. The following additional specific mandatory requirements are included:

(a) The auditor shall determine the relevant persons who are charged with governance and with whom audit matters of governance interest are communicated (paragraph 9).

(b) When the audit is conducted under Part 2M.3 of the Corporations Act 2001, the auditor shall communicate directly with those charged with governance:

(i) a statement as to whether the engagement team and others in the firm as appropriate, the firm and, when applicable, network firms are independent in accordance with relevant ethical requirements and any regulatory requirements that apply to the audit engagement; and

(ii) - details of relationships that may reasonably have a bearing on auditor independence, as outlined in relevant ethical requirements relating to audit engagements; and

- the related safeguards that have been applied to eliminate threats to independence or reduce them to an acceptable level (paragraph 20).

6. The following mandatory requirement and related explanatory guidance paragraphs on “Format and Presentation” in AUS 710 has been removed as it is included in ASA 230 Audit Documentation:

• the auditor should document the subject matter of oral reports to management regarding significant matters (paragraph .31).

7. The mandatory requirement and related explanatory guidance paragraphs on “Management Response” in AUS 710 has been included as explanatory guidance (paragraph 32).

8. Appendices 1 to 3 in AUS 710 are not included.

AUTHORITY STATEMENT

The Auditing and Assurance Standards Board (AUASB) makes Auditing Standard ASA 260 Communication of Audit Matters with Those Charged With Governance as set out in paragraphs 1 to 36, pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001.

This Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.

The mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.

Dated 28 April 2006 M H Kelsall
Chairman - AUASB