Obtaining a Copy of this Auditing Standard

This Auditing Standard is available on the AUASB website: www.auasb.gov.au.

Alternatively, printed copies of this Auditing Standard are available by contacting:

COPYRIGHT

© Commonwealth of Australia 2006. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007. Otherwise, no part of the Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.

ISSN 1833-4393

CONTENTS

PREFACE

AUTHORITY STATEMENT

Paragraphs

Application.................................. 1-2

Operative Date................................ 3

Introduction.................................. 4-8

Acceptance as Principal Auditor.................... 9-11

The Principal Auditor’s Procedures.................. 12-20

Cooperation Between Auditors..................... 21-22

Reporting Considerations

General.................................... 23-25

Reference to Another Auditor in the Auditor’s Report...... 26-27

Conformity with International Standards on Auditing...... 28

Obtaining a Copy of this Auditing Standard

This Auditing Standard is available on the AUASB website: www.auasb.gov.au.

Alternatively, printed copies of this Auditing Standard are available by contacting:

COPYRIGHT

© Commonwealth of Australia 2006. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007. Otherwise, no part of the Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.

ISSN 1833-4393

CONTENTS

PREFACE

AUTHORITY STATEMENT

Paragraphs

Application.................................. 1-2

Operative Date................................ 3

Introduction.................................. 4-8

Acceptance as Principal Auditor.................... 9-11

The Principal Auditor’s Procedures.................. 12-20

Cooperation Between Auditors..................... 21-22

Reporting Considerations

General.................................... 23-25

Reference to Another Auditor in the Auditor’s Report...... 26-27

Conformity with International Standards on Auditing...... 28

Preface

Reasons for Issuing Auditing Standard ASA 600 Using the Work of Another Auditor

The Auditing and Assurance Standards Board (AUASB) issues Auditing Standard ASA 600 Using the Work of Another Auditor due to the requirements of the legislative provisions explained below.

The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (the CLERP 9 Act) established the AUASB as an independent statutory body under section 227A of the Australian Securities and Investments Commission Act 2001, as from 1 July 2004. Under section 336 of the Corporations Act 2001, the AUASB may make Auditing Standards for the purposes of the corporations legislation. These Auditing Standards are legislative instruments under the Legislative Instruments Act 2003.

Main Features

The Auditing Standard establishes mandatory requirements and provides explanatory guidance when an auditor uses the work of another auditor on the financial information of one or more components included in the financial report of an entity.

Operative Date

This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.

Main changes from AUS 602 (July 2002) Using the Work of Another Auditor

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 602 Using the Work of Another Auditor (July 2002), 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 602 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 602 some obligations are implied within certain explanatory paragraphs. Accordingly, these paragraphs have been re-drafted to clarify that the matter forms part of the explanatory guidance.
3. The following implied obligation in AUS 602 has been elevated and restated as a specific mandatory requirement:

(a) when the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

(i) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

(ii) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report (paragraph 25).

AUTHORITY STATEMENT

The Auditing and Assurance Standards Board (AUASB) makes Auditing Standard ASA 600 Using the Work of Another Auditor as set out in paragraphs 1 to 28, 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

Reasons for Issuing Auditing Standard ASA 600 Using the Work of Another Auditor

The Auditing and Assurance Standards Board (AUASB) issues Auditing Standard ASA 600 Using the Work of Another Auditor due to the requirements of the legislative provisions explained below.

The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (the CLERP 9 Act) established the AUASB as an independent statutory body under section 227A of the Australian Securities and Investments Commission Act 2001, as from 1 July 2004. Under section 336 of the Corporations Act 2001, the AUASB may make Auditing Standards for the purposes of the corporations legislation. These Auditing Standards are legislative instruments under the Legislative Instruments Act 2003.

Main Features

The Auditing Standard establishes mandatory requirements and provides explanatory guidance when an auditor uses the work of another auditor on the financial information of one or more components included in the financial report of an entity.

Operative Date

This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.

Main changes from AUS 602 (July 2002) Using the Work of Another Auditor

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 602 Using the Work of Another Auditor (July 2002), 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 602 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 602 some obligations are implied within certain explanatory paragraphs. Accordingly, these paragraphs have been re-drafted to clarify that the matter forms part of the explanatory guidance.
3. The following implied obligation in AUS 602 has been elevated and restated as a specific mandatory requirement:

(a) when the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

(i) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

(ii) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report (paragraph 25).

AUTHORITY STATEMENT

The Auditing and Assurance Standards Board (AUASB) makes Auditing Standard ASA 600 Using the Work of Another Auditor as set out in paragraphs 1 to 28, 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

AUTHORITY STATEMENT

The Auditing and Assurance Standards Board (AUASB) makes Auditing Standard ASA 600 Using the Work of Another Auditor as set out in paragraphs 1 to 28, 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.

AUDITING STANDARD ASA 600

Using the Work of Another Auditor

Application

1 This Auditing Standard applies to:

(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and

(b) an audit of a financial report for any other purpose.

2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.

Operative Date

3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.

Introduction

4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance when an auditor, reporting on the financial report of an entity, uses the work of another auditor on the financial information of one or more components included in the financial report of the entity. This Auditing Standard does not deal with those instances where two or more auditors are appointed as joint auditors nor does it deal with the auditor’s relationship with a predecessor auditor. Further, when the principal auditor concludes that the financial report of a component is immaterial, the mandatory requirements in this Auditing Standard do not apply. When, however, several components, immaterial in themselves, are together material, the procedures outlined in this Auditing Standard would need to be considered.

5 When the principal auditor uses the work of another auditor, the principal auditor shall determine how the work of the other auditor will affect the audit.

6 “Principal auditor” means the auditor with responsibility for reporting on the financial report of an entity when that financial report includes financial information of one or more components audited by another auditor.

7 “Other auditor” means an auditor, other than the principal auditor, with responsibility for reporting on the financial information of a component which is included in the financial report audited by the principal auditor. Other auditors include affiliated firms, whether using the same name or not, and correspondents, as well as unrelated auditors.

8 “Component” means a division, branch, subsidiary, joint venture, associated company or other entity whose financial information is included in the financial report audited by the principal auditor.

Acceptance as Principal Auditor

9 The auditor shall consider whether the auditor’s own participation is sufficient to be able to act as the principal auditor.

10 For this purpose, the principal auditor ordinarily considers:

(a) the materiality of the portion of the financial report which the principal auditor audits;

(b) the principal auditor’s degree of knowledge regarding the business of the components;

(c) the risk of material misstatements in the financial report of the components audited by the other auditor; and

(d) the performance of additional procedures as set out in this Auditing Standard regarding the components audited by the other auditor resulting in the principal auditor having significant participation in such audit.

11 Section 323B of the Corporations Act 2001,[1] provides that the auditor of a controlled entity must give the principal auditor any information, explanation or assistance required under section 323A.

The Principal Auditor’s Procedures

12 When planning to use the work of another auditor, the principal auditor shall consider the professional competence of the other auditor in the context of the specific assignment.

13 Some of the sources of information for this consideration could be common membership of a professional organisation, common membership of, or affiliation with, another firm or reference to the professional organisation to which the other auditor belongs. These sources can be supplemented when appropriate by enquiries with other auditors, bankers, etc. and by discussions with the other auditor.

14 The principal auditor shall perform procedures to obtain sufficient appropriate audit evidence, that the work of the other auditor is adequate for the principal auditor’s purposes, in the context of the specific assignment.

15 Under paragraph 14 of this Auditing Standard, the principal auditor needs to advise the other auditor of:

(a) the independence requirements regarding both the entity and the component and obtain written representation as to compliance with them;

(b) the use that is to be made of the other auditor’s work and report and make sufficient arrangements for the coordination of their efforts at the initial planning stage of the audit;

(c) matters such as areas requiring special consideration, procedures for the identification of intercompany transactions that may require disclosure and the timetable for completion of the audit; and

(d) the accounting, auditing and reporting requirements and endeavour to obtain written representation as to compliance with them.

16 The principal auditor might also, for example, discuss with the other auditor the audit procedures applied, review a written summary of the other auditor’s procedures (which may be in the form of a questionnaire or checklist) or review working papers of the other auditor. The principal auditor may wish to perform these procedures during a visit to the other auditor. The nature, timing and extent of audit procedures will depend on the circumstances of the engagement and the principal auditor’s knowledge of the professional competence of the other auditor. This knowledge may have been enhanced from the review of previous audit work of the other auditor.

17 The principal auditor may conclude that it is not necessary to apply procedures such as those described in paragraph 16 because sufficient appropriate audit evidence has previously been obtained that acceptable quality control policies and procedures are complied with in the conduct of the other auditor’s practice. For example, when they are affiliated firms the principal auditor and the other auditor may have a continuing, formal relationship providing for procedures that give that audit evidence such as periodic inter-firm review, tests of operating policies and procedures and review of working papers of selected audits.

18 The principal auditor shall consider the significant findings of the other auditor.

19 The principal auditor may consider it appropriate to discuss with the other auditor, those charged with governance and management of the component the audit findings or other matters affecting the financial information of the component and may also decide that supplementary tests of the records or the financial information of the component are necessary. Such tests may, depending on the circumstances, be performed by the principal auditor or the other auditor.

20 Under paragraph 18 of this Auditing Standard and ASA 230 Audit Documentation, the principal auditor needs to document in the audit working papers:

• the components whose financial information was audited by other auditors, their significance to the financial report of the entity as a whole, the names of the other auditors and any conclusions reached that individual components are immaterial; and
• the procedures performed and the conclusions reached.

For example, working papers of the other auditor that have been reviewed would be identified and the results of discussions with the other auditor would be recorded. However, the principal auditor need not document the reasons for limiting the procedures in the circumstances described in paragraph 17, provided those reasons are summarised elsewhere in documentation maintained by the principal auditor’s firm.

Cooperation Between Auditors

21 The other auditor, knowing the context in which the principal auditor will use the other auditor’s work, shall cooperate with the principal auditor.

22 For example, the other auditor would bring to the principal auditor’s attention any aspect of the other auditor’s work that cannot be carried out as requested. Similarly, subject to legal and professional considerations, the other auditor will need to be advised of any matters that come to the attention of the principal auditor which may have an important bearing on the other auditor’s work.

Reporting Considerations

General

23 When the principal auditor concludes that the work of the other auditor cannot be used and the principal auditor has not been able to perform sufficient additional procedures regarding the financial information of the component audited by the other auditor, the principal auditor shall issue a modified auditor’s report because there is a limitation in the scope of the audit.

24 The principal auditor has sole responsibility for the opinion expressed on a consolidated financial report. If, having examined the financial reports and auditor’s reports of components for which the principal auditor has not acted as auditor, the principal auditor is not satisfied that the financial reports of any of these components are in form or content appropriate for the purpose of the preparation of a consolidated financial report, or if the principal auditor has not received satisfactory information and explanations to form such opinion, under ASA 701 Modifications to the Auditor’s Report, the principal auditor needs to modify the auditor’s report on the consolidated financial report.

25 When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

(a) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

(b) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

Reference to Another Auditor in the Auditor’s Report

26 The principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification.

27 Such a reference may be misunderstood to be a modification of the auditor’s opinion or a division of responsibility, neither of which is intended.

Conformity with International Standards on Auditing

28 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 600 Using the Work of Another Auditor, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 600 are:

• This Auditing Standard includes the following mandatory requirement that is not included in ISA 600:

♦ the principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification (paragraph 26).

• This Auditing Standard includes the following mandatory requirement, that is included in ISA 600 as explanatory guidance:

♦ When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

○ the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

○ whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

• ISA 600 includes a Public Sector Perspective section whereas this Auditing Standard does not as it is sector neutral.

Compliance with this Auditing Standard enables compliance with ISA 600.

AUDITING STANDARD ASA 600

Using the Work of Another Auditor

Application

1 This Auditing Standard applies to:

(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and

(b) an audit of a financial report for any other purpose.

2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.

Operative Date

3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.

Introduction

4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance when an auditor, reporting on the financial report of an entity, uses the work of another auditor on the financial information of one or more components included in the financial report of the entity. This Auditing Standard does not deal with those instances where two or more auditors are appointed as joint auditors nor does it deal with the auditor’s relationship with a predecessor auditor. Further, when the principal auditor concludes that the financial report of a component is immaterial, the mandatory requirements in this Auditing Standard do not apply. When, however, several components, immaterial in themselves, are together material, the procedures outlined in this Auditing Standard would need to be considered.

5 When the principal auditor uses the work of another auditor, the principal auditor shall determine how the work of the other auditor will affect the audit.

6 “Principal auditor” means the auditor with responsibility for reporting on the financial report of an entity when that financial report includes financial information of one or more components audited by another auditor.

7 “Other auditor” means an auditor, other than the principal auditor, with responsibility for reporting on the financial information of a component which is included in the financial report audited by the principal auditor. Other auditors include affiliated firms, whether using the same name or not, and correspondents, as well as unrelated auditors.

8 “Component” means a division, branch, subsidiary, joint venture, associated company or other entity whose financial information is included in the financial report audited by the principal auditor.

Acceptance as Principal Auditor

9 The auditor shall consider whether the auditor’s own participation is sufficient to be able to act as the principal auditor.

10 For this purpose, the principal auditor ordinarily considers:

(a) the materiality of the portion of the financial report which the principal auditor audits;

(b) the principal auditor’s degree of knowledge regarding the business of the components;

(c) the risk of material misstatements in the financial report of the components audited by the other auditor; and

(d) the performance of additional procedures as set out in this Auditing Standard regarding the components audited by the other auditor resulting in the principal auditor having significant participation in such audit.

11 Section 323B of the Corporations Act 2001,[1] provides that the auditor of a controlled entity must give the principal auditor any information, explanation or assistance required under section 323A.

The Principal Auditor’s Procedures

12 When planning to use the work of another auditor, the principal auditor shall consider the professional competence of the other auditor in the context of the specific assignment.

13 Some of the sources of information for this consideration could be common membership of a professional organisation, common membership of, or affiliation with, another firm or reference to the professional organisation to which the other auditor belongs. These sources can be supplemented when appropriate by enquiries with other auditors, bankers, etc. and by discussions with the other auditor.

14 The principal auditor shall perform procedures to obtain sufficient appropriate audit evidence, that the work of the other auditor is adequate for the principal auditor’s purposes, in the context of the specific assignment.

15 Under paragraph 14 of this Auditing Standard, the principal auditor needs to advise the other auditor of:

(a) the independence requirements regarding both the entity and the component and obtain written representation as to compliance with them;

(b) the use that is to be made of the other auditor’s work and report and make sufficient arrangements for the coordination of their efforts at the initial planning stage of the audit;

(c) matters such as areas requiring special consideration, procedures for the identification of intercompany transactions that may require disclosure and the timetable for completion of the audit; and

(d) the accounting, auditing and reporting requirements and endeavour to obtain written representation as to compliance with them.

16 The principal auditor might also, for example, discuss with the other auditor the audit procedures applied, review a written summary of the other auditor’s procedures (which may be in the form of a questionnaire or checklist) or review working papers of the other auditor. The principal auditor may wish to perform these procedures during a visit to the other auditor. The nature, timing and extent of audit procedures will depend on the circumstances of the engagement and the principal auditor’s knowledge of the professional competence of the other auditor. This knowledge may have been enhanced from the review of previous audit work of the other auditor.

17 The principal auditor may conclude that it is not necessary to apply procedures such as those described in paragraph 16 because sufficient appropriate audit evidence has previously been obtained that acceptable quality control policies and procedures are complied with in the conduct of the other auditor’s practice. For example, when they are affiliated firms the principal auditor and the other auditor may have a continuing, formal relationship providing for procedures that give that audit evidence such as periodic inter-firm review, tests of operating policies and procedures and review of working papers of selected audits.

18 The principal auditor shall consider the significant findings of the other auditor.

19 The principal auditor may consider it appropriate to discuss with the other auditor, those charged with governance and management of the component the audit findings or other matters affecting the financial information of the component and may also decide that supplementary tests of the records or the financial information of the component are necessary. Such tests may, depending on the circumstances, be performed by the principal auditor or the other auditor.

20 Under paragraph 18 of this Auditing Standard and ASA 230 Audit Documentation, the principal auditor needs to document in the audit working papers:

• the components whose financial information was audited by other auditors, their significance to the financial report of the entity as a whole, the names of the other auditors and any conclusions reached that individual components are immaterial; and
• the procedures performed and the conclusions reached.

For example, working papers of the other auditor that have been reviewed would be identified and the results of discussions with the other auditor would be recorded. However, the principal auditor need not document the reasons for limiting the procedures in the circumstances described in paragraph 17, provided those reasons are summarised elsewhere in documentation maintained by the principal auditor’s firm.

Cooperation Between Auditors

21 The other auditor, knowing the context in which the principal auditor will use the other auditor’s work, shall cooperate with the principal auditor.

22 For example, the other auditor would bring to the principal auditor’s attention any aspect of the other auditor’s work that cannot be carried out as requested. Similarly, subject to legal and professional considerations, the other auditor will need to be advised of any matters that come to the attention of the principal auditor which may have an important bearing on the other auditor’s work.

Reporting Considerations

General

23 When the principal auditor concludes that the work of the other auditor cannot be used and the principal auditor has not been able to perform sufficient additional procedures regarding the financial information of the component audited by the other auditor, the principal auditor shall issue a modified auditor’s report because there is a limitation in the scope of the audit.

24 The principal auditor has sole responsibility for the opinion expressed on a consolidated financial report. If, having examined the financial reports and auditor’s reports of components for which the principal auditor has not acted as auditor, the principal auditor is not satisfied that the financial reports of any of these components are in form or content appropriate for the purpose of the preparation of a consolidated financial report, or if the principal auditor has not received satisfactory information and explanations to form such opinion, under ASA 701 Modifications to the Auditor’s Report, the principal auditor needs to modify the auditor’s report on the consolidated financial report.

25 When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

(a) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

(b) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

Reference to Another Auditor in the Auditor’s Report

26 The principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification.

27 Such a reference may be misunderstood to be a modification of the auditor’s opinion or a division of responsibility, neither of which is intended.

Conformity with International Standards on Auditing

28 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 600 Using the Work of Another Auditor, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 600 are:

• This Auditing Standard includes the following mandatory requirement that is not included in ISA 600:

♦ the principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification (paragraph 26).

• This Auditing Standard includes the following mandatory requirement, that is included in ISA 600 as explanatory guidance:

♦ When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

○ the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

○ whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

• ISA 600 includes a Public Sector Perspective section whereas this Auditing Standard does not as it is sector neutral.

Compliance with this Auditing Standard enables compliance with ISA 600.

Application

1 This Auditing Standard applies to:

(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and

(b) an audit of a financial report for any other purpose.

2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.

Introduction

4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance when an auditor, reporting on the financial report of an entity, uses the work of another auditor on the financial information of one or more components included in the financial report of the entity. This Auditing Standard does not deal with those instances where two or more auditors are appointed as joint auditors nor does it deal with the auditor’s relationship with a predecessor auditor. Further, when the principal auditor concludes that the financial report of a component is immaterial, the mandatory requirements in this Auditing Standard do not apply. When, however, several components, immaterial in themselves, are together material, the procedures outlined in this Auditing Standard would need to be considered.

5 When the principal auditor uses the work of another auditor, the principal auditor shall determine how the work of the other auditor will affect the audit.

6 “Principal auditor” means the auditor with responsibility for reporting on the financial report of an entity when that financial report includes financial information of one or more components audited by another auditor.

7 “Other auditor” means an auditor, other than the principal auditor, with responsibility for reporting on the financial information of a component which is included in the financial report audited by the principal auditor. Other auditors include affiliated firms, whether using the same name or not, and correspondents, as well as unrelated auditors.

8 “Component” means a division, branch, subsidiary, joint venture, associated company or other entity whose financial information is included in the financial report audited by the principal auditor.

Acceptance as Principal Auditor

9 The auditor shall consider whether the auditor’s own participation is sufficient to be able to act as the principal auditor.

10 For this purpose, the principal auditor ordinarily considers:

(a) the materiality of the portion of the financial report which the principal auditor audits;

(b) the principal auditor’s degree of knowledge regarding the business of the components;

(c) the risk of material misstatements in the financial report of the components audited by the other auditor; and

(d) the performance of additional procedures as set out in this Auditing Standard regarding the components audited by the other auditor resulting in the principal auditor having significant participation in such audit.

11 Section 323B of the Corporations Act 2001,[1] provides that the auditor of a controlled entity must give the principal auditor any information, explanation or assistance required under section 323A.

The Principal Auditor’s Procedures

12 When planning to use the work of another auditor, the principal auditor shall consider the professional competence of the other auditor in the context of the specific assignment.

13 Some of the sources of information for this consideration could be common membership of a professional organisation, common membership of, or affiliation with, another firm or reference to the professional organisation to which the other auditor belongs. These sources can be supplemented when appropriate by enquiries with other auditors, bankers, etc. and by discussions with the other auditor.

14 The principal auditor shall perform procedures to obtain sufficient appropriate audit evidence, that the work of the other auditor is adequate for the principal auditor’s purposes, in the context of the specific assignment.

15 Under paragraph 14 of this Auditing Standard, the principal auditor needs to advise the other auditor of:

(a) the independence requirements regarding both the entity and the component and obtain written representation as to compliance with them;

(b) the use that is to be made of the other auditor’s work and report and make sufficient arrangements for the coordination of their efforts at the initial planning stage of the audit;

(c) matters such as areas requiring special consideration, procedures for the identification of intercompany transactions that may require disclosure and the timetable for completion of the audit; and

(d) the accounting, auditing and reporting requirements and endeavour to obtain written representation as to compliance with them.

16 The principal auditor might also, for example, discuss with the other auditor the audit procedures applied, review a written summary of the other auditor’s procedures (which may be in the form of a questionnaire or checklist) or review working papers of the other auditor. The principal auditor may wish to perform these procedures during a visit to the other auditor. The nature, timing and extent of audit procedures will depend on the circumstances of the engagement and the principal auditor’s knowledge of the professional competence of the other auditor. This knowledge may have been enhanced from the review of previous audit work of the other auditor.

17 The principal auditor may conclude that it is not necessary to apply procedures such as those described in paragraph 16 because sufficient appropriate audit evidence has previously been obtained that acceptable quality control policies and procedures are complied with in the conduct of the other auditor’s practice. For example, when they are affiliated firms the principal auditor and the other auditor may have a continuing, formal relationship providing for procedures that give that audit evidence such as periodic inter-firm review, tests of operating policies and procedures and review of working papers of selected audits.

18 The principal auditor shall consider the significant findings of the other auditor.

19 The principal auditor may consider it appropriate to discuss with the other auditor, those charged with governance and management of the component the audit findings or other matters affecting the financial information of the component and may also decide that supplementary tests of the records or the financial information of the component are necessary. Such tests may, depending on the circumstances, be performed by the principal auditor or the other auditor.

20 Under paragraph 18 of this Auditing Standard and ASA 230 Audit Documentation, the principal auditor needs to document in the audit working papers:

• the components whose financial information was audited by other auditors, their significance to the financial report of the entity as a whole, the names of the other auditors and any conclusions reached that individual components are immaterial; and
• the procedures performed and the conclusions reached.

For example, working papers of the other auditor that have been reviewed would be identified and the results of discussions with the other auditor would be recorded. However, the principal auditor need not document the reasons for limiting the procedures in the circumstances described in paragraph 17, provided those reasons are summarised elsewhere in documentation maintained by the principal auditor’s firm.

Cooperation Between Auditors

21 The other auditor, knowing the context in which the principal auditor will use the other auditor’s work, shall cooperate with the principal auditor.

22 For example, the other auditor would bring to the principal auditor’s attention any aspect of the other auditor’s work that cannot be carried out as requested. Similarly, subject to legal and professional considerations, the other auditor will need to be advised of any matters that come to the attention of the principal auditor which may have an important bearing on the other auditor’s work.

AUDITING STANDARD ASA 600

Using the Work of Another Auditor

Application

1 This Auditing Standard applies to:

(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and

(b) an audit of a financial report for any other purpose.

2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.

Operative Date

3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.

Introduction

4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance when an auditor, reporting on the financial report of an entity, uses the work of another auditor on the financial information of one or more components included in the financial report of the entity. This Auditing Standard does not deal with those instances where two or more auditors are appointed as joint auditors nor does it deal with the auditor’s relationship with a predecessor auditor. Further, when the principal auditor concludes that the financial report of a component is immaterial, the mandatory requirements in this Auditing Standard do not apply. When, however, several components, immaterial in themselves, are together material, the procedures outlined in this Auditing Standard would need to be considered.

5 When the principal auditor uses the work of another auditor, the principal auditor shall determine how the work of the other auditor will affect the audit.

6 “Principal auditor” means the auditor with responsibility for reporting on the financial report of an entity when that financial report includes financial information of one or more components audited by another auditor.

7 “Other auditor” means an auditor, other than the principal auditor, with responsibility for reporting on the financial information of a component which is included in the financial report audited by the principal auditor. Other auditors include affiliated firms, whether using the same name or not, and correspondents, as well as unrelated auditors.

8 “Component” means a division, branch, subsidiary, joint venture, associated company or other entity whose financial information is included in the financial report audited by the principal auditor.

Acceptance as Principal Auditor

9 The auditor shall consider whether the auditor’s own participation is sufficient to be able to act as the principal auditor.

10 For this purpose, the principal auditor ordinarily considers:

(a) the materiality of the portion of the financial report which the principal auditor audits;

(b) the principal auditor’s degree of knowledge regarding the business of the components;

(c) the risk of material misstatements in the financial report of the components audited by the other auditor; and

(d) the performance of additional procedures as set out in this Auditing Standard regarding the components audited by the other auditor resulting in the principal auditor having significant participation in such audit.

11 Section 323B of the Corporations Act 2001,[1] provides that the auditor of a controlled entity must give the principal auditor any information, explanation or assistance required under section 323A.

The Principal Auditor’s Procedures

12 When planning to use the work of another auditor, the principal auditor shall consider the professional competence of the other auditor in the context of the specific assignment.

13 Some of the sources of information for this consideration could be common membership of a professional organisation, common membership of, or affiliation with, another firm or reference to the professional organisation to which the other auditor belongs. These sources can be supplemented when appropriate by enquiries with other auditors, bankers, etc. and by discussions with the other auditor.

14 The principal auditor shall perform procedures to obtain sufficient appropriate audit evidence, that the work of the other auditor is adequate for the principal auditor’s purposes, in the context of the specific assignment.

15 Under paragraph 14 of this Auditing Standard, the principal auditor needs to advise the other auditor of:

(a) the independence requirements regarding both the entity and the component and obtain written representation as to compliance with them;

(b) the use that is to be made of the other auditor’s work and report and make sufficient arrangements for the coordination of their efforts at the initial planning stage of the audit;

(c) matters such as areas requiring special consideration, procedures for the identification of intercompany transactions that may require disclosure and the timetable for completion of the audit; and

(d) the accounting, auditing and reporting requirements and endeavour to obtain written representation as to compliance with them.

16 The principal auditor might also, for example, discuss with the other auditor the audit procedures applied, review a written summary of the other auditor’s procedures (which may be in the form of a questionnaire or checklist) or review working papers of the other auditor. The principal auditor may wish to perform these procedures during a visit to the other auditor. The nature, timing and extent of audit procedures will depend on the circumstances of the engagement and the principal auditor’s knowledge of the professional competence of the other auditor. This knowledge may have been enhanced from the review of previous audit work of the other auditor.

17 The principal auditor may conclude that it is not necessary to apply procedures such as those described in paragraph 16 because sufficient appropriate audit evidence has previously been obtained that acceptable quality control policies and procedures are complied with in the conduct of the other auditor’s practice. For example, when they are affiliated firms the principal auditor and the other auditor may have a continuing, formal relationship providing for procedures that give that audit evidence such as periodic inter-firm review, tests of operating policies and procedures and review of working papers of selected audits.

18 The principal auditor shall consider the significant findings of the other auditor.

19 The principal auditor may consider it appropriate to discuss with the other auditor, those charged with governance and management of the component the audit findings or other matters affecting the financial information of the component and may also decide that supplementary tests of the records or the financial information of the component are necessary. Such tests may, depending on the circumstances, be performed by the principal auditor or the other auditor.

20 Under paragraph 18 of this Auditing Standard and ASA 230 Audit Documentation, the principal auditor needs to document in the audit working papers:

• the components whose financial information was audited by other auditors, their significance to the financial report of the entity as a whole, the names of the other auditors and any conclusions reached that individual components are immaterial; and
• the procedures performed and the conclusions reached.

For example, working papers of the other auditor that have been reviewed would be identified and the results of discussions with the other auditor would be recorded. However, the principal auditor need not document the reasons for limiting the procedures in the circumstances described in paragraph 17, provided those reasons are summarised elsewhere in documentation maintained by the principal auditor’s firm.

Cooperation Between Auditors

21 The other auditor, knowing the context in which the principal auditor will use the other auditor’s work, shall cooperate with the principal auditor.

22 For example, the other auditor would bring to the principal auditor’s attention any aspect of the other auditor’s work that cannot be carried out as requested. Similarly, subject to legal and professional considerations, the other auditor will need to be advised of any matters that come to the attention of the principal auditor which may have an important bearing on the other auditor’s work.

Reporting Considerations

General

23 When the principal auditor concludes that the work of the other auditor cannot be used and the principal auditor has not been able to perform sufficient additional procedures regarding the financial information of the component audited by the other auditor, the principal auditor shall issue a modified auditor’s report because there is a limitation in the scope of the audit.

24 The principal auditor has sole responsibility for the opinion expressed on a consolidated financial report. If, having examined the financial reports and auditor’s reports of components for which the principal auditor has not acted as auditor, the principal auditor is not satisfied that the financial reports of any of these components are in form or content appropriate for the purpose of the preparation of a consolidated financial report, or if the principal auditor has not received satisfactory information and explanations to form such opinion, under ASA 701 Modifications to the Auditor’s Report, the principal auditor needs to modify the auditor’s report on the consolidated financial report.

25 When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

(a) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

(b) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

Reference to Another Auditor in the Auditor’s Report

26 The principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification.

27 Such a reference may be misunderstood to be a modification of the auditor’s opinion or a division of responsibility, neither of which is intended.

Conformity with International Standards on Auditing

28 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 600 Using the Work of Another Auditor, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 600 are:

• This Auditing Standard includes the following mandatory requirement that is not included in ISA 600:

♦ the principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification (paragraph 26).

• This Auditing Standard includes the following mandatory requirement, that is included in ISA 600 as explanatory guidance:

♦ When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

○ the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

○ whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

• ISA 600 includes a Public Sector Perspective section whereas this Auditing Standard does not as it is sector neutral.

Compliance with this Auditing Standard enables compliance with ISA 600.

General

23 When the principal auditor concludes that the work of the other auditor cannot be used and the principal auditor has not been able to perform sufficient additional procedures regarding the financial information of the component audited by the other auditor, the principal auditor shall issue a modified auditor’s report because there is a limitation in the scope of the audit.

24 The principal auditor has sole responsibility for the opinion expressed on a consolidated financial report. If, having examined the financial reports and auditor’s reports of components for which the principal auditor has not acted as auditor, the principal auditor is not satisfied that the financial reports of any of these components are in form or content appropriate for the purpose of the preparation of a consolidated financial report, or if the principal auditor has not received satisfactory information and explanations to form such opinion, under ASA 701 Modifications to the Auditor’s Report, the principal auditor needs to modify the auditor’s report on the consolidated financial report.

25 When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

(a) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

(b) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

Reference to Another Auditor in the Auditor’s Report

26 The principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification.

27 Such a reference may be misunderstood to be a modification of the auditor’s opinion or a division of responsibility, neither of which is intended.

Conformity with International Standards on Auditing

28 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 600 Using the Work of Another Auditor, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 600 are:

• This Auditing Standard includes the following mandatory requirement that is not included in ISA 600:

♦ the principal auditor shall not refer to the work of another auditor in an auditor’s report unless required by legislation or as part of a modification (paragraph 26).

• This Auditing Standard includes the following mandatory requirement, that is included in ISA 600 as explanatory guidance:

♦ When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider:

○ the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and

○ whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.

• ISA 600 includes a Public Sector Perspective section whereas this Auditing Standard does not as it is sector neutral.

Compliance with this Auditing Standard enables compliance with ISA 600.