The following paragraph 10 is inserted following existing paragraph 9:
Some of the requirements set out in the ASAs are applicable only to audits of financial reports of publicly traded entities, reflecting significant public interest in the financial condition of these entities due to the potential impact of their financial well-being on stakeholders. (Ref: Para. A14-A15)
The following paragraph 11 is inserted following the new paragraph 10:
Stakeholders have heightened expectations regarding an audit engagement for a publicly traded entity because of the significance of the public interest in the financial condition of the entity. The purpose of the requirements in the ASAs that apply to audits of financial reports of publicly traded entities is to meet these expectations, thereby enhancing stakeholders' confidence in the entity's financial reports that can be used when assessing the entity's financial condition. (Ref: Para. A14-A18)
The following sub-paragraph 13(m) is inserted following existing paragraph 13(l):
Publicly traded entity – An entity that issues financial instruments that are transferrable and traded through a publicly accessible market mechanism, including through listing on a stock exchange. A listed entity as defined by relevant securities law or regulation is an example of a publicly traded entity.
For purposes of the ASAs:
(i) If law, regulation or professional requirements define more explicitly a publicly traded entity in a specific jurisdiction, the auditor applies that more explicit definition. For example, law, regulation or professional requirements may define publicly traded entities for purposes of defining entities that are considered public interest entities, by making reference to specific public markets for trading securities, incorporating exemptions for specific types of entities, or setting size criteria.
(ii) When terms other than publicly traded entity are applied to entities by law, regulation or professional requirements to meet the purpose described in paragraphs 10 and 11, such terms are regarded as equivalent to "publicly traded entity".
The following paragraph A14 and heading is inserted following existing paragraph A13:
Public Interest in the Financial Condition of an Entity (Ref: Para. 10-11)
The auditor may determine that there are entities other than publicly traded entities where stakeholders have heightened expectations regarding the audit engagement, reflecting significant public interest in the financial condition of those entities. Therefore, the auditor may also apply one or more requirements set out in an ASA for audits of financial reports of publicly traded entities to the audits of such other entity(ies). Paragraphs A15-A18 may be relevant in this regard.
The following paragraph A15 is inserted following the new paragraph A14:
The extent of public interest in the financial condition of an entity may, for example, be affected by:
The nature of the business or activities, such as taking on financial obligations to the public as part of the entity’s primary business.
Whether the entity is subject to regulatory supervision designed to provide confidence that the entity will meet its financial obligations.
Size of the entity.
The importance of the entity to the sector in which it operates including how easily replaceable it is in the event of financial failure.
Number and nature of stakeholders including investors, customers, creditors and employees.
The potential systemic impact on other sectors and the economy as a whole in the event of financial failure of the entity.
The following paragraph A16 is inserted following the new paragraph A15:
[Deleted by the AUASB. Refer Aus A16.1]
Aus A16.1 Law, regulation or professional requirements, including relevant ethical requirements. may define or designate an entity(ies) as a "public interest entity" or may use terms other than "public interest entity" to describe entities in which there is a significant public interest in their financial condition. For example, the APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) has identified certain categories of public interest entity, including:
An entity one of whose main functions is to take deposits from the public, or
An entity one of whose main functions is to provide insurance to the public; or
An entity specified as such by law, regulation or professional standards to meet the purpose described in paragraph 400.15 of the Code.
The Code provides for the categories to be more explicitly defined or added to as described in paragraphs 400.23 A1 and 400.23 A2 of the Code.
The following paragraph A17 is inserted following the new paragraph A16:
In addition. those responsible for setting law, regulation or professional requirements may also designate categories of "public interest entities". Depending on the facts and circumstances in a specific jurisdiction, such categories may include:
Superannuation funds.
Collective investment vehicles.
Private entities with large numbers of stakeholders (other than investors).
Not-for-profit organisations or governmental entities.
Public utilities.
The following paragraph A18 is inserted following the new paragraph A17:
The auditor may also consider the following factors in determining whether to apply one or more requirements in an ASA for audits of publicly traded entities to the audit of another entity(ies):
Whether the entity is treated as a public interest entity for purposes of relevant ethical requirements. including those related to independence.
Whether the entity is likely to become a publicly traded entity in the near future.
Whether in similar circumstances, the auditor has applied the differential requirements for publicly traded entities to other entities.
Whether the entity has been specified as not being a publicly traded entity by law, regulation or professional requirements.
Whether the entity or other stakeholders requested the auditor to apply the differential requirements for publicly traded entities to the entity and, if so, whether there are any reasons for not meeting this request.
The entity's corporate governance arrangements, for example, whether those charged with governance are distinct from the owners or management.
Whether in similar circumstances, a predecessor auditor has applied differential requirements for publicly traded entities to the entity.
Existing paragraph A70 is amended to read as follows:
The “considerations specific to smaller entities” included in some Australian Auditing Standards have been developed primarily with unlisted entities other than publicly traded entities in mind. Some of the considerations, however, may be helpful in audits of smaller listedpublicly traded entities.