GS 008

This Guidance Statement has been formulated by the Auditing and Assurance Standards Board (AUASB) to provide guidance to auditors reporting pursuant to section 308(3C) of the Corporations Act 2001 (“the Act”) regarding the Remuneration Report required to be included in the annual directors’ report pursuant to section 300A of the Act (“the Remuneration Report”).

This Guidance Statement should be used when an auditor conducts an audit under the Australian Auditing Standards applicable to financial reporting periods commencing on or after 1 January 2010.

This Guidance Statement is operative on 1 March 2010.

The auditor’s objective is to express an opinion on whether the Remuneration Report complies with section 300A of the Act.

Section 300A applies to any disclosing entity^[1] that is a company. In recognition of the section 300A requirements and so as to avoid unnecessary duplication, Accounting Standard AASB 124 Related Party Disclosures lists certain disclosure requirements that do not apply to disclosing entities that are companies.

Section 308(3C) of the Act requires that, if the directors’ report for the financial year includes a Remuneration Report, the auditor must report also to members on whether the auditor is of the opinion that the Remuneration Report complies with section 300A of the Act. If not of that opinion, the auditor’s report must state why.

The requirement to express a distinct opinion on the Remuneration Report in the directors’ report is additional to the auditor’s responsibility to express an opinion on the financial report. In accordance with Auditing Standard ASA 700 Forming an Opinion and Reporting on a Financial Report, the auditor is required to address other reporting responsibilities in a separate section of the auditor’s report that follows the opinion paragraph on the financial report, in order to clearly distinguish them from the auditor’s primary responsibility to express an opinion on the financial report.

Where a company has included a Remuneration Report in the annual directors’ report pursuant to section 300A of the Act, the auditor’s report should identify clearly the paragraph numbers or pages of the directors’ report that have been audited pursuant to section 308(3C) of the Act. This is necessary to avoid any misunderstanding by users as to which part of the directors’ report has been subjected to audit.

Furthermore, the auditor’s report describes the respective responsibilities of the directors and the auditor in relation to the Remuneration Report. See Appendix 1 for an illustrative example of an unmodified report.

The suggested form of opinion on the Remuneration Report, included in the Appendices to this Guidance Statement, does not make reference to materiality. An auditor exercises professional judgement in considering reporting responsibilities under the Act, including considering additional regulatory reporting obligations, such as under section 311 of the Act, for significant breaches of the Act.

Modifications to the auditor’s report in relation to the Remuneration Report are made in accordance with ASA 705 Modifications to the Opinion in the Independent Auditor’s Report. See Appendix 2 for an illustrative example of a modified report.

The example of an unmodified auditor’s report, that is included as Illustration 1A in Appendix 1 of ASA 700 incorporates the audit reporting requirements of the Act and the Auditing Standards. This auditor’s report format has been used in the Appendices to this Guidance Statement to illustrate example wording regarding the auditor’s reporting responsibilities regarding the Remuneration Report, pursuant to section 308(3C) of the Act.

As this Guidance Statement relates to Australian legislative requirements under the Act, there is no equivalent International Standard on Auditing or Auditing Practice Statement to this Guidance Statement.