APRA Prudential Reporting Requirements

APRA may require an ADI, by notice in writing, to appoint an auditor, who may be the existing auditor or another auditor, as specified in APRA’s notice, to undertake an assurance engagement of:

1. under APS 310/3PS 310, a particular aspect of the ADI’s and/or the ADI group’s operations, prudential reporting, risk management systems or financial position; and/or
2. under APS 910, an ADI’s SCV systems and data, and the systems used to generate and transmit FCS payment instruction and reporting information.

The APRA requirement for an auditor to undertake a special purpose engagement constitutes a separate reporting engagement. The details of the engagement will normally be the subject of a specific request from APRA to the ADI. A separate engagement letter will be issued based on that request.

The appointed auditor’s special purpose engagement assurance report is generally to be submitted simultaneously to APRA and those charged with governance of the ADI and/or ADI group, within three months of the date of the notice commissioning the report, unless otherwise determined by APRA, and advised to the ADI by notice in writing.

Terms of the Engagement

Following the determination by APRA of the specific area to be examined, the appointed auditor, APRA and the ADI agree on the terms of the engagement in accordance with the requirements of applicable AUASB Standards. These arrangements are legally binding and include the required terms of engagement specified in APS 310, 3PS 310 and APS 910, as appropriate.

The appointed auditor accepts the engagement only when satisfied that relevant ethical requirements relating to the assurance engagement have been met. The concept of independence is important to the appointed auditor’s compliance with the fundamental ethical principles of integrity and objectivity and the auditor must be able to meet the independence requirements stipulated under both CPS 510 and ASA 102. Furthermore, the auditor needs to satisfy the fitness and propriety requirements specified in CPS 520.

An engagement letter^[114] confirms both the client’s and the appointed auditor’s understanding of the terms of the engagement, helping to avoid misunderstanding, and the auditor’s acceptance of the appointment. Both parties sign the engagement letter to acknowledge that it is a legally binding contract.

To ensure that there is a clear understanding regarding the terms of the engagement, the following are examples of matters to be agreed:

• APRA is to identify the scope of the ADI’s operations, prudential reporting, risk management or financial position to be the subject of the engagement.
• The appointed auditor, APRA and the ADI are to agree on the objectives of the engagement, key features and criteria of the area(s) to be examined, and the period to be covered by the engagement.
• APRA is to identify clearly the level of assurance required, that is, limited or reasonable assurance.
• The format of reports required (for example, long and/or short form reports) or other communication of results of the engagement.
• Responsibility of those charged with governance for the subject matter of the engagement.
• Understanding of the inherent limitations of an assurance engagement.

Format of Reporting Requirements

The appointed auditor has regard to the requirements, guidance and illustrative examples of reports provided in relevant AUASB Standards - ASAs, ASREs and ASAEs, as applicable, when preparing the special purpose assurance report. These Standards do not require a standardised format for special purpose reporting under APS 310, 3PS 310 or APS 910. Instead, these Standards identify the basic elements to be included in the auditor’s report. The format of the special purpose assurance report may vary depending on the type of engagement: that is, reasonable or limited assurance, as well as the subject matter and the findings.

Ordinarily, the appointed auditor adopts a long form style of reporting and the report may include a description of the terms of the engagement, materiality considerations applied, the assurance approach, findings relating to particular aspects of the engagement and, in some cases, recommendations.

The appointed auditor’s assurance report is to be restricted to the parties that have agreed to the terms of the special purpose engagement, namely the ADI and APRA, as well as other parties that APRA is lawfully entitled to share the information with.