Objective

The purpose of this Guidance Statement is to assist auditors in exercising professional judgement in applying the AUASB Standards to a selection of practical application issues that may arise in either a SSGA or a MSE. (Ref: Table 1)

Table 1: Practical Application Issues Addressed in this Guidance Statement

Detailed guidance on these issues is provided at the paragraph references above and in the Appendices.

The Nature of Engagements – Grant Acquittals

A “grant acquittal” is the term used where there is a requirement, generally arising pursuant to a grant agreement, to conduct an audit, a review or agreed-upon procedures and can relate to a single-subject matter or multiple subject matters. (Ref: paragraphs 1, 2 and 11-13)

The AUASB Framework for Assurance Engagements provides information on the nature of assurance and non-assurance engagements.^[4]

A grant acquittal as described in paragraph 1(a), is where the auditor is required to report a single level of assurance on only one subject matter. Examples of documentation a grant recipient may provide include:

1. A statement of grant income and expenditure.
2. A statement of compliance with the terms of the grant agreement.
3. A statement with respect to the design and operating effectiveness of internal controls relating to grant monies.

Ordinarily, the applicable AUASB Standard for a SSGA is easily identified. For example, the relevant AUASB Standards for the examples listed at paragraph 9 are:

1. A statement of grant income and expenditure would be audited and reported on in accordance with ASA 805^[5].
2. A compliance statement would be audited and reported on in accordance with ASAE 3100^[6].
3. A statement on controls would be audited and reported on in accordance with the requirements of ASAE 3150^[7].

The Nature of Engagements - Multi-scope 

For purposes of this Guidance Statement, where any engagement, including a grant acquittal, comprises the elements described in paragraphs 1(b) and 2, it is a MSE. Each different element of a MSE, whether different subject matters or level of assurance is considered as a separate section of the engagement.

Examples of a MSE include:

1. A grant acquittal where the grant agreement might call for independent assurance over historical financial information, such as a statement of grant income and expenditure, as well as assurance over compliance with the terms of the grant agreement.
2. A special purpose audit where management requests the auditor to audit the cash statement of the company’s social club and the related internal controls, agree employee leave taken to employee records (an agreed-upon procedures engagements) and provide limited assurance as to whether leave balances are calculated in accordance with corporate policy.
3. The requirements of the Australian Taxation Office in relation to self-managed superannuation funds – where reasonable assurance is given over historical financial information and over compliance with legislation over a period of time^[8].
4. An Annual Prudential Reporting Engagement undertaken pursuant to Australian Prudential Regulation Authority (APRA) Prudential Standard LPS 310 Audit and Related Matters - where the Regulator requires reasonable assurance over the annual return and limited assurance over the existence of, and compliance with, internal controls.^[9]
5. A financial licensee’s obligations to lodge an annual report with Australian Securities and Investments Commission (ASIC) – where the Regulator requires, inter alia, reasonable assurance over financial information and the operation of internal controls; limited assurance over statements made by the licensee; and a mixture of reasonable and limited assurance over compliance (over a period of time) with the requirements of the relevant Class Orders. In addition, the Regulator prescribes the form and content of the auditor’s report (Form FS71)^[10].

Appendix 3 provides further information about these examples.

Specific Issues

The AUASB recognises that a SSGA and a MSE may give rise to specific issues, including:

1. Determining which AUASB Standards and requirements are relevant, and how to apply them.
2. Planning and performing the engagement effectively and efficiently to address multiple objectives.
3. Reporting appropriately in compliance with:
   1. Relevant AUASB Standards; and
   2. Engagement mandates.
4. Demands for the use of prescribed auditor’s reports that are not in accordance with the AUASB frameworks.
5. Difficulties in conducting a MSE that comprises assurance, where professional judgement is exercised; and agreed-upon procedures, where no professional judgement is exercised.

Reporting appropriately may cause particular difficulties when the auditor seeks to combine statements, opinions, conclusions and sometimes factual findings in a single tailored auditor’s report. [Ref: paragraphs 50 onwards.]

AUASB Standards

This Guidance Statement refers to the requirements and approaches contained in the AUASB Standards by way of addressing a selection of common practical application issues. (Ref: Table 1)

In conducting a SSGA or a MSE, the auditor is required to comply with the relevant requirements in the relevant AUASB Standards. The auditor’s understanding of the composition of the engagement and user requirements is necessary in determining which AUASB Standards and requirements are relevant.

The auditor exercises professional judgement in appropriately applying the relevant AUASB Standards where the engagement mandate is to provide reasonable or limited assurance. The auditor applies their professional capabilities and competence in carrying out agreedupon procedures. The principles described in this Guidance Statement are intended to assist the auditor in applying the AUASB Standards.

The relevant requirements of the AUASB’s Standards are to be applied, regardless of the entity’s size, legal form, activities or the nature of the engagement, when:

1. The terms of the engagement require the auditor to comply with, and report in accordance with, AUASB Standards;
2. A prescribed auditor’s report requires the auditor to state that the engagement has been conducted in compliance with AUASB Standards; or
3. A member of an Australian professional accounting body is required to comply with APES 210 Conformity with Auditing and Assurance Standards.

The AUASB’s assurance Standards are to be applied in the context of the AUASB Framework for Assurance Engagements.

Where the MSE comprises both assurance and non-assurance requirements:

• The relevant AUASB Auditing Standards, Standards on Review Engagements and Standards on Assurance Engagements are applied to the assurance sections of the MSE;
• ASRS 4400^[11] is applied to the non-assurance section(s) of the MSE; and
• Any other applicable requirements that may exist in other Standards, legislation, regulation or contract are applied as relevant.