NZAuASB Meeting 2 June 2021

Here is a summary of the main matters considered at the meeting.

Quality Management

The NZAuASB approved one new and two revised standards, together with conforming amendments to the ISAs (NZ) to adopt the new international quality management standards.

These standards were approved with minimal change from the international equivalent standards. The New Zealand changes recognise the restricted mandate of the NZAuASB that does not set standards for compilation engagements which are covered by the international equivalent standards.

Additional New Zealand public sector paragraphs are included in the New Zealand standard to address comments received from the Office of the Auditor-General (OAG) raising concern that the international standard does not contemplate the business model used by the Auditor-General. 

The NZAuASB also approved amendments to PES 1^[1] addressing the objectivity of an engagement quality reviewer and other appropriate reviewers. The need for revisions were driven by the changes made by the IAASB to address the matter of cooling off as an eligibility requirement for the engagement quality reviewer.

These standards will be gazetted in due course and will be made available on the XRB website, together with material to assist firms to implement the revised standards. The Board is committed to providing further guidance and outreach for first-time implementation of the standards, drawing on guidance being issued by the IAASB.   

Non-Assurance Services

The NZAuASB approved an exposure draft, subject to finalising further refinements discussed at the meeting and to be confirmed out of session, proposing New Zealand compelling reason changes to the revised international Code of Ethics relating to non-assurance services (NAS) to:

• Add application material explaining that additional work performed by the firm will generally not create a self-review threat to independence when that work is related to the audit or review engagement, and to provide examples of such services.
• Expressly prohibit the provision of tax advisory and tax planning services to an audit or review client that is a PIE. This prohibition extends to prohibit the review of tax returns.

The Exposure Draft and invitation to comment are expected to be issued in due course.

Conforming Amendments to NZ AS 1

The NZAuASB approved an exposure draft proposing limited conforming amendments to NZ AS 1, The Audit of Service Performance Information, arising from ISA (NZ) 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement,  to reflect the revised concepts and terminology to ensure consistency with the ISAs (NZ). Submissions are sought by 17 September 2021.

Meeting with CA ANZ

The NZAuASB welcomed Amir Ghandar and Zowie Pateman who joined the meeting virtually to explore ways the Board and CA ANZ can support the adoption and implementation of the new quality management standards in New Zealand.

In addition, the discussion covered current CA ANZ initiatives in the field of auditing and assurance, including:

• Research into trust and confidence in financial statements.
• Work to understand and help address the shortage of auditors in New Zealand.
• Focus topics for the road ahead, including audits of less complex entities (LCEs), fraud and going concern, NAS and assurance on extended external reporting (EER).

Update on IAASB Projects

The Board received an update from Lyn Provost, IAASB member. Lyn is chair of the IAASB’s Fraud Task Force, which is currently working through many submissions received on the 2020 consultation paper, in order to prioritise what actions the IAASB should take forward in a project plan.

On other IAASB work, Lyn highlighted the very limited capacity for the IAASB to take on extra projects if it is to complete its existing priority topics, noting that the IAASB is seeking views through its current work plan consultation.

The Board discussed the pending approval of the LCE exposure draft, which the IAASB is expected to issue in July for global submissions. The NZAuASB is expecting to develop an extensive outreach programme within New Zealand to inform its response.

IASB Disclosure Project

The Board received an update on the IASB’s disclosure project (IASB ED Disclosures in IFRS Standards – A Pilot Approach). Board members expressed support for adding disclosure objectives, but concern around removing black letter requirements, noting an unintended consequence may be additional time, cost and debate without improving the quality of disclosure.

[1]   PES 1, International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand)