NZAuASB Meeting 3 December 2020

Here is a summary of the main matters considered at the public session:

Fraud and Going Concern

The Board considered a draft submission on the IAASB’s discussion paper on fraud and going concern, following feedback from the well-attended roundtable on 24 November.

The discussion paper describes various forms of “expectation gap” in relation to both fraud and going concern, and urges an “ecosystem” approach recognising that not only auditors but management, those charged with governance, standard setters and regulators all play a part in addressing the gaps.

The IAASB has released a key takeaways publication following its recent virtual roundtables with experts and leaders exploring issues and challenges related to fraud and going concern.

Have a look

A key message from the Board’s outreach is that it strongly agrees that the IAASB cannot address the expectation gap on its own. The Board is therefore very supportive of this initiative, both with a focus on what can be done in the assurance standards as well as highlighting the role of others to promote ongoing co-operation between all participants in the financial reporting ecosystem.

The submission will be finalised by way of circular resolution in the New Year. The Board is very appreciative of the feedback it has received on these topics, including through the roundtable.

Meeting with Stakeholders

The Board welcomed guests from the broader wholesale investor community to the meeting to discuss matters of mutual interest, including the impact of COVID-19 and uncertainty on financial reporting, and carbon related disclosures.

Agreed-Upon Procedures

At its October meeting, the Board had considered the submissions received on its exposure draft of the new international standard on Agreed-Upon Procedures (AUP). The Board has been working closely with the Australian Auditing and Assurance Standards Board (AUASB) in its outreach on the standards.

Following its outreach the AUASB has approved the standard with a small number of Australian additions, including a requirement on restriction on use of the AUP report (the new standard leaving this as a matter of judgement).

The Board considered at this meeting the compelling reason analyses AUASB staff had prepared in support of the AUASB’s changes to the standard, along with the agreed wording of the additional paragraphs.

Noting the IAASB’s consideration of these matters in developing the international standard, the divergent views expressed by individual Board members regarding mandating the restriction on use, and feedback received from stakeholders in New Zealand, the Board concluded that the compelling reason test has not been met in New Zealand for the Australian changes.

The Board therefore agreed to adopt the international standard without change, as exposed.

While this will result in some divergence between the Australian and New Zealand standards, the Board applied the principles of harmonisation and concluded that the differences should not prevent consistent application of the standard in the two jurisdictions.

The Agreed-Upon Procedures engagement standard will be released in the New Year. It will be effective for agreed-upon procedures engagements for which the terms of engagement are agreed on or after January 1, 2022. Early adoption is permitted. 

Annual Improvements

The Board approved an exposure draft to align the definition of “assurance practitioner” in Professional and Ethical Standard 1 with the revised definition of the term in XRB Au1 Application of Auditing and Assurance Standards.

XRB Au1 was revised in August 2020 to reflect the extended mandate of the XRB to include standards for related services, such as agreed upon procedures. The revised definition of assurance practitioner includes reference to the undertaking of related services.

The exposure draft will be issued in January 2021 with a 30-day consultation period.

Principles of Conversion and Harmonisation Policy

The Board has been working with the AUASB to review and update the shared principles of convergence and harmonisation of the auditing and assurance standards in the two jurisdictions.

The Board considered a modified draft of the principles of conversion to international standards and harmonisation policy, which had been updated to reflect the feedback from the joint discussion with the AUASB held in October, and further changes arising from the AUASB meeting held earlier in December.

The Board agreed to adopt the updated policy subject to further changes arising from the Australian consideration, to be signed off by the Chair and Deputy Chair following further consideration by the AUASB.