The Financial Markets Authority’s Audit Quality Report 2018 expresses concern at the continued inconsistencies in audits provided by the same firm, while noting the overall quality of audits has improved in recent years.
Reviews have also highlighted the direct link between the quality of an audit and the quality of the financial information provided by the entity being audited.
Garth Stanish, FMA Director of Capital Markets, said: “When an auditor is given poor quality information, there is an increased chance that the audit file was classified by us as requiring significant improvements.
“Auditors should also clearly tell directors when they are having difficulty getting the appropriate information and consider the impact of this issue on their audit opinion. Both auditors and directors have a role to play in raising audit standards.”
The FMA published a guide for directors last year, and this has been updated. Directors and management have primary responsibility for ensuring financial statements are compliant. The FMA expects directors to read and consider the guide carefully.
The FMA is required to carry out a quality review of the systems, policies and procedures of registered audit firms and licensed auditors at least once every four years, publishing an annual report of our findings.
For this year’s report, the FMA reviewed 5 registered firms and 24 audit files. Nine were listed companies and the other 15 were FMC Act companies.
The FMA’s role overseeing auditors is restricted to examining the audit files of Financial Markets Conduct Act reporting entities which includes entities like companies listed on the NZX and managed investment funds.
Mr Stanish added, “Issues around the quality of audits have been raised in the last year in jurisdictions around the world. We continue to monitor developments and expect the audit profession in New Zealand to consider these issues and learn from them.”