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Ernst & Young: Cautious interpretation of ASIC report

By Rob Starr, Content Manager,

Ernst & Young Oceania Assurance Managing Partner Tony Johnson has encouraged readers of the Australian Securities and Investment’s (ASIC) report on its audit inspection program to understand its context and the detail behind some of the key findings.

“Positively, the report  recognised that an adverse finding on a matter during an ASIC review does not necessarily mean that there will be material misstatements in the overall financial report,” Mr Johnson said.

Ernst & Young look forward to working with both ASIC and the broader audit profession to address areas of concern. They remain committed to audit quality improvement and continually responding to any findings, whether identified through their internal quality assurance programs or though external inspection programs such as those conducted by ASIC.

Mr Johnson noted that the design of the inspection program did not measure the instances where auditors detect material misstatements during the audit process that are subsequently corrected before a financial report is completed and released.

“This is an important issue. While compliance with auditing standards and documentation is important, audit quality cannot be measured solely by reference to these factors alone. A crucial aspect of audit quality is the impact the audit process has on ensuring companies accurately report their results and comply with accounting standards,” he said.

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