Transparency-Report-Audit-Quality-in-Focus-2010

Description

Transparency ReportAudit Quality in Focuskpmg.com.auAudit Quality in Focus | IntroductionReliable financial information and high quality audits have always been important but never more so than in the current environment of global economic turbulence, complexity, and uncertainty. There is no legal requirement for audit firms to produce a Transparency Report in Australia; but as it is the independence, expertise and professional scepticism of auditors that add value to financial statements we believe that it is important to be transparent about the processes that sit behind the output of an audit, the audit report. This Transparency Report covers KPMG in Australia and our audit division in particular. It describes the systems and controls that ensure, for the benefit of our clients and the capital markets we serve, that every KPMG audit is a quality audit. This report, the first of its kind for a ‘Big 4’ audit firm in Australia, aims to articulate clearly what we mean by a quality audit and the steps we take to deliver it. This is underpinned by our culture and values, our belief and commitment to being open and honest.This report is structured around our unique seven drivers of audit quality. These assist us to articulate what audit quality means to us, and to highlight how every audit partner and staff member is accountable for the delivery of audit quality. Tone at the top is our first driver. To me, it is the tone of an organisation that drives ...

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• Publié par: Fuiv
• Nombre de lectures: 18
• Langue: English

Extrait

Transparency Report

Audit Quality in Focus

kpmg.com.au

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Audit Quality in Focus | 3

Introduction

Reliable financial information and high quality audits have always been important but never more so than in the current environment of global economic turbulence, complexity, and uncertainty. There is no legal requirement for audit firms to produce a Transparency Report in Australia; but as it is the independence, expertise and professional scepticism of auditors that add value to financial statements we believe that it is important to be transparent about the processes that sit behind the output of an audit, the audit report. This Transparency Report covers KPMG in Australia and our audit division in particular. It describes the systems and controls that ensure, for the benefit of our clients and the capital markets we serve, that every KPMG audit is a quality audit. This report, the first of its kind for a ‘Big 4’ audit firm in Australia, aims to articulate clearly what we mean by a quality audit and the steps we take to deliver it. This is underpinned by our culture and values, our belief and commitment to being open and honest. This report is structured around our unique seven drivers of audit quality. These assist us to articulate what audit quality means to us, and to highlight how every audit partner and staff member is accountable for the delivery of audit quality. Tone at the top is our first driver. To me, it is the tone of an organisation that drives its culture and values. It is this consistent voice both locally and globally that makes it clear that quality is an integral part of everything we do and is therefore not negotiable. I expect this report will be a valuable tool to promote debate about audit quality, inform stakeholders in the capital markets about our audit process, and ultimately enhance quality through increased transparency. I believe a true appreciation of our commitment and performance in relation to audit quality promotes confidence in our client’s financial reporting and contributes to stable capital markets. I trust that you find our report a useful insight into how we strive to enhance audit quality, and a valuable step towards raising the confidence of users and purchasers of audit services.

Peter Nash National Managing Partner, Audit November 2010

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Quality external auditing is integral to the functioning of our capital markets. It is an essential service requiring specialist skills and knowledge. Yet auditor selection is often based more on intuition than informed judgement about what makes a quality audit. But what do we really know about audit quality? In just a few years the concept of audit quality has evolved from being nebulous, loosely discussed and poorly acknowledged, to having substance and understanding. The evolution of audit quality is not finished – in reality it never will be. The pace of development is accelerating, and it is the pace of change that is a challenge for all of us: the audit practitioner, audit firm, professional body, standard setter and regulator. With this challenge comes opportunity to provide strong leadership to influence the development of audit quality for the benefit of all. This Transparency Report by KPMG Australia is an important milestone in audit quality. It is the first to include real metrics or indicators of how audit quality could be measured. This report is important because it clearly shows this firm’s desire to explain publicly its structures, systems, policies and processes, focus and values to deliver audit quality. This report is not a response to a newly introduced regulation but comes from the firm’s commitment to transparency and to making a substantial and meaningful contribution to the evolution of audit quality. This report provides a range of performance measures that show this firm’s size, nature, rate of activity and achievement. These measures tell me of the successes and goals. It shows the significant breadth of operation and contribution that KPMG makes to the Australian business community. These measures also tell where further learning and continuous improvement will occur. Importantly for the evolution of audit quality, commitment to timely remediation and improvement is the clearest sign of a mature and forward looking profession. I congratulate KPMG on taking this step and encourage the broader profession to keep building on our earlier initiatives and successes and ensure that we are all aligned for the common goal.

Lee White General Manager Leadership & Quality Institute of Chartered Accountants in Australia November 2010

4 | Transparency Report

Foreword

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Audit Quality in Focus | 

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Contents

07 07 09 09 09 10 10 10 10 10   10 10 10 11 11 11 11 12 12 13 13 13 14 14 14 14 14 14 1 1 1 1 1 1 1 17 17 18 18 18 18 19 19 19 19

 What is audit quality?  The KPMG Audit Quality Equation   1. Tone at the top  Our culture, values and Code of Conduct  Our Audit Strategy – Audit quality in focus  Governance structure  Leadership responsibilities for quality within the firm  Committee structure  Audit Leadership Group (ALG)  Audit Quality Committee  Department of Professional Practice (DPP)  Risk Management and Quality Partners  Director Audit Quality 2. Association with the right clients  Prospective client and engagement evaluation process  Continuance process  Safeguards and Higher Risk Register  Impact of specific economic conditions  Fee dependency 3. Clear standards and robust audit tools  Auditing and audit quality  KPMG Audit Manual  KPMG audit process  Technology tools to support the audit process  Other tools and templates to support the audit process  Ethics and independence  Quality & Risk Management Manual  Personal independence – investment tracking systems  Audit partner rotation  Non-audit services – independence systems  Conflicts of interest  Confidentiality of client information  Internal Ethics and Compliance Hotline  External complaints  Accounting and financial reporting resources 4. Recruitment, development and assignment  of appropriately qualified personnel  Recruitment  Development and retention of talent  Reward, recognition and promotion  Promoting our senior high performers – partner admissions  Partner remuneration  Assignment of partners and staff to engagement teams  Composition of the engagement team  Industry expertise  Capacity and resource management

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 | Transparency Report 5. Commitment to technical excellence and quality service delivery 21  Training programs 21  Technical training – auditing, financial reporting and independence 21  Developing business understanding and industry knowledge 22  Attendance and assessment of training 22  Continuing professional education of statutory auditors 22  Accreditation and licensing 22  Investment in technical support 23  Access to specialist networks 23  Consultation and differences of opinion 24 6. Performance of effective and efficient audits 25  Planning and risk assessment 2  Timely partner and manager involvement 2  Testing and evidence gathering 2  Critical assessment of audit evidence 2  Professional judgement and professional scepticism 2  Ongoing mentoring and on the job coaching,  supervision and review 2  Appropriately supported and documented conclusions 2  Engagement Quality Control Review Partner 27  Completion and reporting 27  Insightful, open and honest two-way communications 27 7. Commitment to continuous improvement 29  Internal monitoring 29  Formal global monitoring programs 29  Quality Performance Review (QPR) Program 29  Other assessments of audit quality 30  Assessments of compliance with independence  and ethics requirements 30  External inspections 31  Australian Securities and Investments Commission (ASIC) 31  Institute of Chartered Accountants in Australia (ICAA) 31  Evaluating and appropriately responding to feedback and findings 31  Client feedback 32  Proactive identification of emerging risks and opportunities  to improve quality and provide insights 32 Statement on effectiveness of system of quality control 33 Appendices Appendix 1 KPMG Australia legal structure and ownership 34 Appendix 2 Network arrangements 3 Appendix 3 Financial and other information 37 Appendix 4 Governance structure 40 Appendix  Public listed clients of the firm 42 Key terms   43 © 2010 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”). Liability limited by a scheme approved under Professional Standards Legislation.

Legirds andal St

KPMG global values We lead by example At all levels we act in a way that exemplifies what we expect of each other and of our clients. We work together We bring out the best in each other and create strong and successful working relationships. We respect the individual We respect people for who they are and for their knowledge, skills and experience as individuals and team members. We seek the facts and provide insight By challenging assumptions and pursuing facts we strengthen our reputation as trusted and objective business advisers. We are open and honest in our communication We share information, insight and advice frequently and constructively and manage tough situations with courage and candour. We are committed to our communities We act as responsible corporate citizens by broadening our skills, experience and perspectives through work in our communities and protecting the environment. Above all, we act with integrity We consistently strive to uphold the highest professional standards, provide sound advice and rigorously maintain our independence.

Audit Quality in Focus | 7

At KPMG we consider audit quality We embed our values in our culture is not just about reaching the right and they define who we are and how opinion, but how we reach that opinion. we act. It is about the processes, thought and integrity behind the final formal audit The KPMG Audit Quality report. KPMG views the outcome of Equation a quality audit as the delivery of an  KPMG has a culture of personal appropriate and independent opinion  accountability and a commitment in compliance with the auditing  to quality. We use our Audit Quality standards. This means, above all, being  Equation to articulate what audit quality independent, compliant with our legal  means to KPMG, to highlight what and professional requirements, and  every audit partner and staff member offering insight and impartial advice to  is accountable for. Sharing what audit our clients.  quality means to us is a critical step in our commitment to transparency and T f h  a er u e d   i i t s     q n u o a   li u t n y i , v  n er o s  e all s y t   a a b g li r s e h e e d d     definition  allows better understanding of how we  o safeguard  the quality of the service we me r a e s e u m res  t o   r a   b b o e u n t c   h w m ha a t r   k a s c , t   u a a n l d ly     n d o r   ives  provide. ag en audit quality. It is difficult for clients and  We view audit quality as seven key stakeholders to determine whether the  drivers combined with the commitment audit is of high quality because what  of each individual in KPMG. drives audit quality is a complex set of factors that are often obscured and hard  Every KPMG member firm uses this to measure  framework to describe, focus on, and . enhance audit quality. Focusing on our The only commentary on audit quality  drivers of audit quality benefits our visible to the market relates to financial  clients, our people and ultimately our statement restatements or re-issuance,  communities. litigation and investigations. However these can take years to manifest and may bear little or no correlation to the original quality of the audit. In this environment, we recognise we must be transparent about what we do so you can have confidence in us. Our commitment to transparency is an important part of our global values that state, “above all, we act with integrity”.

What is audit quality?

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Commitment to  Association with i c m o p n r t o i v n e uo m u e s nt the right clients

Our people make the difference... with their professional judgement, scepticism and technical expertise

Issuing an appropriate and independent opinion in compliance with the auditing standards

Performance of  Tone at  Clear standards and effective and  the top  robust audit tools efficient audits Recruitment, Commitment to  development and technical excellence  assignment of and quality service  appropriately delivery qualified  personnel

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7 Drivers

Audit Quality

Example factors outside the control of auditors affecting audit quality Importance attached to the organisation’s financial reporting process. Number and experience of the organisation’s finance resources. Quality and timeliness of the client’s financial information. Regulatory environment, including reporting deadlines. Background and experience of the Audit Committee members 3 . Oversight of financial reporting process by those charged with governance 4 .

Our people

8 | Transparency Report

Our framework is mapped to the only In its recent report 2 , Treasury recognised Audit Quality Framework, supported these five drivers of audit the UK Financial Reporting Council’s quality as relevant to Australia. Qual Framewor F A r u a d m it  ewor i k t ) y  released in  k F 1  RC( FUK r pehTsilebaro    tes oorate wan th ew sy 008.ry 2bruae The UK FRC Framework includes the  control and assess the performance follo n e drivers:  of our audits. We recognise the risks wi g fiv  associated with trying to measure 1 The culture within an audit firm something as hard to define as 2 The skills and personal qualities of  audit quality, including unintended  consequences such as managing to audit partners and staff  a particular number or benchmark. 3 The effectiveness of the audit  However, some inputs to the audit ocess process are worth tracking to ensure pr we  operate our business in a way that 4 The reliability and usefulness of  enhances audit quality. audit reporting  Factors outside the control of auditors affecting audit quality.

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