NSW Audit Office - Awareness - Issue 2004 02 - March 2004

The Audit Office Of New South Wales

Informations

• Publié par: Inke
• Nombre de lectures: 22
• Langue: English

Extrait

AWARENESSccounting and Auditing Developments Issue 2 MARCH 2004
AUDIT OFFICE 1AUDIT OFFICE UPDATE
UPDATE
AUDITOR-GENERAL’S REPORT TO PARLIAMENT 2004, VOLUME 1 ACCOUNTING 2
UPDATEThis report was released on the 25 February 2004. Significant issues in this
volume include:
URGENT ISSUES 2
GROUP UPDATEReview of InterContinental Hotel Land Sale
On 24 September 2003, a media article alleged that the sale of government land
AUDITING 3
under the InterContinental Hotel in August 1999 had occurred at considerably UPDATE
less than the market valuation. The article referred to a site valuation in 1991
by the government valuer of $130 million and the sale price in 1999 of $37 INTERNATIONAL 5
million. UPDATE
The $130 million valuation was not a market valuation of the site and is not
MISCELLANEOUS 6
comparable to the sale price. The sale price is within an independent market
PUBLICATIONS
value range for the site at that time.
The nature and execution of the sale transaction exposed the government to a TREASURY UPDATE 7
range of risks. Given the circumstances, risk management processes could have
PREMIER’S 7been improved.
DEPARTMENT
UPDATEAudit of Members’ Additional Entitlements
Members substantially complied with the requirements of the Parliamentary AUDIT OFFICE 8
Remuneration Tribunal’s (PRT) 2002 Determination. BETTER PRACTICE
GUIDESMost Members receiving the Sydney Allowance on an annual basis are
late in submitting supporting documentation.
9INSTITUTE OF
Some Members are late in submitting expenditure claims for a range of TECHNOLOGY
other allowances. REUNION DINNER
New South Wales Aboriginal Land Council
Our audit identified systemic and persistent problems in the Council’s financial
management. We have raised some of these issues for several years, and they
remain unresolved.
Awareness is published by The Audit Office of New South Wales, 234 Sussex Street,
Sydney NSW 2000, GPO Box 12, Sydney NSW 2001 Telephone [phone] Fax [phone]
Email [e-mail] Website www.audit.nsw.gov.au
CONTENTSACCOUNTING UPDATE
ACCOUNTING STANDARD AASB 1046 DIRECTOR AND EXECUTIVE DISCLOSURES BY
DISCLOSING ENTITIES
The aim of this Standard is to improve the quality of disclosures relevant to individuals responsible
for the governance of listed entities.
The majority of the disclosures in this Standard were initially proposed in Exposure Draft ED 106
Part 1 Director and Executive Disclosures by Disclosing Entities (May 2002). Those proposals have
been amended to reflect the responses received and subsequent decisions of the International
Accounting Standards Board (IASB) addressing share-based payment.
Disclosing entities applying AASB 1046 will be exempt from complying with requirements on director
disclosures in AASB 1017 Related Party Disclosures. The requirements in AASB 1034 Financial
Report Presentation and Disclosures for the banded disclosures of executive remuneration will be
withdrawn. However, disclosing entities will still need to provide the other disclosures required by
AASB 1017. Corporate non-disclosing entities will remain subject to all requirements of AASB 1017,
including the disclosure requirements for directors. The issue of AASB 1046 does not change AAS 22
Related Party Disclosures, applicable to non-corporate, non-public sector reporting entities.
It is expected that reporting requirements for reporting entities other than disclosing entities will
be reviewed when considering the adoption of IAS 24 Related Party Disclosures.
This Standard is effective for years ending on or after 30 June 2004.
URGENT ISSUES GROUP UPDATE meeting 12 February 2004
ACCOUNTING FOR EARTHWORKS
UIG members discussed the current diversity in the accounting for earthworks, particularly in
relation to roads. In some jurisdictions, road earthworks are not depreciated at all, based on
assessment that the useful life is either infinite or indefinite, whereas in other jurisdictions
earthworks may be depreciated over standard periods ranging from 80 to 100 years.
Members considered the appropriate accounting for road earthworks if they had an indefinite life,
and took the view that an event may occur in relation to a specific road that would require the
entity to determine a useful life and to depreciate the earthworks over that period.
MMeemmbbeerrss aaggrreeeedd ttoo ccoonnssiiddeerr aa ddrraafftt AAbbssttrraacctt aatt tthhee nneexxtt mmeeeettiinngg aanndd ttoo oobbttaaiinn iinnffoorrmmaattiioonn
regarding the engineering assessment of the useful life of road earthworks.
COMMODITY POOLING ARRANGEMENTS
Members discussed the various arrangements for the sale of commodities, the distributions to
producers, and commission for pool managers. Members were advised that pool managers or related
ccoommppaanniieess mmaayy aallssoo pprroovviiddee aaddvvaanncceess aanndd ootthheerr sseerrvviicceess ttoo pprroodduucceerrss..
Members noted that the issues represented a specific application of general principles for
distinguishing transactions as a principal from those as an agent or as a bare trustee.
Members agreed to continue their discussion at a subsequent meeting.
2 3The Audit Office of New South Wales1ADOPTION OF SIC INTERPRETATIONS FOR 2005
The UIG Abstracts will adopt the AASB’s approach to editorial changes to the wording in the
International pronouncements, such as changing “financial statements” to “financial report” when
referring to both the statements and the accompanying notes, and prefixing additional Australian
paragraphs with “Aus”.
UUIIGG mmeemmbbeerrss ddiissccuusssseedd tthhee pprroocceessss ffoorr ccoonnvveerrssiioonn,, nnoottiinngg tthhaatt PPeennddiinngg UUIIGG AAbbssttrraaccttss ccaann bbee
prepared only once the related AASB Accounting Standard and revised International Interpretation
had been largely finalised. A Pending Abstract is subject to editorial changes and to approval by
the AASB.
INTRODUCTION OF THE EURO (SIC-7)-PENDING ABSTRACT AGREED
TThhee UUIIGG rreeaacchheedd aa ccoonnsseennssuuss ccoonncceerrnniinngg tthhee eeffffeecctt oonn ffoorreeiiggnn eexxcchhaannggee aaccccoouunnttiinngg ooff tthhee
introduction of the euro. Members noted that the issue remained relevant where entities had
operations in countries that in the future changed from their national currency to the euro.
UIG members agreed Pending Abstract 107 Introduction of the Euro, which will support the
requirements of the forthcoming Accounting Standard AASB 121 The Effects of Changes in Foreign
Exchange Rates.
The next meeting will be held in Melbourne on the 18 March 2004.
AUDITING UPDATE
AUDIT RISK STANDARDS
The Australian Auditing & Assurance Standards Board (AuASB) has released new and revised
Auditing and Assurance Standards (AUSs), which aim to improve audit quality by requiring auditors
to perform better audit risk assessments. The new requirements represent significant changes to
the standards governing audits of financial reports and provide the underpinnings for other AuASB
projects currently under development. The new and revised Australian AUSs are based on the
corresponding International Standards on Auditing (ISAs) issued by the International Federation of
Accountants (IFAC) late last year.
The newly issued AUSs are as follows:
AUS 202 “Objectives and General Principles Governing an Audit of a Financial Report” (revised)
AUS 402 “Understanding the Entity and Its Environment and Assessing the Risks
of Material Misstatements” (revised)
AUS 406 “The Auditor’s Procedures In Response to Assessed Risks” (new)
AUS 502 “Audit Evidence” (revised).
These AUSs should enable auditors to more clearly focus on areas where there is a greater risk
of potential material misstatement in a financial report. It is anticipated that implementation of
the newly issued standards will improve the linkage between assessed risks and audit procedures,
resulting in better quality audits.
1 Refer Awareness Issue 1 February 2004
2 3The Audit Office of New South Wales The Audit Office of New South WalesIn addition to the other new requirements, the auditor is now required to:
perform audit procedures to obtain a broader understanding of the entity and its
environment, including its internal control
make assessments of the risks of material misstatements in all cases and perform
more rigorous assessments
design and perform further audit procedures that are linked to the assessed risks.
The changes are effective for audits of financial reports for periods commencing on or
after 15 December 2004. This is in line with the operative date for the equivalent
International Standards on Auditing.
The following existing AUSs will continue to remain operative for financial reporting
periods commencing prior to 15 December 2004:
AUS 202 “Objectives and General Principles Governing an Audit of a Financial Report” (July 2002)
AUS 214 “Auditing in a CIS Environment” (October 1995)
AUS 304 “Knowledge of the Business” (July 2002)
AUS 402 “Risks Assessments and Internal Controls” (July 2002)
AUS 502 “Audit Evidence” (October 1995).
These AUSs will be withdrawn when the new and revised AUSs come into effect later this year.
Other existing AUSs address various specific aspects of an audit. Changes will be made to these