NSW Audit Office - Awareness - Issue 2004 03 - April 2004

The Audit Office Of New South Wales

Description

AWARENESSccounting and Auditing Developments ISSUE 3 APRIL 2004ACCOUNTING 1ACCOUNTING UPDATEUPDATERELEVANCE OF PARENT ENTITY FINANCIAL URGENT ISSUES 2REPORTS-DISCUSSION PAPER GROUP UPDATEThe above discussion paper addresses the issue of the extent to which parent AUDITING 3entity financial information is needed by users of general purpose financial UPDATE reports (GPFRs). It provides objective evidence aimed at assisting the Australian Accounting Standards Board (AASB) to determine whether it should recommend INTERNATIONAL 3legislative changes in respect of the form, content and presentation of parent UPDATEentity information.MISCELLANEOUS 6PUBLICATIONSAs part of the study, a survey was undertaken from across a wide range of users LEGISLATIVE 7of GPFRs and results indicated that:CHANGES UPDATEmany financial report users, predominantly those working in roles involving TREASURY UPDATE 7credit risk assessment, use information from the parent entity financial reportsPREMIER’S 8frequency of use and particular components of the financial report used DEPARTMENT UPDATEvaries across financial report user groupsthere is limited potential to reduce parent entity financial information, as it AUDIT OFFICE 10was found that no particular type of information would satisfy the needs of BETTER PRACTICEall GPFR users GUIDESuser’s needs in relation to the current regulatory requirements indicated that there is potential for a reduction in reporting ...

Informations

• Publié par: Kinuc
• Nombre de lectures: 28
• Langue: English

Extrait

AWARENESS

CONTENTS

ACCOUNTING

1

UPDATE

URGENT ISSUES

2

GROUP UPDATE

AUDITING

3

UPDATE

INTERNATIONAL

3

UPDATE

MISCELLANEOUS

6

PUBLICATIONS

LEGISLATIVE

7

CHANGES UPDATE

TREASURY UPDATE

7

PREMIER’S

8

DEPARTMENT

UPDATE

AUDIT OFFICE

10

BETTER PRACTICE

GUIDES

Accounting and Auditing Developments

ISSUE 3 APRIL 2004

Awareness

is published by The Audit Office of New South Wales, 234 Sussex Street,

ice of New S

Sydney NSW 2000, GPO Box 12, Sydney NSW 2001

2000, GPO Box 12,

Telephone

9285 0155

Fax

9285 0001

Email

[e-mail]

Website

www.audit.nsw.gov.au

ACCOUNTING UPDATE

RELEVANCE OF PARENT ENTITY FINANCIAL

REPORTS-DISCUSSION PAPER

The above discussion paper addresses the issue of the extent to which parent

entity financial information is needed by users of general purpose financial

reports (GPFRs). It provides objective evidence aimed at assisting the Australian

Accounting Standards Board (AASB) to determine whether it should recommend

legislative changes in respect of the form, content and presentation of parent

entity information.

As part of the study, a survey was undertaken from across a wide range of users

of GPFRs and results indicated that:

many financial report users, predominantly those working in roles involving

credit risk assessment, use information from the parent entity financial

reports

frequency of use and particular components of the financial report used

varies across financial report user groups

there is limited potential to reduce parent entity financial information, as it

was found that no particular type of information would satisfy the needs of

all GPFR users

user’s needs in relation to the current regulatory requirements indicated

that there is potential for a reduction in reporting requirements.

Comment period ends on 30 June 2004.

period e

The Audit Office of New South Wales

2

URGENT ISSUES GROUP UPDATE MEETING

18 March 2004

REVISION OF UIG CHARTER

Members discussed a draft revised Charter, without coming to a view.

The revision is intended to

support the decision of the AASB that it should vote to approve (or reject) UIG Abstracts rather than

consider the exercise of a reserve power of veto as under the current arrangements

ACCOUNTING FOR EARTHWORKS

UIG

members

continued

their

discussion

of

the

accounting

for

road

earthworks.

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

fixed periods ranging from 80 to 100 years.

Members agreed to consider a revised draft Abstract at the next meeting for approval.

CHANGES IN DECOMMISSIONING, RESTORATION AND SIMILAR LIABILITIES

Members supported the general approach adopted in the proposed Interpretation, which would

require changes in the decommissioning liability to be adjusted as part of the depreciated cost

component of the carrying amount of an asset, with a consequential adjustment of the revaluation

reserve where the asset is accounted for under the revaluation model.

PROPOSED PENDING ABSTRACTS AGREED

The members agreed to the following Proposed Pending UIG Abstracts, based on the corresponding

SIC Interpretations:

110

Government Assistance – No Specific Relation to Operating Activities

112

Consolidation – Special Purpose Entities

.

Proposed Pending Abstracts are subject to editorial changes and to approval by the AASB.

UIG members also discussed and agreed editorial revisions to Pending Abstract 107

Introduction

of the Euro

, following International Accounting Standards Board corrections to the corresponding

Interpretation SIC-7.

Interpret

The next meeting will be held on 4 May 2004.

will be

The Audit Office of New South Wales

3

AUDITING UPDATE

REVISED AUDITING AND ASSURANCE GUIDANCE STATEMENT AGS 1048 THE SPECIAL

CONSIDERATIONS IN THE AUDIT OF SMALL ENTITIES

The new AGS explains how audits of financial reports of small entities differ from audits of financial

its of fin

reports of other entities. It is intended to be used by practitioners who already know how to conduct

s. It i

an audit in accordance with AUSs. Importantly, the AGS does not establish any new requirements for

dan

the audit of small entities, nor does it establish any exemptions from the requirements of AUSs. All

sm

audits of small entities are to be conducted in accordance with AUSs.

m

Specifically, the new AGS has been revised to take account of AUSs issued between March 1999 and

lly, the new AGS has been revised to take account of AUSs issued be

March 2003. For AUSs issued subsequent to March 2003, whenever necessary, considerations in the

03. For AUSs issued subsequent to March 2003, wheneve

audit of small entities are to be included in the body of those AUSs.

all entities are to be included in the body of tho

The guidance is based on the corresponding International Auditing Practice Statement (IAPS) 1005

is based on the corresponding International A

issued by the International Auditing and Assurance Standards Board (IAASB) of the International

ternational Auditing and Assurance Standards

Federation of Accountants (IFAC) in October 2003.

tan

INTERNATIONAL UPDATE

INTERNATIONAL STANDARD ON AUDITING (ISA) 240 THE AUDITOR’S

RESPONSIBILITY TO CONSIDER FRAUD IN THE AUDIT OF FINANCIAL STATEMENTS

The revised ISA, issued by the International Auditing and Assurance Standards Board (IAASB) of the

ard (IAAS

International Federation of Accountants (IFAC), builds on the new audit risk standards issued last

last

year. It requires the auditor to focus on areas where there is a risk of material misstatement due

to fraud, including management fraud. The revised standard emphasises the need for the auditor

to maintain an attitude of professional scepticism throughout the audit, notwithstanding the

auditor’s past experience about the honesty and integrity of management and those charged with

governance.

The standard, effective for audits of financial statements for financial periods beginning on or

after December 15, 2004, requires the engagement team to discuss how the financial statements

may be susceptible to material misstatement due to fraud and what audit procedures would be

more effective for their detection. The standard also requires the auditor to design and perform

audit procedures to respond to the identified risks of material misstatement due to fraud, including

procedures to address the risk of management override of controls.

The Audit Office of New South Wales

4

INTERNATIONAL STANDARD ON QUALITY CONTROL (ISQC) 1, “QUALITY CONTROL

FOR FIRMS THAT PERFORM AUDITS AND REVIEWS OF HISTORICAL FINANCIAL

INFORMATION, AND OTHER ASSURANCE AND RELATED SERVICES ENGAGEMENTS,”

INCLUDING RELATED CONFORMING AMENDMENTS AND INTERNATIONAL STANDARD

ON AUDITING (ISA) 220, “QUALITY CONTROL FOR AUDITS OF HISTORICAL

FINANCIAL INFORMATION,” INCLUDING RELATED CONFORMING AMENDMENTS

ISQC 1 establishes a firm’s responsibilities to set up and maintain a system of quality control for

all audits and assurance engagements. In addition to setting out guidance on client acceptance

and retention criteria that firms should consider, the standard requires that an engagement quality

control review must be performed for audits of listed entities and such other engagements as a firm

determines.

The

review,

which

must

be

completed

before

the

audit

report

can

be

released,

includes

consideration of:

significant risks identified during the engagement and the responses to those risks

the significance and disposition of corrected and uncorrected misstatements identified during

the audit

whether appropriate consultation has taken place on difficult or contentious matters and the

conclusions arising from those consultations.

The second quality control standard, ISA 220 establishes standards for the specific responsibilities

of firm personnel for an individual audit engagement and is premised on the requirements of the

firm-wide quality control standards set out in ISQC1.

The above two quality control standards were issued by the IAASB.

To provide firms sufficient time to design and implement the systems required under ISQC1, both of

these standards are effective from 15 June 2005.

ENTERPRISE GOVERNANCE: GETTING THE BALANCE RIGHT

IFAC and The Chartered Institute of Management Accountants (CIMA) issued the above study. The

study includes an in-depth analysis of corporate successes and failures in 27 case studies from 10

countries. Industries covered in the case studies, include telecommunications, retail, financial

es. Indu

services, energy and manufacturing.

d manu

Although poor corporate governance can ruin a company, the study revealed that good governance

Although poor corporate governance ca

on its own couldn’t make a company successful. Companies need to balance conformance with

s own couldn’t make a company success

performance. This is a fundamental component of enterprise governance.

This is a fundamental component of en

In the study, conformance is defined as “corporate governance.” It covers such issues as board

ance is defined as “corporate gover

structures and roles and executive remuneration. The performance dimension focuses on strategy

xecutive remuneration. The perform

and value creation.

The Audit Office of New South Wales

5

An analysis of the case studies showed that, in addition to the corporate governance issues

mentioned above, there were several key strategy issues contributing to corporate success and

failures:

choice and clarity of strategy

strategy execution

ability to respond to abrupt changes and/or fast-moving market conditions; and

d to

ability to undertake successful mergers and acquisitions.

und

In addition to introducing the concept of the strategic scorecard, the report offers guidance

n to introducing the concept of the strategic scorecard, the report offers guidance

on enterprise risk management, the acquisition process, and managing board performance. An

prise risk management, the acquisition process, and managing boa

appendix features a synopsis of recent international corporate governance developments.

features a synopsis of recent international corporate go

INTERNATIONAL ACCOUNTING STANDARDS BOARD MEETINGS

18-20 FEBRUARY 2004 AND 17-19 MARCH 2004

Matters discussed at the February meeting included:

at t

Business Combinations

Consolidation

Disposal of non-current assets and presentation of discontinued operations

ntati

Financial instruments

IAS 20 Government Grants and Disclosure of Government Assistance

IFRIC issues

Insurance contracts

Post-employment benefits

Revenue recognition

Small and medium-sized entities

Continued over page...

The Audit Office of New South Wales

6

Matters discussed at the March meeting included:

Board priorities

Business combinations

Consolidation

Disposal of non-current assets and presentation of discontinued operations

Financial guarantees and credit insurance

Financial instruments

IAS 12 Income Taxes

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IFRIC issues

Post-employment benefits

Reporting comprehensive income

Revenue recognition

Small and medium-sized entities.

MISCELLANEOUS PUBLICATIONS

Australian National Audit Office Reports:

Audit Activity Report: July to December 2003

Governance of the National health and Medical Research Council

Quality Internet Services for Government Clients-Monitoring and Evaluation by Government

Agencies

The Senate Order for Departmental and Agency Contracts (Financial Year 2002-2003

Compliance)

Wedgetail Airborne Early Warning and Control Aircraft: Project Management

Wedget

The Australian Taxation Office’s Collection and Management of Activity Statement Information

axation

The Administration of Major Programs

rogram

These reports are available at www.anao.gov.au.

ports are available at www.anao.gov.au.

Independent Commission Against Corruption (ICAC) Publications:

Report on investigation into the introduction of contraband into the High Risk Management Unit

into the introduction of contraband

at Goulburn Correctional Centre

l

Investigation into the alleged misreporting of Hospital waiting list data

nto the alleged misreporting of Hospital waiting

These reports are available at www.icac.nsw.gov.au.

The Audit Office of New South Wales

7

LEGISLATIVE CHANGES UPDATE

PUBLIC FINANCE AND AUDIT (SOCOG AND STATE BRICKWORKS) REGULATION 2004

The object of this Regulation is to amend the Public Finance and Audit Act 1983 to remove

nd the Pub

references to the Sydney Organising Committee for the Olympic Games and Officer in charge of the

ising Co

State Brickworks from the list of statutory bodies in Schedule 2.

the l

(Commencement of this Regulation is 5 March 2004, GG No 51 5 March 2004 p 1024).

nt o

PROCLAMATION UNDER THE PUBLIC FINANCE AND AUDIT ACT 1983

This Proclamation amends the list of Departments in Schedule 3 to the Public Finance and Audit Act

lamation amends the list of Departments in Schedule 3 to the Public

1983 so as to reflect the changes made by the Public Sector Employment and management (Ministry

s to reflect the changes made by the Public Sector Empl

for Science and Medical Research) Order 2003 and add the Ministry for Science and Medical Research

e and Medical Research) Order 2003 and add the M

to that Schedule.

du

(Commencement of this Proclamation is 5 March 2004, GG No 51 5 March 2004 p 998).

of this Proclamation is 5 March 2004, GG No 5

TREASURY UPDATE

TREASURY CIRCULAR TC 04/02 FUNDING ARRANGEMENTS FOR LONG SERVICE

LEAVE AND FOR TRANSFERRED OFFICERS LEAVE ENTITLEMENTS

This Circular is issued as part of the review of Treasury Circulars due for automatic lapsing.

s due f

The Circular withdraws and supersedes NSWTC93/7 and TC91/23. However, the Circular does

the Circ

not represent a substantive change to the previous policy. Treasury Circular TC03/08 covers the

s the

requirements for year end accounting of Long Service Leave (LSL).

Funding Arrangements for LSL:

For the purposes of LSL, agencies are assigned to one of three categories:

Category 1: Most Budget Dependent Agencies

These agencies have their LSL assumed by the Crown. The liabilities are transferred via journals.

The Crown reimburses payments made by agencies.

Category 2: Non–Budget Long Service Leave Pool Agencies

These agencies have their LSL liabilities assumed by the Crown. The liabilities are transferred via

cash payments to the Crown. The Crown reimburses payments made by agencies.

Category 3: All Other Residual Agencies in the Public Sector Employment and

Management Act 2002 (PSEMA).

These agencies record and fund their own liabilities.

The Audit Office of New South Wales

8

Funding Arrangements for Transferred Officers Leave Entitlements:

The Public Sector Employment and Management Act 2002 allows for the transfer of leave entitlements

when employees (including ministerial employees) transfer within the NSW Public Sector. Section 99

of the PSEMA allows the Treasurer to give directions and issue guidelines regarding the transfer of

funds between public sector employers for LSL and annual leave.

This Treasury Circular is issued as a Treasurer’s Direction under s9 and s45E of the Public Finance

and Audit Act 1983.

For further information contact Gary deBruyn on 92284148.

PREMIER’S DEPARTMENT UPDATE

PREMIER’S DEPARTMENT CIRCULAR 2004-07 CONFLICTS OF INTERESTS

The Ombudsman’s Office issued a fact sheet Pre-requisites to Avoid or Manage Conflict of Interests.

This document outlines the necessary steps for staff and agencies to avoid or properly manage

conflict of interests that may arise. It is a companion fact sheet to Conflict of Interests which was

issued in 2003.

Both

of

these

fact

sheets

can

be

downloaded

from

the

Ombudsman’s

Office

website

at

www.ombo.nsw.gov.au by clicking on “publications” and then “fact sheets”.

The term ‘conflict of interests’ refers to situations where a conflict arises between public duty and

private interest which could influence the performance of official duties and responsibilities. Such

conflict generally involves opposing principles or incompatible wishes or needs.

The Circular encourages Chief Executive Officers to utilise this resource, in order for agencies

to avoid situations in which private interests conflict or might be perceived to conflict with the

impartial fulfilment of their official duties and the public interest.

Further enquiries may be directed to the Office of The NSW Ombudsman on telephone [phone].

PREMIER’S DEPARTMENT CIRCULAR 2004-08 COMMENCEMENT OF VARIATIONS TO

CONDITIONS OF EMPLOYMENT AWARD RE: CASUAL RATES AND ENTITLEMENTS

The Public Sector Employment and Management Act 2002 introduced a new category of casual

mploym

employment within the public service. In January 2004 the Public Employment Office issued

c serv

Circular 2004-01 which outlines the variations to the Crown Employees (Public Service Conditions of

rcular 2004-01 which outlines the variation

Employment) Award 2002 to allow for casual rates of pay and conditions of employment.

t) Award 2002 to allow for casual rates

Departments are reminded that the award variation is operative from 12 April 2004.

Commentary

inded that the award variation is op

and guidelines on temporary and casual employment is available at

ry and casual employment is availab

http://www.premiers.nsw.gov.au/

our_library/employment_conditions/ctedefault.htm

The Audit Office of New South Wales

9

It should be noted that the provisions for casual employment do not apply to casuals employed

under legislation other than the Public Sector Employment and Management Act 2002 or where the

agency has an existing industrial instrument (i.e.: an award, enterprise agreement, determination,

ent, determination,

etc) that provides conditions of employment for casual employees.

l employees.

PREMIER’S DEPARTMENT CIRCULARS

Number

Issued

2004-05

Strategic Management Framework and Strategic

Management Calendar

February 04

2004-06

Electronic Information Security-Certification to AS/NZS 7799

ion

March 04

2004-07

Conflicts of Interests

March 04

2004-08

Commencement of Variations to Conditions of Employment

Commencement of Variations to Conditions of

Award Re: Casual Rates and Entitlements

rd

no date given

The Audit Office of New South Wales

10

AUDIT OFFICE BETTER PRACTICE GUIDES

The Audit Office produces guides to better practice to assist agencies. The following is a list of

those guides and the dates that they were published. All these guides are available on the Audit

Office website at www.audit.nsw.gov.au/guides-bp/bpgilest.htm.

Title of Guide

Date issued

Management of Intellectual Property

October 2001

e-ready, e-steady, e-government: e-government readiness

assessment guide

September 2001

Monitoring and reporting on performance audit recommendations

June 2001

Internal Financial Reporting

June 2001

Reporting Performance: a guide to preparing performance

information for annual reports

November 2000

Contracting Out Review Guide

June 1999

Public Sector Corporate Governance - ready reckoner

April 1999

Methodology for the Review of Residential Services for People

with Disabilities

June 1998

On Board: Guide to better practice for public sector governing and

advisory boards

April 1998

The Corporate Credit Card: guidelines for the internal control

January 1997

Ambulance Service of New South Wales: debtors administration

September 1996

Ethnic Affairs Commission: administration of grants

December 1995

Joint Operations in the Education Sector: a review of establishment,

management and effectiveness issues

September 1995

Fraud Control: developing an effective strategy

Volume 1: conceptual framework

Volume 2: strategy

Volume 3: diagnostics

March 1994

Volume 4: Fraud Control Self Audit Kit

olume

March 1998

COPIES OF REPORTS AND PUBLICATIONS

All performance audit reports are available on The Audit Office web site at www.audit.nsw.gov.au/repperf.htm

and can be purchased from the NSW Government Information Service (tel [phone]).

Copies of Auditing Standards, Auditing Guidance Statements, Audit Guides, Exposure Drafts,

and other guidance, including Legislative Policy Discussion Papers may now be obtained from:

The Institute of Chartered Accountants in Australia CA Retail/Chartered Bookshop

Phone:[phone] - Fax: [phone]

Email: [e-mail] - Postal Address: GPO Box 3921, Sydney. NSW.2001

Address: Level 11, 37 York Street, Sydney. NSW. 2000; or

CPA Australia

Level 28, 385 Bourke Street Melbourne, Victoria, 3000 - Telephone [phone]

Publications

of

the

Australian

Accounting

Standards

Board

(AASB),

including

Accounting

Standards

and Accounting Exposure Drafts are available direct from the Australian Accounting Standards Board.

PO Box 204 Collins

Street

West,

Victoria,

8007. Telephone (03)

9617 7600 -

Fax (03)

9617 7608

Email: [e-mail]. Or by visting the AASB website: www.aasb.com.au.

Copies of International Federation of Accountants (IFAC) publications may be obtained direct from IFAC, 535

Fifth Avenue, 26th Floor, New York, NY 10017, USA (tel [phone] or fax [phone] or by visiting the IFAC

web site at www.ifac.org.

Copies

of

International

Accounting

Standards,

Exposure

Drafts

and

International

Accounting

Standards Committee (IASC) publications may be obtained direct from the IASC, 166 Fleet Street, London EC4A

2DY, United Kingdom (tel [phone] or fax [phone] or email [e-mail] or Internet

www.iasc.org.uk).

Copies of NSW Government legislation including changes to legislation can be purchased from the NSW

Government Information Service. The legislation is also on the Internet at www.austlii.edu.au/.

Treasury publications (including Circulars) may be viewed by visiting the NSW Treasury web site at

www.treasury.nsw.gov.au.

Copies of Premier’s Department Circulars and Premier’s Memoranda may be viewed by visiting the Premier’s

Department website at http://www.premiers.nsw.gov.au/.

The AWARENESS Newsletter is of a general nature only and is not intended to be a substitute for or relied upon

as specific professional advice. No responsibility for loss occasioned to any person acting on or refraining from

action as a result of any material in the publication can be accepted.