ANAO - Manual de Auditoria - Financial Statements Audit Services Group (FSASG)

26/05/2023, 14:57 ANAO Audit Manual — FSASG Specific | Australian National Audit Office (ANAO)
AUDIT MANUAL
ANAO Audit Manual — FSASG Specific

UPDATED Wednesday 31 August 2022
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The Financial Statements Audit Services Group (FSASG) volume of the

ANAO Audit Manual applies to the financial statement audit activity
performed by FSASG in collaboration with the Systems Assurance and Data
Analytics (SADA) group. Relevant policies and guidance from the FSASG
volume are also applied to other assurance work performed by FSASG.
Policies and guidance in the FSASG volume address the planning, execution
and reporting stages of the financial statement audit process.
ANAO Audit Manual
Shared content FSASG specific PASG specific
Engagement performance — general

Chapters 101 to 106
101. Terms of audit engagement

https://www.anao.gov.au/work/audit-manual/fsasg-specific 1/106
Policy
101.1 An engagement letter shall be issued for each new audit engagement. The
terms of engagement shall be formally re-confirmed at least every 5 years.
101.2 Circumstances where an engagement letter shall be re-issued include, but are
not limited to, a material change to the terms of the audit engagement, including:
a. a change in legal or regulatory requirements, including significant changes in

Australian National Audit Office (ANAO) Auditing Standards impacting on the
terms of the audit engagement;
b. a change in the financial reporting framework adopted in the preparation of the
financial statements; and
c. a change in other significant reporting requirements.
101.3 The Engagement Executive shall assess whether there is a need to draw the
attention of the entity to the existing terms of engagement. These circumstances
include, but are not limited to:
a. a change in:
i. (the head of) the accountable authority for a Commonwealth entity, or

ii. the Board Chair for a Commonwealth company or subsidiary company; or
iii. for all other auditees, the person with ultimate responsibility for the
preparation of the financial statements to be audited; or
b. where there is an indication that the entity misunderstands the objective and
scope of the audit.
101.4 The Engagement Executive shall consider whether the circumstances

identified in paragraph 101.3 above warrant the re-issue of the terms of engagement.
101.5 When the audit engagement is undertaken according to legislation, including

legislation other than the Auditor-General Act 1997 (Cth) (A-G Act), the applicable
terms contained in the legislation shall be included in the letter. This includes the
legislation creating the Auditor-General’s mandate to perform the audit or, where the
audit is conducted by arrangement, section 20 of the A-G Act.
Guidance
101.6 For the purposes of this policy, an engagement letter is required when an entity
is to be audited for the first time by the Auditor-General, either as a result of an entity
being created or the Auditor-General auditing an existing entity for the first time. Terms
of engagement should be agreed when the Auditor-General undertakes a new

engagement with an existing auditee. Engagement letters are required irrespective of
whether the engagement is a mandated engagement or entered into by arrangement
under section 20 of the A-G Act.
101.7 The engagement letter is sent to the accountable authority of a

Commonwealth entity (normally the Chair of the accountable authority where the
authority has more than one member) or to the Chair of the Board of Directors of a
Commonwealth company or subsidiary company.
101.8 ASA 210 Agreeing the Terms of Audit Engagements requires that, on recurring
audits, the auditor should assess whether circumstances require the terms of the
engagement to be revised, and whether there is a need to re-confirm in writing the
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existing terms of the engagement with the entity.
101.9 Paragraphs 101.2 and 101.3 list situations where ANAO policy requires an
engagement letter to be revised and re-issued or requires the attention of the entity to
be drawn to the existing terms. Subject to these specific policy requirements, it is a
matter for judgement by the Engagement Executive whether to formally confirm the
terms of engagement or to draw attention to existing terms. The list of circumstances
in paragraphs 101.2 and 101.3 are not exhaustive, and the Engagement Executive
needs to be alert to other circumstances where an entity needs to be advised of revised
terms of engagement or reminded of the existing terms. Examples where the
Engagement Executive will need to consider re-issuing or drawing the entity’s attention
to the terms of engagement include:
a. a change of several Board members (other than the Board Chair);

b. a change of Audit Committee Chair;
c. a significant change in ownership; and
d. a significant change in nature or size of the entity’s business e.g. by the addition
of functions following an Administrative Arrangements Order (AAO).
101.10 Typically, a new formal agreement with the entity is needed when the matters
covered by the current engagement letter change or new conditions relevant to an
engagement arise. Examples are changes in governing legislation, respective
responsibilities or reporting requirements. In this situation, formal acknowledgement
on behalf of the entity of the revised terms of engagement is needed from the (head of
the) accountable authority, company Board Chair or equivalent.
101.11 Where the existing terms of engagement are unchanged but there is a need
to draw the entity’s attention to the existing terms, a response from the entity is not
required.
101.12 For the purpose of applying paragraph 101.5, the applicable legislation for
most Financial Statements Audit Services Group (FSASG) financial statement audits is
the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act) or
the Corporations Act 2001 (Cth) (Corporations Act). In a small number of cases, the
audit is conducted under entity-specific legislation (e.g. High Court of Australia Act 1979
(Cth)) or under other arrangements (e.g. audits of international bodies like the
Commission for the Conservation of Southern Bluefin Tuna).
101.13 Pro forma engagement letters are located in Teamstore.
102. Roles and responsibilities of the Engagement

Executive
Background
102.1 This policy sets out the responsibilities of the Engagement Executive in a
financial statements audit or other FSASG assurance engagement conducted in-house.
This policy does not apply to those engagements where the responsibility for the audit
is substantially contracted to a third party. In these circumstances, the responsibilities
of the ANAO Engagement Executive are specified in Chapter 105 Project managed
audits.
102.2 The Signing Officer is formally the ‘engagement partner’ under the auditing
standards. The engagement partner is defined in the auditing standards as the person
who is responsible for the audit engagement and its performance, and for the auditor’s
report that is issued on behalf of the firm.
102.3 In practice in the ANAO, the duties of the engagement partner are fulfilled by
the FSASG Engagement Executive. This policy on the roles and responsibilities of the
Engagement Executive applies whether the Engagement Executive is also the Signing
Officer for the audit or not. Where the Signing Officer is a person other than the
Engagement Executive, additional policies apply (see Chapter 103 Role and
responsibilities of the Signing Officer.)
Policy
102.4 The Engagement Executive shall fulfil:
a. the responsibilities of the ‘engagement partner’ under the ANAO Auditing

Standards and assigned by legislation:
i. in their own right, when the Engagement Executive is also the Signing
Officer for the audit; and
ii. on behalf of the Signing Officer, where another person signs the auditor’s
report; and
b. other responsibilities assigned by ANAO policy.
102.5 Where this Manual specifies a policy requirement, that policy does not require
the Engagement Executive to be directly involved in the performance of that action
unless the policy specifically requires the Engagement Executive to do so. However,
as required by 102.4 above, the Engagement Executive retains overall responsibility
that the audit has been conducted in accordance with this Manual. Further, as
required by Chapter 8 Engagement Performance of the ANAO Audit Manual Shared
Content, the Engagement Executive also retains overall responsibility for suitable
direction, review and supervision being provided to the members of the audit team
working on an engagement.
102.6 Where the Signing Officer for the audit is the Auditor-General or Deputy
Auditor-General, the Engagement Executive shall provide the Auditor-General with:
a. At planning:
i. Audit Strategy Document;

ii. Materiality levels determined for the financial statements and where
relevant particular items, including ‘overall materiality’, ‘performance
materiality’, and ‘clearly trivial threshold’. This information shall be
included in a cover letter which is to accompany the Audit Strategy
Document;
b. At interim (if applicable):
i. Interim Management Letter;

c. At the end of the audit:
i. For contract-out audits, the Signing Officers Review Memorandum

(SORM);
ii. Closing letter;
iii. Final draft of the financial statements;
iv. Proposed auditor’s report; and
d. Any other information as directed by the Auditor-General in the form and at the
audit stage requested.
102.7 Consistent with the responsibilities of an engagement partner under the

ANAO Auditing Standards:
a. Where an Engagement Quality Control Reviewer (EQCR) is appointed to the

audit, the Engagement Executive shall discuss significant matters arising during
the audit, including those identified through the EQCR’s processes, with the
EQCR and also with the Signing Officer if applicable.
b. Where an EQCR has not been appointed, the Engagement Executive shall be
alert for changes in circumstances that would require an EQCR to be appointed.
102.8 Consistent with ASA 220 Quality Control for an Audit of a Financial Report and
Other Historical Financial Information, the Engagement Executive shall, on or before
the date of the auditor’s report, through a review of the audit documentation and
discussion with the engagement team, be satisfied that sufficient appropriate audit
evidence has been obtained to support the conclusions reached and for the auditor’s
report to be issued.2
102.9 The FSASG GED shall not exercise any authority specifically reserved by the
Audit Manual to the role of FSASG GED with regards to the audits for which they have
been appointed Engagement Executive. In these circumstances, the Auditor-General
or the Deputy Auditor-General shall delegate this authority to other GEDs in the ANAO.
Guidance
102.10 Australian Auditing Standards (ASA) require certain responsibilities to be
undertaken by the engagement partner. This approach is explained in the definition of
‘auditor’, as follows:
‘Auditor’ is used to refer to the person or persons conducting the audit, usually the
engagement partner or other members of the engagement team, or, as applicable, the
firm. Where an ASA expressly intends that a requirement or responsibility be fulfilled by
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the engagement partner, the term ‘engagement partner’ rather than ‘auditor’ is used.
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102.11 These requirements are concentrated mainly in ASA 220. Some other
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standards also have engagement partner-specific requirements or guidance.
102.12 The responsibilities in the auditing standards which this policy places on
Engagement Executives include the following:
a. the overall quality on each audit engagement to which the Engagement Executive
is assigned;
i. through their actions and appropriate messages to the engagement team,

the Engagement Executive should emphasise the importance of
compliance with the ANAO Auditing Standards and quality control policies
and procedures. In addition the engagement team should have the ability to
raise concerns without fear of reprisals. Quality is essential in performing
audit engagements and the overall quality of the audit is maintained by
ensuring that the audit is performed consistent with ANAO standard

methodology.
b. the engagement team’s compliance with relevant ethical requirements including
APES 110;
i. these include the principles of integrity, objectivity, professional

competence and due care, confidentiality and professional behaviour. The
Engagement Executive should remain alert for evidence of non-compliance
and if it occurs, should determine the appropriate action in consultation
with others.
c. the engagement team’s compliance with the ANAO’s Independence Policy;
d. for audits by arrangement, applying appropriate procedures regarding
acceptance and continuance of auditee relationships and specific audit
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engagements;
i. these procedures should include consideration of the integrity of those

charged with governance and management, competence of the
engagement team and compliance with ethical requirements. All
conclusions reached should be documented within the audit file.
e. communication of the role of Engagement Executive and where different, the
Signing Officer, to key members of auditee management and those charged with
governance;
f. the appropriate planning of the engagement consistent with ASA 300 Planning an
Audit of a Financial Report;
g. the assignment of engagement teams and auditor’s experts which collectively
have the appropriate levels of competencies and capabilities;
i. the Engagement Executive is required by the ANAO Auditing Standards to

be satisfied that the competence and capabilities of the audit team will
ensure performance of the audit engagement consistent with professional
standards and regulatory requirements and enable an auditor’s report that
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is appropriate in the circumstances. When considering the competence
and capability of the engagement team as a whole, the Engagement
Executive may take into account such matters as the team’s understanding
and practical experience of audit engagements of a similar nature, their
understanding of professional standards and regulatory and legal
requirements, technical expertise, ability to apply professional judgement
and understanding of the ANAO’s quality control policies and procedures.
h. the direction, supervision and review of the performance of the engagement that
is consistent with professional and auditing standards and regulatory and legal
requirements. The Engagement Executive should document the extent and timing
of their reviews. Refer to the policy relating to the Direction, Supervision and
Review (ANAO Audit Manual - Shared Content, paragraphs 8.2-8.4) for further
guidance;
i. ensuring that sufficient and appropriate audit evidence exists and is documented
to support the conclusions reached and for the auditor’s report to be issued;
i. in line with the ANAO policy Audit Documentation (ANAO Audit Manual -
Shared Content, paragraphs 9.2-9.16) the only work that should be done
after the signing of the auditor’s report is that of an administrative nature.
j. following appropriate procedures for consultations and differences of opinion
and, in particular, ensuring compliance with the ANAO policy on differences of
opinion (ANAO Audit Manual - Shared Content, paragraphs 8.64-8.68);
k. determining that an EQCR has been appointed, as required by the ANAO Auditing
Standards and ANAO policy (refer to the policy relating to the Engagement Quality
Control Review (ANAO Audit Manual - Shared Content, paragraph 8.42);
l. discussing the susceptibility of the entity to material misstatement, particularly
due to fraud, with the engagement team; and
m. enough involvement in the audit engagement at appropriate stages throughout
the engagement including attendance at key meetings, discussions with the
engagement team, EQCR and Signing Officer (where appropriate) and the
completion of the planning and completion checklists at the appropriate stages
of the audit.
Relationship with engagement quality control review
102.13 Where an EQCR has been appointed:
a. significant issues arising on an engagement should be considered by the

Engagement Executive (and the Signing Officer if applicable) in consultation with
PSRG as appropriate before consultation with the EQCR to preserve the EQCR’s
objectivity. Where there is a difference of opinion between the Engagement
Executive (and the Signing Officer if applicable) and the EQCR, ANAO policy on
differences of opinion (ANAO Audit Manual - Shared Content, paragraphs 8.64-
8.68) should be followed;
b. the auditor’s report cannot be issued until the completion of the engagement
quality control review (refer to the Engagement Quality Control Review policy
(ANAO Audit Manual - Shared Content, paragraph 8.42.))
102.14 Where an EQCR has not been appointed, circumstances which may cause the
Engagement Executive to seek to have an EQCR appointed could include the
emergence of an unforeseen risk of material misstatement, identification of areas
which are complex or contentious, or an increased reputational threat to the ANAO.
Date of signing the auditor’s report

102.15 The date of signing of the auditor’s report should coincide with the date
financial statements (or other reports) are signed. The Engagement Executive should
endeavour to agree an audit timetable with the auditee that provides for the auditor’s
report to be signed on the same date the financial statements (or other report) are
signed. The ANAO reports to Parliament the gap between the dating of the statements
and the dating of the auditor’s report in the Audits of the Financial Statements of
Australian Government Entities for the Period Ended 30 June 20XX (Year End Report).
102.16 Where the reports are not signed on the same day, ASA 560 Subsequent
Events provides that a subsequent events review to the date of the auditor’s report
must be undertaken and documented in the audit working papers (and the audit file for
project managed audits). The reasons for the gap between the two signing dates
should be documented.
103. Role and responsibilities of the Signing Officer

Background
103.1 The Signing Officer is the person who signs the audit report on the financial
statements. In most cases, the Signing Officer is also the Engagement Executive for
the audit.
103.2 On some audits, the Auditor-General signs the audit report or delegates where
signing responsibilities are assigned to another executive other than the Engagement
Executive for the audit. In such cases the Signing Officer has a reduced involvement in
the audit due to the Engagement Executive’s role.
103.3 This policy requires the Signing Officer to review or approve key aspects of the
audit and also provides the basis for the Signing Officer’s reliance on the Engagement
Executive.
Policy
103.4 The Signing Officer is responsible for the audit and is the engagement partner
for the purposes of the ANAO Auditing Standards.
103.5 While the Signing Officer relies on the Engagement Executive to fulfil key
duties and requirements of the ANAO Auditing Standards, this does not reduce the
Signing Officer’s overall responsibility for the audit. Where the Signing Officer is not
the Engagement Executive on the audit, the following shall apply:
a. the Signing Officer shall be briefed by the Engagement Executive at appropriate

times during the audit;
b. the Signing Officer shall approve:
i. key aspects of the audit approach;

ii. the Engagement Executive’s assessment of overall and performance
materiality for the financial statements as a whole and for particular items;
iii. the schedule of unadjusted differences;
iv. the Signing Officer Review Memorandum (SORM) if prepared;
v. the audited financial statements; and
vi. the audit report.
c. the Signing Officer shall be satisfied that the Engagement Executive has
completed their work consistent with the ANAO Auditing Standards;
d. where an EQCR is appointed, the Signing Officer shall be satisfied that the
review processes have been completed satisfactorily before the audit report is
issued;
e. the Signing Officer shall seek to review other information if the Signing Officer
considers it appropriate to the circumstances of the audit; and
f. the audit file shall contain documented evidence of the Signing Officer’s
involvement.
Guidance
103.6 Significant matters arising on an engagement should be considered by the
Engagement Executive in consultation with the Signing Officer as appropriate.
Significant matters may include critical areas of judgement, difficult or contentious
matters, high risks of material misstatement or other areas that the Engagement
Executive or Signing Officer consider important.
103.7 The requirement for the Signing Officer to approve key aspects of the audit
strategy is intended to ensure that the Signing Officer provides approval of the key
judgements in the audit.
103.8 Part of the audit approach is determination of the materiality levels applied on
the audit. In addition to approving overall, performance and particular materiality levels,
the Signing Officer should formally approve any changes to materiality which may be
made as the audit progresses.
103.9 The SORM may be used by the Signing Officer as a basis for accepting that the
Engagement Executive has met their responsibilities under the auditing standards and
ANAO Audit Manual – FSASG Specific policy.
103.10 When approving the SORM, the Signing Officer should note details of
significant matters arising on the audit, and in particular, consultation and conclusions
on matters that were difficult or contentious.
103.11 The Signing Officer may seek to review matters additional to those required
by this policy. For example, the Signing Officer may seek to review the interim or final
management letters or the closing report.
103.12 Where the Signing Officer is the Auditor-General or Deputy Auditor-General,

the information required by the Auditor-General or the Deputy Auditor-General to fulfil
the requirements of this policy will ordinarily be limited to that specified at paragraph
102.6 and verbal briefings. Where further information is required, this will be requested
by the Auditor-General or the Deputy Auditor-General.
103.13 The Signing Officer’s approval of documents or key judgements and other
significant matters can be evidenced in the TeamMate file or alternatively by signing-off
file copies of documents, file notes in the working papers or other means, as
appropriate.
103.14 Signing Officer templates are located in the TeamStore.
104. Role and responsibility of the Second Reviewer

Background
104.1 The ANAO Auditing Standards require FSASG to have policies and procedures
requiring, for appropriate engagements, an engagement quality control review that
provides an objective evaluation of the significant judgements made by the
engagement team and the conclusion reached in formulating the auditor’s report.
Relevant policies are set out in Chapter 107 Engagement Risk Rating and Public
Interest Entity Assessment and in ANAO Audit Manual - Shared Content Chapter 8
Engagement Performance.
104.2 This policy sets out the role of a ‘Second Reviewer’ and the responsibilities of
that role. This policy has been developed to promote audit quality within FSASG by
providing review processes over and above those required by the auditing standards.
104.3 Unlike the EQCR, the Second Reviewer does not need to be independent of the
engagement team. This allows the Second Reviewer, in addition to fulfilling the
responsibilities required by this policy, to decide the extent of his or her further
involvement in the audit, such as increasing their involvement in the planning phase of
the audit.
104.4 In particular, the aims of this policy are:
a. to provide a mechanism for the GED to appoint someone who is neither the
Engagement Executive nor the EQCR to have a formal role in an engagement; and
b. to provide a mechanism to support the quality of an engagement where the
appointment of an independent EQCR is not required by ANAO Audit policy.
Policy
104.5 The FSASG GED, in consultation with the Auditor-General, shall determine the
engagements in each audit cycle to which a Second Reviewer will be appointed. The
GED shall provide a summary report to the Auditor-General early in the audit cycle
each year.
104.6 In the year in which an outsourced audit engagement of a material entity

transitions back in-house, the GED shall consider assigning a Second Reviewer,
unless an EQCR has been appointed. The summary report required by
paragraph 104.5 above shall note the considerations made by the GED in determining
whether to appoint a Second Reviewer in these circumstances.
104.7 The Second Reviewer shall be an Executive Director or higher.
104.8 The Second Reviewer shall be at least one level higher than the Engagement
Executive, unless the GED approves appointment of a Second Reviewer who is the
same level as the Engagement Executive.
104.9 The Second Reviewer shall be independent of the auditee consistent with the
ANAO Independence policy and standards.
104.10 The Second Reviewer shall undertake at least the review activities required
by ANAO Policy for an EQCR and consider any additional review activities for EQCRs
detailed in the guidance to ANAO policy.
104.11 Before the issue of the auditor’s report, the Second Reviewer shall document
the review activities undertaken consistent with ANAO Auditing Standards and policy,
including:
a. completing the Second Reviewer checklists at the planning and final stages of
the audit;
b. documenting briefings or relevant discussions with the Engagement Executive;
and
c. evidencing their review of the SORM (where applicable).
104.12 Subject to fulfilling the responsibilities required by this policy, the Second
Reviewer shall decide the extent of his or her further involvement in the audit. The
Second Reviewer is not permitted to perform functions that substitute the
responsibilities of the Engagement Executive or audit team.
Guidance
104.13 The Second Reviewer responsibilities required by this policy are the same
review and documentation responsibilities required by ANAO policy addressing the
responsibilities of the EQCR.
104.14 Unlike an EQCR, the Second Reviewer is not required to operate independently
of the engagement team. It is also not intended that a Second Reviewer perform work
in substitution for the work of the Engagement Executive or the team. This policy
therefore provides that, subject to fulfilling the Second Reviewer’s responsibilities
required by this policy, the Second Reviewer may determine the extent of their further
involvement in the audit, taking into consideration the complexity of the engagement,
the experience of the Engagement Executive and the risk that the auditor’s report may
not be appropriate in the circumstances. In making this decision, it is anticipated that a
Second Reviewer would liaise with the Engagement Executive.
104.15 A Senior Executive may be involved in an engagement, as a Second Reviewer,

to allow the ANAO to be represented at an appropriate level or to support the quality of
the engagement, particularly when the Engagement Executive is not an SES officer.
Representing the ANAO in this manner does not of itself involve the Senior Executive,
however a greater involvement may be appropriate in some circumstances.
104.16 Second Reviewers are to be regarded as key audit personnel for the purposes
of the ANAO rotation policy within ANAO Audit Manual - Shared Content Professional,
ethical and independence requirements paragraphs 5.14 to 5.16.
104.17 Second Reviewer templates are located in TeamStore.
105. Project managed audits

Background
105.1 When the ANAO contracts out an audit, or part of an audit, the duties of the
engagement partner are, in practice, fulfilled by the contractor partner. In these
circumstances, the responsibilities of the ANAO Engagement Executive are set out in
this policy. Where an outsourced audit has both an ANAO Engagement Executive and
ANAO Signing Officer in place, this policy applies equally to both individual roles.
Policy
Minimum requirements for contracts
105.2 Tenders and contracts for the audit or part of the audit of the financial
statements of an ANAO auditee shall require the use of an audit methodology that
enables compliance with the requirements of:
a. the ANAO Auditing Standards;

b. legislation or regulations relevant to the audit;
c. APES 110, as supplemented by ANAO policy about the provision of other
services to ANAO auditees;
d. applicable ANAO audit policies as provided to the contractor through the PSRG
extranet or via other means; and
e. such ANAO policies and procedures as are notified to the contractor by the
ANAO Engagement Executive.
Signing Officer and Engagement Executive responsibilities
105.3 The ANAO Signing Officer shall be responsible for the audit and is the
engagement partner for the purposes of the ANAO Auditing Standards. The ANAO
Engagement Executive, if a different person to the Signing Officer, and contract
engagement partner shall fulfil the responsibilities of the ‘engagement partner’ under
the ANAO Auditing Standards and assigned by legislation on behalf of the Signing
Officer.
105.4 At a minimum, the following policies shall apply to the Engagement Executive
and the Signing Officer, if a different person:
a. the Engagement Executive shall be briefed by the contract engagement partner

at appropriate times during the audit (if a different person, the Engagement
Executive shall brief the Signing Officer);
b. the Engagement Executive (and if different, the Signing Officer) shall approve:
i. key aspects of the audit approach, including audit responses to significant

risks;
ii. the contract engagement partner’s assessment of overall and
performance materiality for the financial statements as a whole and for
particular items;
iii. the schedule of uncorrected misstatements;8

iv. the SORM;
v. the audited financial statements; and
vi. the auditor’s report.
c. the Engagement Executive (and if different, the Signing Officer) shall be satisfied
that the contract engagement partner has completed their work consistent with
the ANAO Auditing Standards;
d. where an EQCR9 (either a contractor or an ANAO EQCR) is appointed, the
Engagement Executive (and if different, the Signing Officer) shall be satisfied
that the review processes have been completed satisfactorily before the
auditor’s report is issued; and
e. the audit file shall contain documented evidence of the Engagement Executive’s
(and if different, the Signing Officer’s) involvement, including documentation of
the briefings at the planning, interim and final stages of the audit before the
signing of the auditor’s report.
Further engagement executive responsibilities
105.5 The Engagement Executive shall:
a. gain an understanding of the Auditee to be comfortable that the risk

assessments are appropriate, including the rating of risks;
b. in approving materiality levels, ensure that ANAO policy on materiality is applied,
including component materiality set for the purposes of the Consolidated
Financial Statements (CFS), and materiality levels for particular items;
c. review significant risks, key judgements, assumptions, estimates and other
major sources of estimation uncertainty, that have a risk of resulting in material
misstatement or adjustment on the audit;
d. be satisfied that the ANAO policies notified to the contractor firm have been
complied with; and
e. review and sign all correspondence on ANAO letterhead.
105.6 The Engagement Executive shall make enquiries and document their review
of work papers, as deemed necessary, and be satisfied that the quality control
procedures applied to the audit are consistent with the requirements of the contract,
including:
a. meeting the ANAO Auditing Standards; and

b. the use of contractor staff with appropriate competence, qualifications and
experience.
105.7 For larger or higher risk audits, the Engagement Executive’s involvement shall
be extended with a greater involvement in audit planning and execution, regular
meetings with firm and auditee, and review of significant matters arising during the
audit.
Audit completion
105.8 Before signing the auditor’s report, the Signing Officer shall be satisfied that
the contractor’s work provides sufficient appropriate audit evidence to support the
release of the auditor’s report.
105.9 At the completion of the audit, the Engagement Executive shall ensure the
following procedures are performed:
a. before the signing of the auditor’s report, the contract engagement partner shall
provide written sign-off on the audit consistent with the approved form
‘Contractor’s Representation Letter’, including the auditor’s independence
declaration if the audit is performed under the Corporations Act; and
b. review the contractor’s representations and complete the relevant TeamMate
library file.
105.10 Contractor firm files shall be completed and ready for finalisation consistent
with ANAO Audit Manual - Shared Content, paragraph 9.12.
105.11 The Engagement Executive shall request the contractor firm to provide all
the working papers within 30 days of the date of the finalisation of each year’s
financial statement audit. Contractor firm files shall be archived consistent with ANAO
Audit Manual – Shared Content, paragraph 9.37.
Guidance
Legal basis for contracting
105.12 Under section 27 of the A-G Act, the Auditor-General, on behalf of the
Commonwealth, may engage any person under contract to help in the performance of
any Auditor-General function. For various reasons, the ANAO engages audit firms to
undertake an audit or a discrete part of an audit on his behalf.
105.13 Under section 29 of the A-G Act, the Auditor-General may delegate any of his
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functions or powers to an Official, which includes a person engaged under contract.
The Auditor-General has exercised his power of delegation regarding audits to senior
ANAO staff. Auditor’s reports on contracted out audits are therefore signed either by
the Auditor-General or by an appropriately delegated senior staff member of the ANAO.
Minimum requirements for contracts
105.14 The mandatory requirements governing ANAO audits need to be made known
to contractors via tender and contract documentation.
105.15 ANAO policy is to comply with the requirements of APES 110. Those
requirements apply equally to contractor firms and their staff. ANAO policy also adds to
these professional requirements; for example, ‘provision of other services by ANAO
Contractors to ANAO auditees’ includes prohibited services additional to the
requirements of APES 110.
105.16 Except for the ANAO audit policies provided to the contractor through the
PSRG extranet or notified to the contractor by the ANAO Engagement Executive, audit
firms contracting to the ANAO can use their own audit methodologies on the basis that
they meet the requirements of the ANAO Auditing Standards. To help ensure that
contractors comply with ANAO policy, paragraph 105.2 of this policy requires tenders
and contracts for audit services to make provision for the ANAO Engagement Executive
to notify the contractor of policies and procedures the ANAO requires be followed on
the audit.
Signing Officer and Engagement Executive responsibilities
105.17 The ANAO Signing Officer is formally the ‘engagement partner’ under the
auditing standards. In practice, when the ANAO contracts out an audit, or part of an
audit, the duties of the engagement partner are fulfilled by the contactor partner, while
the responsibility for the audit remains with the ANAO.
105.18 The ANAO Signing Officer and the Engagement Executive may be the same
person. Where this is the case, this policy requires the Engagement Executive to meet
the requirements of paragraphs 105.4 to 105.8 inclusive about the conduct of the audit.
105.19 Where the ANAO Signing Officer and the Engagement Executive are different
people, the requirements of paragraph 105.4 apply to the Signing Officer. These
responsibilities for the separate Signing Officer are the same that apply when there is a
separate Signing Officer on ANAO audits conducted in-house.
105.20 The Engagement Executive is required by ASA 220 to be satisfied that

sufficient appropriate audit evidence has been obtained to support the conclusions
reached and the auditor’s report to be issued. The Engagement Executive’s review
covers critical areas of judgement, especially those relating to difficult or contentious
matters identified during the course of the engagement, significant risks and other
areas the Engagement Executive has identified as important. Evidence of this review
should be documented and recorded in the audit file.
105.21 To satisfy the requirements of paragraph 105.6, and as part of the review of
the contractor’s audit working papers, the Engagement Executive should consider
reviewing the key areas of financial statements risk and associated key judgements,
assumptions and other major sources of estimation uncertainty, that may result in a
material misstatement or adjustment on the audit, including:
a. the execution and conclusions reached on audit procedures identified and

communicated to the auditee as part of the audit strategy;
b. the design and execution of the sampling strategy performed on the key areas of
audit focus, including the evaluation of the sampling results;
c. the design and appropriateness of the substantive analytical procedures
performed on the key areas of audit focus; and
d. the design and execution of audit procedures that were identified as deficient in
prior year quality assurance reviews that relate to sufficiency and appropriateness
of audit evidence.
105.22 The Engagement Executive should ensure that the Appropriation Test
Program has been completed and that sufficient and appropriate procedures have
been undertaken on other financial statement disclosures required by the PGPA FRR
2015.
105.23 The Engagement Executive should be satisfied that the engagement partner
and other senior members of the audit team were suitably involved in the design,
execution and evaluation of the key audit procedures, including planning, control, and
substantive audit procedures.
105.24 Where deficiencies are identified in the course of undertaking the review, the
Engagement Executive will need to notify the contract engagement partner and request
that identified deficiencies are rectified promptly and before the issue of the auditor’s
report. To be satisfied that the quality control procedures are consistent with the
requirements, the Engagement Executive would need to be satisfied that the identified
deficiencies have been appropriately rectified.
105.25 The audit contractor is responsible for ensuring that audit work undertaken
on behalf of the Auditor-General is performed in a manner consistent with professional
standards and for having in place quality control policies and assurance procedures to
be employed throughout the audit engagement. It is expected that these policies and
procedures would include the contracted audit engagement being subject to periodic
internal review as part of the contracted Firm’s quality assurance processes.
105.26 ASA 600 Special Considerations – Audits of a Group Financial Report provides
a useful reference point to guide the ANAO Engagement Executive in determining an
appropriate level of involvement for project-managed audits (taking a parallel from the
group engagement team involvement in the audit of a component). Relevant
requirements in ASA 600 that might be considered, include:
a. the level of materiality of components (i.e. contracted-out audits) is reviewed by

the group engagement team (ANAO) when set by the component auditor
(contractor) to ensure that it is within the threshold set by the group engagement
team (refer to policy paragraph 105.5(a)).
b. for significant components (entities), the group engagement team is involved in
the component auditor’s risk assessment to identify significant risks of material
misstatement of the group (CFS) financial statements. The nature, timing and
extent of this involvement is affected by the team’s understanding of the
component auditor but should include at a minimum:
i. discussion with the component auditor of those of the business activities

that are significant to the CFS;
ii. discussion with the component auditor on the susceptibility of the entity to
material misstatement due to fraud or error; and
iii. review of the component auditor’s documentation of identified significant
risks of material misstatements. This documentation may take the form of
a memorandum that reflects the component auditor’s conclusion regarding
identified significant risks; and
c. where significant risks of material misstatement of the group financial
statements have been identified in a component audit, the group engagement
team is required by ASA 600 to evaluate the appropriateness of further audit
procedures to be performed to respond to the identified significant risks of
material misstatement.
105.27 The level of involvement in the contracted-out audit is also influenced by:
a. the size of the audit relative to the CFS;

b. the potential level of parliamentary interest in the entity;
c. the engagement risk; and
d. the competency of the contractor’s audit team and their familiarity with the
auditee (i.e. first year of the contract versus later years.)
105.28 The expected level of ANAO involvement should be communicated to the

contract partner at the start of the audit to allow for timely involvement throughout the
audit.
Use of letterhead
105.29 For the purpose of applying the policy at paragraph 105.5(e), ANAO letterhead
should be used in covering letters or covering e-mails to an entity and all
communications to Ministers, but attachments such as Audit Strategy Documents may
be jointly badged. In the latter situation, the ANAO name and logo needs to have no less
prominence than the contractor’s name and logo. Refer to paragraph 109.3 or further
guidance on the form of the Audit Strategy Document.
Completion
105.30 The working papers provided by the contractor can be provided in:
a. an electronic copy, in a form which can be read by the ANAO using its existing
software; or
b. a printed copy on A4 paper (noting that some functionality of the audit software
may be lost in printed form); or
c. another suitable form which does not affect the readability of the working papers.
For example, a file in PDF or HTML format from which working papers in excel or
word file formats are extracted and provided in an electronic copy.
105.31 Contractor audit templates are located in TeamStore.
106. Role and responsibilities of the SADA Executive

Background
106.1 This policy sets out the responsibilities of the SADA Executive in a financial
statements audit or other FSASG assurance engagement that engages the specialist
skills of the SADA Branch.
106.2 A SADA Executive is allocated to a financial statements audit or other

assurance engagement consistent with ANAO Audit Manual - Shared Content
paragraph 6.4.
Policy
106.3 The role and responsibilities of the SADA Executive shall include:
a. the direction, supervision and performance of the SADA component of the

engagement;
b. reviewing key documents and work papers on the audit file, including:
i. the SADA sign-off – planning and completion procedures; and
ii. those relating to significant IT risks, judgements and difficult or

contentious matters;
c. having sufficient involvement in the engagement at appropriate stages including
attendance at key audit team meetings and discussions with the engagement
team, Engagement Executive and / or Signing Officer;
d. attendance at entry/exit meetings where appropriate, or other relevant meetings
with senior IT management; and
e. attendance at Audit Committees, where appropriate.
Guidance
106.4 The responsibility for the direction, supervision and performance of the SADA
component of the engagement includes:
a. emphasising the importance of audit quality on each engagement;

b. tracking the progress of the SADA component of the engagement;
c. considering the competence and capabilities of the SADA audit team assigned to
the engagement;
d. ensuring that appropriate SADA procedures are planned and performed;
e. addressing significant SADA matters arising during the engagement and the
impact on the planned approach; and
f. ensuring the SADA work performed supports the conclusions reached and is
appropriately documented.
106.5 Attendance at key meetings should be determined by the nature of the audit
and the level of SADA involvement. Attendance at key meetings would be expected if
there was extensive SADA involvement and/or material findings arising from SADA
work performed.
Engagement performance — planning
107. Engagement risk rating and public interest entity

assessment
Background
107.1 The assessment of engagement risk helps the Auditor-General, the FSASG
GED and FSASG Engagement Executives identify professional risks associated with
auditees and engagements of the ANAO at a whole-of-practice and individual
engagement level. The determination of engagement risk provides a basis to determine
whether additional quality control responses in accordance with ASA 220 and
equivalent provisions for non-financial engagements are required.
107.2 In addition to the EQCR requirements in this section, the assessment of

11
whether an entity is, or is to be treated as, a PIE, impacts independence requirements
under the ANAO Independence Policy and the parameters to be applied in determining
overall materiality (refer to Chapter 108 Materiality).
Policy
Annual engagement risk and public interest entity assessment
107.3 At the start of each audit cycle the FSASG GED shall determine the following
matters:
a. the risk ratings assigned to all FSASG engagements; and

b. which entities that are subject to FSASG engagements must be classified as a
PIE.
107.4 The FSASG GED’s determinations shall be communicated to the Auditor-

General, the Deputy Auditor-General, the PSRG GED and all Engagement Executives
responsible for FSASG engagements.
Policy applicable to assessment of engagement risk for FSASG engagements
107.5 An engagement shall be assessed as being a high, moderate or low risk

engagement based upon the overall risk of the engagement to the Auditor-General
and the ANAO. This shall include consideration of:
a. the inherent RoMM arising from the engagement (that is, the risk that there is a
material misstatement in the subject matter before the conduct of the
engagement); and
b. other professional risks, being any other source of risk to the Auditor-General
and the ANAO arising from the conduct of the engagement including, but not
limited to, litigious and reputational risks.
107.6 A preliminary assessment of the engagement risk for each engagement shall
be documented by the Engagement Executive. The results of this preliminary
assessment shall be made available to the FSASG GED for consideration.
107.7 Where a new FSASG engagement has become part of the ANAO’s mandate or
has been accepted under a s20 arrangement subsequent to the FSASG GED’s
determination, the Engagement Executive shall recommend an engagement risk
rating to the FSASG GED for approval.
107.8 Engagement risk shall be monitored throughout the engagement. Where a

change in the circumstances of an FSASG engagement causes the Engagement
Executive to believe that the engagement risk rating requires revision, a new rating
shall be recommended to the FSASG GED for approval.
Policy applicable to assessment of PIE status of auditees
107.9 The FSASG GED shall apply APES110 paragraph 400.8 to AUST 400.8 A1 in
determining which entities to treat as PIEs.
107.10 In determining under APES110 paragraph AUST R400.8.1 which additional

entities to treat as a PIE, the FSASG GED shall consider the following factors:
a. the level of public interest and scrutiny applied to the entity;

b. the size of the entity, including the number of employees;
c. the nature of the business, including holding assets in a fiduciary capacity for a
large number of stakeholders; and
d. any other indicators that the entity has a large number and wide range of
stakeholders.
Consequences of engagement risk assessments
107.11 Where the engagement risk has been assessed as High on a mandated
financial statements audit that is material to the Commonwealth’s Consolidated
Financial Statements:
a. an EQCR shall be assigned;

b. staff assigned with key roles shall have appropriate skills and experience for
their assigned role; and
c. other appropriate responses shall be determined and documented, including
specific responses to the underlying events or conditions giving rise to the High
engagement risk rating.
107.12 For all other engagements (including FSASG engagements on subjects other
than historical financial information and engagements under a s20 arrangement)
where the engagement risk has been assessed as High, the Engagement Executive
shall consider and document an appropriate response or responses to the assessed
risk (which does not necessarily require the appointment of an EQCR). If the response
does not include the appointment of an EQCR, the Engagement Executive shall
document the reasoning.
107.13 Where the engagement risk has been assessed as High on an engagement
conducted under s20 of the A-G Act the consideration of an appropriate response by
the Engagement Executive shall include whether it is appropriate to continue to
undertake the engagement (refer to ANAO Audit Manual - Shared Content paragraphs
2.108-2.116).
107.14 The engagement risk, together with the associated rationale and impact on
the audit approach, shall be communicated to the auditee as part of formal
communication at the planning stage.
107.15 Where the engagement risk assessment is revised to High during the audit,
the Engagement Executive shall ensure that the risk responses required by this policy,
including appointment of an EQCR where applicable, are applied.
Consequences of PIE assessments
107.16 Where an auditee has been assessed to be a PIE, an EQCR shall be

appointed.
Guidance
Components of engagement risk
107.17 When assessing engagement risk, one relevant risk is the risk of material
misstatement, which is a risk posed by the engagement and reflects the risk prior to
the conduct of the engagement that the engagement subject matter contains material
misstatements. The auditor’s procedures in response to the risk of material
misstatement are designed to reduce audit risk to an acceptably low level in each
engagement.
107.18 However, for the purposes of managing risk for the ANAO as a whole,
engagement risk also encapsulates other risks to the Auditor-General and the ANAO
arising from the conduct of the engagement that is separate or additional to the risk of
material misstatement. These risks are referred to collectively as “Other Professional
Risks.”
107.19 FSASG uses an engagement risk rating scale of High, Moderate and Low. The
rating assigned to an auditee is based on professional judgement relating to the
auditee’s particular circumstances.
107.20 Sources of engagement risk are cumulative and should be considered

collectively to assess the overall risk.
Risks of material misstatements
107.21 For audits of financial reports, the risk of material misstatement exists at the
financial report level and at the assertion level. The risks of material misstatement at
the assertion level consist of two components: inherent risk and control risk. Inherent
risk and control risk are the entity’s risks; they exist independently of the audit of the
financial report.
107.22 Assessment of risk of material misstatement does not take into account the
ANAO’s planned audit response to reduce the residual risk to an acceptable level.
Overall, this means that for an audit of a financial report, the risk of material
misstatement is the risk that the financial report is materially misstated prior to audit.
107.23 Risk of material misstatement applies equally to assurance engagements on

non-financial information and is the risk that the subject matter information is
materially misstated. In the particular case of direct-reporting engagements, this
includes material differences between the engagement subject matter and the criteria
against which it will be assessed. The definition of risk of material misstatement and
related concepts in ASAE 3000 Assurance Engagements Other than Audits or Reviews
of Historical Financial Information and any relevant subject-matter specific auditing
standards should be considered in making this determination for engagements other
than those related to financial statements.
107.24 The assessment of the risk of material misstatement is central to the risk-
based audit approach, and requires the engagement team to:
a. understand the entity and its environment, including internal control;

b. assess the risks of material misstatement at the financial statement and
assertion level, whether due to fraud or error; and
c. design and perform audit procedures to reduce audit risk to an acceptably low
level.
107.25 TeamMate contains templates in the A.2: Understand Entity and its
Environment (including IT risks) folder which help in determining the risk of material
misstatement for an auditee and may be used as the basis for recording the
preliminary risk assessment required by paragraph 107.6 above.
107.26 Factors to consider when determining the risk of material misstatement

include:
a. size, complexity and stability of the auditee;

b. materiality;
c. nature of the business risks the auditee faces and the strength of the controls in
place to mitigate those business risks;
d. effectiveness of internal control; and
e. results of previous engagements and actions taken to address any issues
identified.
107.27 As a general guide, the risk of material misstatement would generally be

characterised by the following attributes:
High risk of material misstatement

highly complex entities with multiple programs or functions;
deficiencies in corporate governance;
significant business risks which impact on the financial statements, some of
which are poorly managed;
high risk financial statement items, which may include complex accounting
estimates and valuations;
poorly controlled and or changing processes and accounting systems;
frequent changes in key personnel, systems or programs which are poorly
managed; and
prior year’s auditor’s report may have been modified.
Moderate risk of material misstatement

moderately complex entities with multiple programs or functions;
significant business risks which impact on the financial statements, that are
somewhat well-managed;
may contain one or two high risk and several medium risk financial report items;
internal control is considered to be generally effective; and
prior year’s audit may have a limited number of significant findings, which are
being addressed by management.
Low risk of material misstatement

less complex entities with usually a small number of programs or functions;
business risks which impact on the financial statements are low or moderate and
for the most part are appropriately managed;
most financial report components are low risk with no high risk items;
effective internal control, or for small organisations with inadequate segregation

of duties, appropriate compensating controls exist; and
prior year’s audit findings will tend to be less significant.
107.28 The assessed risk of material misstatement is communicated to the auditee

as part of formal communication at the planning stage. Subject to the agreement of
the FSASG GED, low and moderate engagement risk ratings may be communicated to
the auditee as ‘normal’ risk.
107.29 The Interim Report on Key Financial Controls of Major Entities (Controls
Report) and the Year End Report tabled in Parliament use the Low, Moderate and High
risk rating approach in line with the TeamMate file workpapers. The low or moderate
rating can be communicated with the auditee formally or informally, as considered
appropriate by the relevant Engagement Executive.
Other professional risks
107.30 While the assessment of the risk of material misstatement is central to the
ANAO’s risk-based audit approach, it does not address all of the risks that the Auditor-
General must manage to effectively deliver on all of the functions provided under the A-
G Act. To assist the Auditor-General to manage these risks it is the responsibility of the
FSASG to identify and respond to other potential risks arising out of the conduct of
individual engagements.
107.31 While the A-G Act provides the ANAO with expansive powers, independence
and indemnities, the Office and the Auditor-General are not immune from litigation. The
possibility of legal action being taken by an auditee or other interested party due to the
conduct of an FSASG engagement may impinge upon the professional reputation and
independence of the Office.
107.32 In some other circumstances there may be a reputational risk arising from the
conduct of an audit. Reputational risks may arise because of perceptions about the
appropriateness, competence or role of the Auditor-General. Examples may include:
a. politically sensitive subject matters where the ANAO’s audit conclusion may be
perceived as supportive or unsupportive of areas of government policy;
b. audit subject matters where stakeholder understanding or expectation is different
from the relevant engagement criteria for the matter, resulting in an expectation
gap between the scope of the audit and the expectations of the users. For
example, the ANAO may issue an unmodified auditor’s report on financial
statements which do not include disclosures that are not required by the
Australian Accounting Standards but are considered desirable or necessary by
Parliamentarians;
c. breaches (or apparent breaches) of confidentiality and privacy provisions of the

A-G Act, Parliamentary conventions, other legislation and community
expectations;
d. difficult or contentious relationships with auditees, particularly those likely to lead
to public disagreements;
e. the ANAO being perceived as unpragmatic, unrealistic or otherwise inconsistent
with relevant stakeholder expectations;
f. the ANAO auditing an entity that is likely to be privatised or to otherwise leave
ANAO’s mandate and there being significant differences in accounting treatment
accepted by the incoming auditor; and
g. the ANAO not being perceived as independent because of a conflict between the
ANAO’s mandate and relevant professional independence requirements.
107.33 In some cases no amount of additional audit work will significantly reduce the
risk arising from Other Professional Risks, however the employment of additional
quality assurance and risk management procedures will provide the Auditor-General
with additional confidence that the work performed is appropriate and will stand up to
scrutiny.
Roles, Responsibilities and Appointment of EQCRs
107.34 Where it is determined under this policy that an EQCR is to be appointed, the
roles, responsibilities and appointment of the EQCR are determined by the Engagement
Quality Control Review policy (refer to ANAO Audit Manual - Shared Content,
paragraphs 8.42-8.52).
107.35 Under the policy, the role of an EQCR may be fulfilled by an external party to
the ANAO where relevant, including in the case of an appropriate EQCR partner from an
auditing firm to whom the engagement has been contracted out. In some cases, the
firm’s own internal policies may require appointment of an EQCR, and so long as the
work of their internal EQCR is sufficient to meet the requirements of the Audit Manual,
there is no requirement for an additional ANAO EQCR.
Public interest entity assessment
107.36 PIEs refer to those auditees which have a fiduciary or other financial trust
relationship with a large number and wide range of stakeholders. The following meet
the definition of a PIE under APES110:
12
a. a Listed Entity; or
b. any entity:
i. defined by regulation or legislation as a PIE; or
ii. for which the audit is required by regulation or legislation to be conducted in

compliance with the same independence requirements that apply to the
audit of Listed Entities. Such regulation may be promulgated by any
relevant regulator, including an audit regulator; or
iii. for which the ANAO’s policy has determined to treat as PIE because they
have a large number and wide range of stakeholders.
107.37 By their nature, Australian Government entities have a higher level of public
interest than other entities because they are taxpayer-funded, subject to parliamentary
oversight and often engage directly with the general public. This, in itself, does not
make an Australian Government entity a PIE, and the relative interest in that entity
compared to other Australian Government entities should be considered when
determining whether the entity is a PIE.
107.38 As the consolidation of the entire Commonwealth government and its

controlled entities, the CFS should be considered to be a PIE because all Australian
citizens could be considered a stakeholder. Entities that are significant or material to
CFS are not PIEs automatically, and each entity should be assessed on a case by case
basis.
107.39 For entities other than CFS that are not Listed Entities, not defined by
legislation as a PIE or not otherwise subject to the same independence standards as
Listed Entities, the following indicators will assist in determining which entities are to
be treated as PIEs based upon their large number and wide range of stakeholders:
Indicator More likely to be a PIE Less likely t
Level of public interest and Entities with increased public or Subject only
scrutiny applied to the parliamentary interest compared to other parliamenta
entity public sector entities demonstrated by: processes, f
extensive media coverage; Estimates a
frequency of being called to give requirement
evidence to parliamentary
committees and enquiries;
existence of additional scrutiny,
accountability and reporting
processes, for example special
public reporting required of the
entity in addition to the general
requirements of the PGPA Act; and
Indicator More likely to be a PIE Less likely t
for-profit entities that voluntarily

hold themselves to external
scrutiny standards equivalent to
their listed peers, for example
preparing a reviewed half-year
financial report or publishing a
remuneration report.
Size of the entity and Entities that control assets or liabilities Entities that
number of employees on behalf of the Australian Government narrow rang
that are significant to the Australian policy agen
economy.
Entities with large service delivery

aspects to their business that gives rise
to large numbers of staff.
Nature of the business, Entities that provide financial services to Entities that
including holding assets in the public or to significant subsets of the educational
a fiduciary capacity for a public on terms broadly comparable to benefits and
large number of other financial industry service providers, to the public
stakeholders and any such as general insurance, investment entitlement
special rules relating to the management/superannuation and appropriatio
conduct of the audit. banking. would not e
reasonable
Audits where there are special rules
ability of the
relating to auditor independence or
Governmen
conduct greater than the generally
associated
accepted provisions related to the
discretion a
Auditor-General’s mandate.
the delivery
107.40 Paragraph AUST 400.8.1 A1 of APES 110 provides a list of entities which are
likely to be classified as PIEs based on the large number and wide range of
stakeholders. This includes entities regulated by the Australian Prudential Regulatory
Authority, disclosing entities under the Corporations Act and other issuers of debt and
equity instruments to the public. These entities would be expected to be captured
under the application of this policy because of the nature of their business.
107.41 In some cases, the source of stakeholder interest for a Commonwealth entity
may be balances and transactions that are reported in the administered statements.
Because administered items are items that the entity does not control directly, this may
be a consideration supporting the determination that an entity is not a PIE. In relation to
administered items, the entity is more likely to be a PIE if the accountability for the
related items is chiefly through the entity (for example, if stakeholder interest was
chiefly related to how the specific program was managed by the entity). The entity is
less likely to be a PIE if the accountability for the related items is chiefly through the
Commonwealth government as a whole (for example if the main source of stakeholder
interest is the credit-worthiness of the government, which is best represented by the
CFS accounts).
108. Materiality
Background
108.1 This policy creates standard parameters to apply the concept of materiality in
planning and performing the audit. Chapter 111 Evaluating misstatements deals with
the evaluation of misstatements identified as a result of the audit and creates the
parameters for setting a clearly trivial threshold. Chapter 107 Engagement risk rating
and public interest entity assessment includes policy and guidance on assessing if an
entity is, or is to be treated as, a PIE.
108.2 Overall and particular materiality amounts are driven by the needs of users and
are the materiality levels against which we evaluate misstatements. Performance and
particular performance materiality amounts reflect audit risk and are the levels that we
audit to.
Policy
108.3 The Engagement Executive shall be responsible for approving materiality.
Where there is a separate Signing Officer to the Engagement Executive, approval of
materiality is also required by the separate Signing Officer.
108.4 The basis for the professional judgements made in assessing materiality
shall be documented. The materiality levels to be determined for each audit are as
follows:
a. materiality for the financial statements as a whole (‘overall materiality’);

b. ‘performance materiality’; and
c. ‘particular materiality’ and ‘particular performance materiality’ where relevant,
for particular classes of transactions, account balances or disclosures.
108.5 Where the financial statements include both ‘departmental’ items and
‘administered’ items, materiality shall be determined separately for each.
108.6 In determining overall materiality for an ANAO audit (other than the CFS), the
Engagement Executive shall use professional judgement to apply standard
benchmarks and thresholds, taking into account the financial information needs of
users of the financial statements report.
108.7 In determining performance materiality for an audit (other than CFS), the
Engagement Executive/Signing Officer shall reduce overall materiality having regard
to the level and pervasiveness of the risk of material misstatement. Standard ANAO
‘haircuts’ of overall materiality are 10%, 25% or 50%.
108.8 Engagement Executives shall specify particular materiality and a related

performance materiality for classes of transactions, account balances and
disclosures when, in their professional judgement, it is appropriate to do so. In
addition, Engagement Executives shall comply with any particular materiality and
related performance materiality for application on specified classes of audits
determined by the FSASG GED. Formal GED approval is required for departures from
FSASG GED-determined particular materiality.
108.9 The following items shall be treated as material by nature, and it may be
appropriate to determine particular materiality for these items:
a. Appropriations note disclosures, including:
i. annual and special appropriations; and

ii. special accounts;
b. authorisation of investments (sections 58 and 59 of the PGPA Act); and
c. disclosures of senior and key management personnel remuneration required by
the PGPA FRR 2015 and AASB standards.
108.10 The FSASG Engagement Executive for the audit of the CFS shall recommend
to the Auditor-General for approval:
a. the overall materiality level to be applied to the CFS audit;

b. performance materiality; and
c. the maximum overall materiality level or levels to apply to the component audits
for the CFS. Overall materiality in the financial statement audit of a component
of the CFS shall not exceed this maximum.
108.11 Materiality levels shall be revised when the auditor becomes aware of
information during the audit that would have caused the auditor to have determined a
different materiality amount (or amounts) at planning.
108.12 Materiality levels determined for application on an audit shall not be

communicated to the auditee unless such communication is approved by the FSASG
GED.
Guidance
Materiality in the context of an audit
108.13 ASA 320 Materiality in Planning and Performing an Audit provides specific
guidance on the application of materiality for auditing in the public sector in the
following terms:
‘In the case of a public sector entity, legislators and regulators are often the
primary users of its financial report. Furthermore, the financial report may be
used to make decisions other than economic decisions. The determination of
materiality for the financial report as a whole (and, if applicable, materiality
level or levels for particular classes of transactions, account balances or
disclosures) in an audit of the financial report of a public sector entity is
therefore influenced by law, regulation or other authority, and by the financial
information needs of legislators and the public about public sector programs.’
108.14 In the audit of general purpose financial statements, the needs of users as a
group are considered because the needs of specific individual users may vary widely.
However, in an audit of special purpose financial statements, the needs of specific
users need to be taken into account.
108.15 Materiality is considered when planning and performing the audit to reduce
audit risk to an acceptably low level. Materiality is used to:
a. determine the nature, timing and extent of risk assessment procedures;

b. identify and assess the risk of material misstatement in the financial statements;
and
c. determine the nature, timing and extent of further audit procedures.
Engagement executive/signing officer involvement
108.16 It is important for both overall materiality and performance materiality levels
to be discussed and agreed during planning. If materiality is set too high during
planning, audit procedures might fail to detect a misstatement that users of the
financial statements consider material. If materiality is set too low, the engagement
team is likely to over-audit.
108.17 Discussion up-front as a team, with Engagement Executive involvement, is

vital to avoid under or over-auditing, which can result where team members have
different views on what is material. The final judgements on materiality are the
responsibility of the Engagement Executive with, where a different person, the approval
of the Signing Officer (refer to Chapter 103 Roles and Responsibilities of the Signing
Officer).
108.18 This materiality policy applies equally to project-managed audits undertaken

by private firms under contract to the ANAO. Where materiality levels proposed by a
contractor are not based on the standard ANAO benchmarks and thresholds described
in this policy, it is up to the ANAO Signing Officer/Engagement Executive to be satisfied
that the amounts proposed are appropriate to the audit. The approval of the Signing
Officer/Engagement Executive is subject to the consultation and approvals required by
this policy.
Overall materiality
108.19 The Parliament is the primary user of the financial statements. Financial
statements provide a basis for Parliamentarians to keep Government and its entities
accountable for their actions and may be used by the Executive Government for
making economic decisions (about the allocation of resources). Overall materiality is
influenced by the ANAO’s perception of the financial information needs of the
Parliament and other users about the activities of Government.
108.20 The auditor determines a single overall materiality level based on a selected
benchmark (for example, revenue) relevant to users of the financial statements. Overall
materiality based on this benchmark is applied to the overall financial statements and
forms a basis for performance materiality. Applying separate quantitative levels of
overall materiality (for example, a certain materiality level for profit and loss account
items and a different materiality level for balance sheet items) will not enable the
auditor to plan the audit effectively to detect material misstatements.
108.21 ANAO Audit Manual – FSASG Specific policy specifies standard benchmarks
and thresholds to be considered in setting overall materiality. However, there is an
overriding responsibility of the Engagement Executive and Signing Officer to consider
whether the standard benchmarks and threshold are appropriate for the particular
entity. In cases where a non-standard benchmark is used, approval by the
Qualifications and Technical Advisory Committee (QTAC) is required when the overall
materiality amount determined is higher than the highest amount that could be
determined using a standard benchmark threshold for the type of entity.
Selecting a benchmark
108.22 Factors that may help to identify an appropriate benchmark include:
a. the elements of the financial report (for example, assets, liabilities, equity,
revenue, expenses);
b. whether there are items on which the attention of the users of the particular
entity’s financial report tends to be focused (for example, for the purpose of
evaluating financial performance users may tend to focus on profit, revenue or
net assets);
c. the nature of the entity, where the entity is in its life cycle, and the industry and
economic environment in which the entity operates;
d. the entity’s ownership structure and the way it is financed (for example, if an
entity is financed solely by debt rather than equity, users may put more emphasis
on assets, and claims on them, than on the entity’s earnings); and
e. the relative volatility of the benchmark.
Applying a threshold to a chosen benchmark
108.23 A key determinant in setting overall materiality is whether the entity is

assessed to be a PIE under Chapter 107 Engagement risk rating and public interest
entity assessment.
108.24 In most circumstances, a threshold percentage towards the higher end of the
range can be applied to a chosen benchmark when setting overall materiality where
there are no indicators that a lower threshold should be applied. However, depending
on the entity’s nature, particular circumstances and users of the financial statements, a
threshold percentage towards the lower end of the range should be considered when
setting overall materiality. Factors which indicate that a percentage at the lower end of
the range may be appropriate include:
a. the entity is currently subject to relatively high levels of scrutiny by the Parliament
13
or its Committees compared to other government entities;
b. the entity is currently subject to relatively high levels of interest from the media or
the public compared to other government entities;
c. the entity has a significant level of external debt;
d. there are specific factors, such as the existence of financial covenants, which
increase the sensitivity of the selected benchmark; and
e. the chosen benchmark may be particularly sensitive based on the understanding

of users’ interests in the financial statements (but note that general purpose
financial statements are being considered – it is more likely that benchmarks are
particularly sensitive in special purpose financial information designed to meet
the specific needs of the users).
108.25 Note that consideration of audit risk is reflected in the determination of

performance materiality. Therefore, factors such as the effectiveness of the entity’s
internal controls and the number of identified misstatements in prior years’ audits are
reflected in the determination of performance materiality, affecting the selection of the
haircut percentage among 10%, 25% and 50%, rather than overall materiality.
Performance materiality
108.26 Planning the audit solely to detect individually material misstatements

overlooks the fact that the aggregate of individually immaterial misstatements may
cause the financial statements to be materially misstated and leaves no margin for
possible undetected misstatements. Auditors determine performance materiality,
which is one or more amounts, to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements in the financial
statements exceeds materiality for the financial statements as a whole.
108.27 The determination of performance materiality is impacted by the auditor’s

understanding of the entity and is updated during the performance of the risk
assessment procedures. It is also affected by the nature and extent of misstatements
identified in previous audits and thereby the auditor’s expectations about
misstatements in the current period.
108.28 Performance materiality is used throughout planning to determine which

account balances, classes of transactions and disclosures to select for examination.
Throughout the audit, it enables the auditor to define the extent of work necessary to
reduce audit risk to an acceptably low level. It also impacts testing through the
selection of items for testing (targeted testing and sampling) and substantive analytical
procedures. It is not always appropriate to exclude all balances below the performance
materiality level from the scope of the audit. The auditor should consider the risks
relating to those account balances, including the risk relating to completeness of those
balances. The auditor should also take into account the overall coverage achieved from
the audit, to avoid the risk that large numbers of non-material balances totalling a
material balance are excluded from the audit plan.
ANAO standard haircuts
108.29 Setting performance materiality is a matter of professional judgement taking

into account an entity’s circumstances and is calculated by taking a ‘haircut’ off overall
materiality. ANAO haircuts are usually 10%, 25% and 50%.
108.30 A haircut above 25% should form part of the Engagement Executive’s
documented risk assessment for the purposes of the engagement risk rating
14
assessment at the start of each audit cycle. Otherwise, it should be considered for
consultation under the ANAO Audit Manual - Shared Content paragraph 8.15.
Factors to consider in setting haircut
15
Haircut Proposed audit Risk assessment & aggregation risk Cont
adjustments
10% History of limited or no The characteristics of the entity being Wher

booked proposed audit audited result in low aggregation risk opera
adjustments. related to potential misstatements effec
16
arising from environmental factors. contr
overa
the c
histo
deter
opera
25% History of limited or no The characteristics of the entity being Wher

booked proposed audit audited result in low to moderate opera
adjustments. aggregation risk related to potential effec
misstatements arising from contr
17
environmental factors. overa
the c
histo
deter
opera
50% History of frequent audit The characteristics of the entity being Expe
adjustments. audited result in high aggregation risk signi
related to potential misstatement defic
Significant management 18
arising from environment factors. contr
turnover that suggests a
potential increase in the
frequency of audit
adjustments.
Factors to consider in setting haircut
108.31 When considering the history of misstatements in determining the

appropriate haircut, audit teams should ensure that they consider the nature and extent
of the misstatements identified during the audit for the immediate prior year. Extent of
misstatements includes both the number of misstatements and the size, individually
and collectively, of those misstatements. In considering these misstatements, it is not
appropriate to exclude corrected misstatements, nor should misstatements be
disregarded be ause they have no or only a small impact upon the net result of the
entity. For example, a corrected misstatement resulting in a gross-up of the balance
sheet or income statement may have nil impact on the operating surplus of the auditee
but is still an indicator of increased risk of material misstatements given that the
misstatement was resolved during the audit and not prevented by management. In
some circumstances the auditor may consider that misstatements in the previous year
do not indicate a higher risk of misstatements because they are unlikely to be repeated
in the current year. For example, the misstatements may have related to a one-off event
such as implementation of a new accounting standard. Where this is the case auditors
should ensure that their documentation clearly addresses this judgement.
108.32 Using one of the haircut percentages above will generally be appropriate.
However, in some circumstances we may consider using percentages other than those
above. For example, a percentage between 25% and 50% may be appropriate where the
entity has a predominant factor at both the higher and lower end of the range and we
consider these factors to be equally important.
108.33 A 50% haircut would be considered when the risk factors described above are
pervasive across the entity. If risk factors are isolated to one area or business process,
consider using a 25% haircut and applying a higher haircut to the riskier account(s).
Items that are material by nature
108.34 When forming the audit plan, the auditor often uses performance materiality
to identify line items and disclosures that require audit examination, to ensure that
audit risk is reduced to an acceptably low level. The auditor also needs to consider
whether, in the specific circumstances of the entity, there exist items that require audit
examination due to their nature even though their dollar amount below performance
materiality.
108.35 Items may be identified as material by nature due to:
a. the users’ interest in the item, consistent with the assessment of when setting a
particular materiality level for certain items is appropriate; or
b. the financial reporting framework requiring disclosures for certain items
regardless of the amount and materiality. Paragraph 108.9 above identifies
specific items to be treated as material by nature.
108.36 As a minimum, items that are material by nature will be subject to a level of
audit attention that:
a. is consistent with the Engagement Executive’s assessment of the user’s interest

in the item; or
b. gains sufficient and appropriate audit evidence that the disclosures are
appropriate and consistent with the requirements of the financial reporting
framework.
108.37 Setting a particular materiality for an item that is material by nature may help
in driving the level of audit attention required and evaluating misstatements but is not
always necessary.
108.38 For example, the appropriation of the Consolidated Revenue Fund (CRF) is a
key control that the Parliament has over the Executive Government. The appropriation
notes in non-corporate Commonwealth entities’ financial statements disclose, for each
appropriation, the purpose and total amount of spending authorised by the Parliament
and the spending actually made. If we were to set a particular materiality for each
appropriation, we would render overall materiality largely redundant, as all non-
corporate Commonwealth entity expenditure is made via an appropriation. Setting a
particular materiality for each appropriation would ordinarily be unnecessary. Enough
coverage would usually be obtained by evaluating the effectiveness of the design of
controls over (i) recording appropriations available and (ii) spending for purpose. We
can then test the effectiveness of those controls over the year for appropriation items
of all sizes and undertake appropriate substantive testing.
108.39 For senior and key management personnel remuneration, it may be

appropriate in some cases to fully substantiate remuneration of key management
personnel such as the accountable authority, Chief Executive, Statutory Office Holders
and Company Directors. Other executives may be able to be audited by controls testing
and analytical review of the supporting schedules and financial statement disclosures.
108.40 In the case of authorisation of the PGPA Act Part 2-4 Division 5 investments,
19
audit teams should ensure that the entity has the appropriate delegation to invest and
that the investment is an authorised investment under:
a. section 58 of the PGPA Act and section 22 of the PGPA Rule, for non-corporate
Commonwealth entities; or
20
b. section 59 of the PGPA Act, for corporate Commonwealth entities.
108.41 Refer to Chapter 111 Evaluating misstatements for policy and guidance when
evaluating misstatements in items that are identified as material by nature.
Materiality for particular items
108.42 When forming the audit plan, the auditor needs to consider whether, in the
specific circumstances of the entity, misstatements in particular items of lesser
amounts than overall materiality could reasonably be expected to influence the
economic or political decisions of users. For this reason, it is appropriate to set
particular materiality levels for some items.
108.43 Factors which may be considered in determining the need for particular
materiality include:
a. whether accounting standards, law or regulations (PGPA FRR 2015) affect users’
expectations regarding the measurement or disclosure of certain items
(examples include disclosures of related party transactions and remuneration of
directors, senior and key management personnel and others charged with
governance);
b. the key disclosures about the industry and the environment in which the entity
operates;
c. whether attention is focused on the financial performance of a particular
business segment that is separately disclosed in the financial statements; and
d. the factors mentioned in paragraph 108.42 when they affect one or more
particular classes of transactions, account balances or disclosures rather than
the financial statements as a whole.
108.44 Where particular materiality is determined, performance materiality relating to

that particular class of transactions, account balance or disclosure is set to reduce to
an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds the pre-determined materiality level for that
particular class of transactions, account balance or disclosure.
108.45 ANAO Audit Manual – FSASG Specific policy provides for the FSASG GED to
determine particular materiality for specific items. Where such a determination is
made, it will be communicated formally by the FSASG GED or via a PSRG Technical
Update or other communication mediums. The absence of a determination of
particular materiality for any item does not relieve the Engagement Executive/Signing
Officer of the responsibility to determine particular materiality where appropriate to

their individual audit.
Australian Government Consolidated Financial Statements
108.46 The materiality for any individual audit cannot exceed the materiality for the
CFS of the Whole of Government. Accordingly, the Engagement Executive for the CFS
recommends to the Auditor-General the overall materiality level (a single dollar amount)
for the CFS audit and the maximum materiality level or levels to be applied on all ANAO
audits that are components of the CFS. The CFS Engagement Executive will formally
advise the maximum materiality level or levels to all Engagement Executives and PSRG
as soon as practicable after the decision.
Materiality considerations for entities with disproportional financial statements
108.47 Some Commonwealth entities have one account balance or class of

transactions that is significantly larger than the remainder of the financial statements.
When selecting the appropriate benchmark for determining overall materiality, the audit
team’s judgement should be driven by what they consider to be the primary area of
interest to users. If the benchmark selected includes the significantly large line item
resulting in a high overall materiality figure compared to the remainder of the financial
statements, the audit team also needs to consider if there are further areas of interest
to users that require a particular materiality to be determined at a lower level for those
line items.
108.48 The audit team may also consider that some line items are not focus areas
for users and do not require a particular materiality level to be set. However, the audit
team may consider that these line items contain an unacceptable level of risk and
performing limited audit procedures over them is not appropriate. For these line
items/risk areas, the audit team’s response may be to determine a lower performance
materiality level by applying a larger haircut, which will drive further audit procedures
and increase the level of assurance gained. Judgements made and the supporting
considerations in the above scenarios should be documented clearly in the audit file.
Revising materiality levels
108.49 The auditor’s initial assessment of materiality and audit risk may change after
evaluating the results of audit procedures. This could be because of a change in
circumstances, new information or because of a change in the auditor’s knowledge as
a result of performing audit procedures.
108.50 The levels of overall materiality, performance materiality and materiality for
particular items need to be revised when the auditor becomes aware of information
during the audit that would have resulted in a lower materiality at planning. In addition
to the flow-on effect of changes in overall materiality, performance materiality and
materiality for particular items to the clearly trivial threshold, such information may
also require the auditor to revise the clearly trivial threshold percentage in accordance
with ANAO Audit Manual – FSASG Specific Chapter 111 Evaluating Misstatements.
Minimum documentation
108.51 To meet the policy requirement of documenting the professional judgements

made regarding materiality, the documentation of the rationale in determining
materiality levels should include:
a. how the individual circumstances of the entity were taken into account;
b. the benchmark and rule of thumb percentage used;
c. reasons for selecting the benchmark and the percentage used;
d. the rationale for selecting the haircut for determining performance materiality;
and
e. the reason(s) for determining a different materiality for particular items (if any).
108.52 Changes to the preliminary judgment about materiality are to be documented

and approved by the Engagement Executive/Signing Officer.
108.53 ASA 320 requires the audit file to include evidence that overall materiality,
performance materiality, and materiality for particular items (if any) were discussed by
the engagement team and the decisions made (including any revisions) to be
communicated to the team. This should be achieved by including a materiality
discussion on the agenda of the planning meeting, documenting the procedures
performed to determine materiality and by the Engagement Executive’s planning sign-
off.
108.54 Chapter 105 Project managed audits in the ANAO Audit Manual – FSASG
Specific requires audit files to contain evidence that decisions on materiality and the
professional judgements exercised for contracted-out audits are those approved by the
Signing Officer/Engagement Executive.
Communicating materiality to auditees
108.55 As a matter of ANAO policy, materiality levels determined for application on

an audit are ordinarily not to be communicated to the auditee. The reason for this
approach is to avoid situations where the auditee deliberately structures transactions
to avoid audit scrutiny or responds to our request for adjustments to be made to the
financial statements based on our materiality decisions. This is consistent with the
requirements in the standards for auditors to request that all errors accumulated
during the audit (i.e. those above clearly trivial) are corrected by the auditee and for
auditors to include some unpredictability in their audit work.
108.56 Where requested by an auditee, a materiality parameter may be advised

verbally to, for example, the chair of an audit committee. The extent to which we
communicate materiality will be a matter of judgment for individual Signing Officers.
108.57 Nevertheless, it is appropriate to give an auditee and its management a

general explanation of the concept of materiality and how materiality is applied on the
audit, including mention of overall and performance materiality and items that we
regard as material by nature. It is also important to communicate that there may also
be qualitative factors which impact on the assessment of whether misstatements
identified during the audit are material. Auditees should be reminded that we will be
requesting that they correct all audit adjustments communicated to them during the
audit, and that the reason for this is that it represents a safeguard against accumulated
undetected misstatements that may exist in the financial statements.
109. Communicating the audit strategy

Background
109.1 The auditing standards require the auditor to establish an overall audit strategy
that sets the scope, timing and direction of the audit and that guides the development
21
of the audit plan. Care is required to ensure that in communicating a strategy, the
audit is not compromised (for example, by making procedures too predictable.)
109.2 An overview of the audit strategy is therefore communicated to the auditee.

This will help meet the needs of the auditee regarding information about the audit.
Policy
109.3 An overview of the audit strategy shall be communicated to Those Charged
With Governance (TCWG).
109.4 For financial statements audits that are material to Whole of Government, the
audit strategy shall be communicated in writing.
109.5 For other audits, the audit strategy shall be communicated either in writing or
orally. Where communicated orally, that communication shall be documented.
109.6 The following matters shall be communicated, as a minimum:
a. a reference to the terms for the audit engagement and the date at which they
were formalised;
22
b. an overview of the planned scope and timing of the audit;
23
c. the form, timing and expected general content of communications;
d. the identity of the members of the audit team and, if applicable, the EQCR
Executive for the audit; and
e. either:
i. for engagements where no fee is payable, the expected audit cost; or

ii. for engagements where a fee is payable, the expected audit fee.
Guidance
Timing for communication of the overview of the audit strategy
109.7 To create the audit strategy, the engagement team should have enough
knowledge of the auditee to enable the team to determine the approach to be adopted
in the audit of the financial statements. For continuing audit engagements, the team
may be in a position to document the audit strategy at the completion of the previous
year’s audit. However, where the engagement team has changed or where there have
been changes within the auditee, the development of the audit strategy might be
somewhat later in the planning phase.
109.8 It may be necessary to speak to TCWG as a step in forming the strategy. This
will help ensure that the auditee concurs with our assessment of the various risks
affecting the organisation.
The overview of the audit strategy
109.9 The content and detail of the audit strategy will depend on the size and nature
of the auditee, and this will affect the information communicated to them.
24
109.10 The overview of the planned scope of the audit should include:
a. an analysis of significant risks and how the audit proposes to address them,
including:
i. new external or internal factors which may significantly affect the auditee;
ii. significant accounting and auditing issues relevant to the financial
25
statements, including changes in reporting requirements; and
iii. where relevant, audit activity proposed for significant organisational
units/geographical locations.
b. the audit’s approach to internal control relevant to financial reporting, including:
i. where IT is significant, the broad approach to the audit of major IT

applications;
c. the impact of status of unresolved audit findings and their impact upon the audit;
d. the application of the concept of materiality and how it impacts on the audit; and
e. where there is an internal audit function, the planned use of the internal audit.
109.11 Communication of the timing of the audit would include agreeing a timetable
for the various phases of the audit to the timing of audit procedures.
109.12 It is appropriate to communicate information on performance audits planned

for the auditee during the audit cycle, after clearance by the relevant Engagement
Executive in the Performance Audit Services Group (PASG) and their impact, if any, on
the financial statements audit.
Form of communication
109.13 Audit Strategy Documents issued, including those for contracted-out audits,
should be identifiably an ANAO document in appearance. This is achieved through the
use of ANAO Audit Strategy Document and Covering E-mail templates, though these
templates are not required by the Audit Manual. For contracted-out audits, refer to
paragraph 105.29 for the policy on jointly badged documents.
109.14 Proforma audit strategy documents are located in TeamStore.
Engagement performance — execution

Chapters 110 to 115
110. Lead schedules

Background
110.1 Lead schedules are the mechanism by which each line item in the financial
statements is linked to its general ledger accounts and the audit procedures
performed.
Policy
110.2 Lead schedules shall be used to agree each line item in the final financial
statements to its component general ledger accounts.
110.3 Lead schedules shall include the final analytical review performed on the line
items in the schedule.
110.4 The lead schedule shall include a conclusion as to whether sufficient

appropriate audit evidence has been obtained to provide reasonable assurance that
the line item and its related disclosure are not materially misstated.
Guidance
110.5 The lead schedule conclusion cannot use the term ‘in my opinion.’
110.6 Final analytical review is performed as an overall review of the financial

statements at the end of the audit to assess whether the financial statements are
consistent with our understanding of the entity. It includes a comparative analysis of
the current year balance to the prior year and identifies and explains significant
variances.
111. Evaluating misstatements

Background
111.1 In considering misstatements identified during the audit, the auditor’s objective
under ASA 450 Evaluation of Misstatements Identified during the Audit is to evaluate:
a. the effect of identified misstatements on the audit; and

b. the effect of uncorrected misstatements, if any, on the financial statements.
Policy
Accumulation of misstatements
111.2 All misstatements identified shall be accumulated, except those that are
‘clearly trivial’.
111.3 A misstatement is clearly trivial if it is clearly inconsequential, whether taken

individually or in aggregate and whether judged by any criteria of size, nature or
circumstances. The Signing Officer shall approve an amount below which identified
misstatements are ‘clearly trivial’. The amount is to be the lower of:
a. 0%, 3% or 5% of overall materiality consistent with the guidance at

paragraph 111.17; and
b. 0.1% of the CFS overall materiality level, unless a different amount is approved
by the Auditor-General.
111.4 When obtaining the Auditor-General’s approval for the CFS overall materiality
threshold, the FSASG Engagement Executive for the audit of the CFS shall obtain
approval from the Auditor-General on the impact of the CFS overall materiality level on
the clearly trivial threshold for FSASG financial statement audits under 111.3(b)
above. The CFS Engagement Executive shall inform the FSASG Signing Officers and
PSRG GED of the approved threshold.
111.5 Paragraph 111.3 above does not apply to the audit of the CFS, and the clearly
trivial threshold for CFS shall be approved by the Auditor-General.
111.6 Paragraph 111.3 above does not apply to misstatements in items identified
by policy as material by nature or presentation and disclosure misstatements. These
misstatements shall be judged to be clearly trivial where, after assessing the nature
and circumstance of the misstatement, it is assessed to be clearly inconsequential
either individually or in aggregate.
Consideration of identified misstatements as the audit progresses
111.7 As the audit progresses, audit teams shall evaluate the effect of accumulated
misstatements, including those corrected by management, on:
a. the overall audit strategy and audit approach; and

b. the amount at which the clearly trivial threshold has been set.
111.8 The audit strategy and approach shall be revised if the nature of identified
misstatements (including corrected misstatements) and the circumstances of their
occurrence indicate that:
a. other missta
misstatements may exist that, when totalled with accumulated
misstatements, could be material; or
b. deficiencies in internal control not previously identified give rise to additional
risk of material misstatement.
Communication and correction of misstatements
111.9 All accumulated misstatements shall be reported to the appropriate level of

management. Management shall be requested to adjust accumulated misstatements
in the financial statements.
Evaluating the effect of uncorrected misstatements
111.10 Uncorrected accumulated misstatements shall be assessed, both

individually and in aggregate, and a conclusion made as to whether they are material
to the financial statements (refer to Materiality Policy, paragraph 108.3).
111.11 Uncorrected accumulated misstatements relating to items identified as

material by nature or presentation and disclosure shall be evaluated by assessing the
nature of the item or disclosure, the nature of the misstatements and the
circumstances of their occurrence rather than against overall materiality.
Communication with those charged with governance
111.12 The audit team shall communicate to TCWG all uncorrected misstatements,
including uncorrected misstatements related to prior periods that continue to impact
upon the financial statements, and the effect that they, individually or in aggregate,
may have on the opinion in the auditor’s report. Uncorrected misstatements that may
contribute to a material misstatement shall be identified individually, as their impact
on the audit opinion will need to be considered. The auditor shall request that
uncorrected misstatements be corrected.
Misstatements below the clearly trivial threshold
111.13 Factual misstatements of 0.02% or more of the CFS overall materiality which
are below the clearly trivial threshold (‘other
other missta
misstatements’) shall be communicated
to management with a record of the misstatement and communication in the audit
file.
Documentation
111.14 The auditor shall document the clearly trivial threshold, each misstatement
that is to be accumulated, each other misstatement,
missta and conclusions as to whether
the misstatements are material individually or in aggregate.
Prior period misstatements identified in the current audit
111.15 During the course of an audit, teams or the auditee might discover
misstatements that relate to prior periods. In such circumstances, the auditor shall:
a. evaluate the effect of uncorrected misstatements related to prior periods, taking

into account the newly-discovered misstatements; and
b. consider the requirements of ASA 560.
111.16 Material prior period misstatements require consultation as per ANAO Audit
Manual - Shared Content paragraph 8.16.
Guidance
Determining a threshold for misstatements that are ‘clearly trivial’
111.17 The Signing Officer for the audit should approve an amount below which
identified misstatements are ‘clearly trivial’ and is permitted to set that amount in the
range of 0% to 5% of overall materiality, consistent with the following guiding factors
supporting a clearly trivial threshold, to a maximum of 0.1% of the CFS overall
materiality level:
Threshold History of Risk assessment Management and audit

(% of overall misstatements committee expectation
materiality) of misstatements to be
communicated
0% Frequent and High engagement risk. All misstatements

material Numerous significant regardless of amount.
risks identified.
3% Frequent but Generally several Misstatements less

not material additional significant than 5% of overall
risks identified beyond materiality.
the presumed
significant risks of
revenue recognition
and management
override.
5% Occasional and Generally several risks Misstatements about

not material of material 5% of overall materialit
misstatement that
show a higher but not
significant level risk of
material misstatement
or few additional
significant risks other
than the presumed
Threshold History of Risk assessment Management and audit

(% of overall misstatements committee expectation
materiality) of misstatements to be
communicated
significant risks of
revenue recognition
and management
override.
Accumulation of identified misstatements
111.18 Misstatements that are not clearly trivial are accumulated in the ‘Overs and
Unders Schedule’ for referral to the auditee.
111.19 To help in evaluating the effect of misstatements, misstatements should be

accumulated as follows:
a. factual misstatements: the amount of the misstatement is known;

b. judgmental misstatements: differences arising from the judgements of
management about accounting estimates that the auditor considers
unreasonable, or the selection or application of accounting policies that the
auditor considers unreasonable;
c. projected misstatements: the auditor’s best estimate of misstatements in
populations based on projections of misstatements in sampling. Note that as
projected misstatements are only an estimate of misstatements, management
should not adjust the financial statements without further investigation and
determining the actual misstatement; and
d. material by nature
Consideration of identified misstatements as the audit progresses
111.20 A misstatement may not be an isolated occurrence. A misstatement arising

from a breakdown in internal control may indicate that other misstatements also exist.
Similarly, an inappropriate assumption identified in one measure may suggest that
misstatements exist in other measures using the same assumption.
111.21 Where frequent and/or material misstatements have been identified during
the engagement, the auditor should consider if the clearly trivial threshold should be
revised downwards if initial expectations about the level of misstatements in the
subject matter were too low. If we identify an increased number of misstatements
below the original clearly trivial posting level, we may need to decrease it until we are
satisfied that misstatements below the designated amount, either individually or
aggregated with other adjustments, would be trivial to the financial statements.
111.22 If aggregate misstatements accumulated during the audit approach

materiality threshold, the risk increases that the accumulated misstatements taken
together with possible undetected misstatements could exceed the materiality
threshold. In these situations, the audit team needs to consider whether the audit
strategy or audit plan need to be reconsidered to reduce this risk. The Engagement
Executive may consider explaining to management (and, if considered appropriate,
TCWG) the implications on the audit when misstatements are not corrected and
strongly encourage them to correct all misstatements above the clearly trivial
threshold.
Communication and correction of misstatements
111.23 The audit team should promptly advise all accumulated misstatements,
uncorrected misstatements related to prior periods, to the appropriate level of
management and request that they be corrected. The appropriate level of management
is the one that has responsibility and authority to evaluate the misstatements and to
take the necessary action.
111.24 Should management not correct a misstatement, the auditor shall obtain an
understanding of management’s reasons and use that understanding when evaluating
the unadjusted misstatements for the impact on the financial statements as a whole. If
the effect of the unadjusted differences is material, a modified audit report will need to
be considered.
111.25 Uncorrected misstatements that do not contribute to a material

misstatement may be advised in aggregate in appropriate cases. Communication with
TCWG is discussed further in the Closing Letter policy (refer to paragraph 122.4).
111.26 The audit team needs to be alert to the possibility that the correction of a
prior period misstatement by adjustment of the current year’s figures might give rise to
a material misstatement in the current year’s figures (i.e. the adjustment causes the
current year figures to be materially different to what they would have been had there
been no error in the current and prior periods). In this situation, retrospective
restatement will be necessary. The techniques most commonly used to guard against
this possibility are generally referred to as the “rollover” and “iron curtain” methods.
111.27 The audit team should use the rollover method when assessing the
materiality of uncorrected misstatements.
111.28 The rollover method quantifies a misstatement based on the amount of the
error originating in the current year statement of comprehensive income. This method
considers that differences not considered in the period in which they arise may be
offset against the misstatements in the ‘Overs and Unders Schedule’ of the subsequent
period.
111.29 Guidance on how to use the rollover method is available in the Online Audit
Guide paragraph 8204.3 entitled ‘Methods of Assessing Uncorrected Misstatements of
Current and Prior Periods.’
Evaluating the effect of uncorrected misstatements
111.30 Before the evaluation of the effect of uncorrected misstatements, the audit
team shall re-examine materiality determined during the planning stage (Refer to
Chapter 108 Materiality Policy) based on the actual financial results to confirm whether
it remains appropriate.
111.31 The circumstances related to some misstatements may cause the auditor to
evaluate them as material, individually or when considered together with other
misstatements accumulated during the audit, even if they are lower than materiality for
the financial statements as a whole – for example, the extent to which a misstatement
affects compliance with regulatory requirements. Further examples are included in the
Application and Other Explanatory Material of ASA 450.
111.32 When reviewing individual misstatements, the auditor should assess

quantitative and qualitative materiality by considering, for example, whether the item:
a. affects compliance with regulatory requirements;

b. affects compliance with debt covenants or other contractual requirements;
c. relates to the incorrect selection or application of an accounting policy that has
an immaterial effect on the current period’s financial report but is likely to have a
material effect on future periods’ financial reports;
d. masks a change in earnings or other trends, especially in the context of general
economic and industry conditions;
e. affects segment information presented in the financial report (for example, the
significance of the matter to a segment or other portion of the entity’s business
that has been identified as playing a significant role in the entity’s operations or
profitability);
f. has the effect of increasing management remuneration, for example, by ensuring
that the requirements for the award of bonuses or other incentives are satisfied;
g. is significant having regard to the auditor’s understanding of known previous
communications to users, for example, in relation to forecast earnings;
h. relates to items involving particular parties (for example, whether external parties
to the transaction are related to members of the entity’s management);
i. is an omission of information not specifically required by the applicable financial
reporting framework but which, in the judgement of the auditor, is important to
the users’ understanding of the financial position, financial performance or cash
flows of the entity; or
j. affects other information to be included in the entity’s annual report (for example,
information to be included in a ‘Management Discussion and Analysis’ or an
‘Operating and Financial Review’) that may reasonably be expected to influence
the economic decisions of the users of the financial report. ASA 720 paragraph
16 deals with the auditor’s responsibilities relating to other information.
These circumstances are only examples; not all are likely to be present in all audits, nor
is the list necessarily complete. The existence of any circumstances such as these
does not necessarily lead to a conclusion that the misstatement is material
111.33 Evaluating misstatements is discussed further in Online Audit Guide 8204.
Evaluating the effect of uncorrected misstatements in items that are material by

nature and presentation and disclosure misstatements.
111.34 As outlined in Chapter 108, in an audit there may be items that are identified
as material by nature due to either:
a. the users’ interest in the item; or

b. the financial reporting framework requiring disclosures for certain items
regardless of the amount and materiality.
111.35 If a misstatement is identified in an item that is material by nature, it cannot

be evaluated based on size alone and misstatements below the clearly trivial threshold
may be accumulated. The evaluation of misstatements in items that are material by
nature involves a high degree of professional judgment. This is also the case for
presentation and disclosure misstatements.
111.36 If a misstatement is identified in:
a. an item that is material by nature due to the requirements of the financial

reporting framework; or
b. the presentation and disclosure of the financial statements,
the auditor needs to consider if the misstatement or omission impacts the entity
meeting its financial reporting requirements. For example, appropriations are
considered to be material by nature in the PGPA FRR 2015 and as such, information for
Special Accounts is required to be disclosed regardless of whether the amounts are

considered to be immaterial.
Written representations
111.37 The auditor is required to request a written representation from management

and, where appropriate, TCWG about uncorrected accumulated misstatements (refer to
the Representation letters policy, paragraph 113.1).
Misstatements below the clearly trivial threshold
111.38 Other misstatements of 0.02% or more of the CFS overall materiality which
are below clearly trivial, are communicated to management outside of the purposes of
ASA 450 and should not have an impact on the audit if they remain uncorrected, as
they are clearly trivial. There is no requirement to communicate in writing to senior
executives, and the means and audience for the communication will depend on the
nature and risk of the misstatement. It is at the discretion of the Engagement Executive
whether ‘other misstatements’ are also communicated to TCWG.
111.39 The purpose of communicating other misstatements is to inform

management of misstatements that we have identified, regardless of the impact on the
audit. This information allows management to properly maintain their accounts and
records and may alert them to other underlying issues that the audit team is not aware
of.
111.40 Where the clearly trivial threshold is below 0.02% of the CFS’ overall
materiality, there is no requirement to communicate misstatements below the clearly
trivial threshold to management.
Minimum documentation
111.41 The following information should be documented:
a. the amount below which misstatements would be regarded as clearly trivial;

b. all misstatements accumulated during the audit and whether they have been
corrected;
c. in a schedule either separate to or part of the Overs and Unders Schedule, all
‘other misstatements’; and
d. the auditor’s conclusion as to whether uncorrected misstatements are material,
individually or in aggregate, and the basis for that conclusion.
Identified misstatements that relate to prior periods
111.42 The nature and extent of uncorrected and corrected misstatements identified
in prior years are taken into account when setting performance materiality and the
audit approach for the current year’s audit. Further, uncorrected misstatements from
the prior year are carried forward to the current year’s Overs and Unders Schedule to
ensure that current year and prior year errors do not accumulate to a material
misstatement in the current year.
111.43 During the course of an audit, the audit team or the auditee might discover
misstatements that relate to prior periods. Should this happen, the audit team should:
a. promptly obtain sufficient appropriate evidence to determine whether the

26
misstatement is material to the prior period and if so, take the actions required
by ASA 560;
b. consider the implications for the current year’s audit approach; and
c. consider the implications of correction in the current year.
Determining whether a newly-discovered prior period misstatement identified in

the current year is material
111.44 When a prior period misstatement is newly discovered, the evaluation of

misstatements for the prior year should effectively be re-performed, consistent with
ASA 450 (including considering whether the misstatement is an isolated instance.)
111.45 The identification of a prior period misstatement that is material is a ‘fact

which becomes known to the auditor after the date of the auditor’s report that, had it
been known to the auditor at that date, may have caused the auditor to amend the
auditor’s report.’ The Engagement Executive should refer to ASA 560 paragraphs 14 to
17 and to ASA 706 Emphasis of Matter paragraphs 8 and A4-A5 which include
considerations relating to the re-issue of the financial statements and the auditor’s
report. In consulting as required by policy, the Engagement Executive should consider
and document the following points in addition to the requirements of ASA 560 when
consulting with the GED and when making a recommendation for required action
regarding a prior period material misstatement:
a. the pervasiveness of the misstatement(s) – if the misstatement is both material

and pervasive to the financial statements (as defined in ASA 705 Modifications to
the Opinion in the Independent Auditor’s Report), it is expected that the financial
27
statements will be amended and reissued and our auditor’s report reissued.
b. the timing of the identification of the material misstatement – if the planned
issuance date of the financial statements and auditor’s report for the current
period is imminent, it may not be necessary to reissue the prior period financial
statements, provided appropriate disclosures are made in the current financial
28
statements;
c. the action to be taken to notify users of the prior period error, such as
communicating to the Minister or Parliament or reporting to the Minister and
Parliament under section 25 or 26 of the A-G Act; and
d. for audits conducted under the Corporations Act, the material misstatement may
result in a section 311 breach (refer to Chapter 120 Auditor’s reporting obligations
under section 311 of the Corporations Act.)
111.46 Note that ASA 560 paragraphs 10 to 13 address the situation where the
auditor’s report has been signed but the financial statements have not yet been tabled
in Parliament (issued). In this situation, the ANAO expects that the financial statements
will be corrected and re-signed, and a new auditor’s report issued and dated.
Impact on the current audit approach
111.47 As noted at paragraph 111.42 above, the nature, extent and circumstances of
identified and uncorrected prior period misstatements are considered in planning the
current year’s audit approach and setting performance materiality, and their amounts
are added to the Overs and Unders Schedule.
111.48 Similarly, newly-discovered prior period misstatements, whether material or

not, will require the audit approach and performance materiality to be re-examined (and
if necessary amended) and are also added to the Overs and Unders Schedule.
111.49 It is necessary to consider and document:
a. the nature of the prior period misstatement and the circumstances of its
occurrence;
b. if the misstatement is indicative of a deficiency in controls previously not
identified that should be raised as an audit finding;
c. if there is a deficiency in prior year’s audit procedures that needs to be resolved in
the current audit cycle; and
d. if the current cycle audit approach needs to be modified to ensure that there are
no other misstatements previously unidentified.
Correction in the current year
111.50 If the misstatement was material to a prior period and the financial
statements were not re-issued, the auditee is required to correct the misstatement
retrospectively by presenting corrected figures as comparative information in the
current year’s financial statements and making the necessary disclosures, consistent
with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The
auditee may also be required to present a third balance sheet consistent with AASB
101 Presentation of Financial Statements.
111.51 In this situation, an Emphasis of Matter paragraph may need to be included in

our current period auditor’s report where the correction and disclosure is fundamental
29
to users’ understanding of the financial statements. This may be the case where the
correction significantly amends the net result for the period or where an administered
item is involved. This is a matter of judgement, and the Engagement Executive should
consult with the FSASG GED before following the QTAC referral process.
111.52 As noted at paragraph 111.26 above, it may also be necessary to

retrospectively correct misstatements that are not material to the prior period to avoid
a material misstatement to current year figures.
Comparatives not corrected
111.53 If a material misstatement exists in prior period financial statements on

which an unmodified opinion was issued and the comparative figures have not been
properly restated or appropriate disclosures made, ASA 710 Comparative Information –
Corresponding Figures and Comparative Financial Reports requires the auditor to
express a modified opinion in the current period’s auditor’s report with respect to the
30
comparative figures.
Definitions
111.54 Misstatement – a difference between the amount, classification,

presentation, or disclosure of a reported financial statement item and the amount,
classification, presentation, or disclosure that is required for the item to be consistent
with the applicable financial reporting framework. Misstatements can arise from error
or fraud.
111.55 Accumulated misstatements – misstatements which are above the clearly

trivial threshold and misstatements that are discovered in items identified as material
by nature and presentation and disclosure (except those that are clearly
inconsequential to the audit.)
111.56 Other Misstatements – misstatements which are equal to or greater than

0.02% of the CFS’ overall materiality but below the clearly trivial threshold.
111.57 Overs and Unders schedule – a schedule used to record accumulated

misstatements, which provides a summary of:
a. all unadjusted audit differences above the clearly trivial threshold, aggregating the
combined effect of the differences identified; and
b. all adjusted differences above the clearly trivial threshold.
111.58 Adjustments identified and corrected as a result of the auditee’s own

procedures are not considered as adjusted differences and therefore do not have to be
posted to the Overs and Unders schedule.
111.59 Minimum posting level – the term ‘minimum posting level’ means the same
as the clearly trivial threshold.
111.60 Clearly trivial – matters that are clearly trivial will be of a wholly different
(smaller) order of magnitude than materiality used in planning and performing the
audit, and will be matters that are clearly inconsequential, whether taken individually or
in aggregate and whether judged by any criteria of size, nature or circumstances.
Further, whenever there is uncertainty about whether one or more items are clearly
trivial, the auditor ordinarily presumes the item is not clearly trivial.
112. ANAO’s responsibilities regarding an entity’s annual

report
Background
112.1 This policy deals with making sure that the Auditor’s Report and Audited
Financial Statements published in the entity’s Annual Report and on the entity’s
website:
a. are as they were signed;

b. are clearly differentiated from other information in the Annual Report; and
c. are not inconsistent with that other information.
Policy
112.2 This policy shall apply to both printed material and material published on the
entity’s website.
112.3 The engagement team shall ensure that the audit file allows the definitive
version of the audited financial statements and auditor’s report to be readily
identified. This shall be achieved by either of the following methods.
a. Where, under either the PGPA Act or this Audit Manual, a copy of the financial
statements and auditor’s report thereon has been provided by the ANAO to the
auditee’s responsible Minister, that email with attached documents shall be
placed on the audit file and is taken to be definitive.
b. Where the circumstances of the engagement do not require the financial
statements and auditor’s report thereon to be communicated to the responsible
Minister, the definitive version of those documents shall be certified and placed
on the audit file. The documents are certified on the first page of the financial
statements by stamping or marking the first page of the financial statements as
‘certified’ and the audit manager, Engagement Executive or signing officer
signing and dating it. The certification process may be achieved with digital
markings.
112.4 The engagement team shall obtain a copy of the audited financial statements
and the auditor’s report thereon in their final pre-publication form (both for printing
and publishing on the entity’s website) and confirm that each is consistent with the
definitive copy of the financial statements and the signed auditor’s report.
112.5 The engagement team shall verify that information in the Annual Report
which is not covered by the audit opinion is clearly differentiated from the audited
financial statements, and if it is not, shall take the follow-up action required by ASA
700 Forming an Opinion and Reporting on a Financial Report.
112.6 The engagement team shall review the Annual Report for material
inconsistencies with the audited financial statements and material misstatements of
fact consistent with ASA 720 The Auditor’s Responsibilities Relating to Other
Information.31
112.7 The published audited financial statements and auditor’s report shall be
checked against the definitive copy of the financial statements and the signed
auditor’s report. If discrepancies are discovered, appropriate follow-up action to
address the discrepancies shall be taken consistent with ASA 720.32
112.8 If the auditee will not adjust the Annual Report for material misstatements or
inconsistencies between signed financial statements and the Annual Report on the
internet, the matter shall be referred to QTAC.
Guidance
Definitive copy of audited financial statements and auditor’s report
112.9 Having a policy to establish the definitive copy of the audited financial
statements ensures there is always a copy of the financial statements which can be
readily identified as the audited document. The definitive copy of the audited financial
statements and the audit report are used to verify the content of the entity’s annual
report and supports the audit of comparatives in future periods.
112.10 In almost all cases, the PGPA Act or this policy manual will require financial
statements and auditor’s reports to be provided to the responsible Minister. In those
cases it will not be necessary to certify the financial statements as the version
communicated to the Minister is considered to be definitive. The main exception to this
arrangement would be where audits or reviews of financial statements are performed
on a section 20 basis, where the arrangement entered into with the auditee does not
require the ANAO to provide a copy of the financial statements or auditor’s report to the
responsible Minister.
112.11 Where it is necessary to certify a copy of the financial statements and

auditor’s report, at a minimum, the first page of the financial statements shall be, either
digitally or physically:
a. stamped with an ‘ANAO’ stamp or marked ‘certified’; and

b. signed by the audit manager, Engagement Executive or signing officer and dated.
Pre- and post-publication accuracy checks
112.12 Responsibility for the publication of the audited financial statements and
auditor’s report rests with management. Nevertheless, the ANAO applies the policies at
paragraphs 112.4 and 112.7 given the importance of the audited financial information.
Clear differentiation from other information in annual report
112.13 ASA 700 requires clear differentiation of audited information from other
information in the Annual Report.
112.14 If supplementary information that is not required by the applicable financial

reporting framework is presented with the audited financial statements and is not
clearly differentiated, the auditor may need to explain in the auditor’s report that such
supplementary information has not been audited. Such matters should be referred to
QTAC.
112.15 Supplementary information that is not required by the applicable financial

reporting framework but is nevertheless an integral part of the financial statements
because it cannot be clearly differentiated from the audited financial statements due to
its nature and how it is presented may be covered by the audit opinion. For example,
this would be the case when the notes to the financial statements include an
explanation of the extent to which the financial statements comply with another
financial reporting framework. In circumstances where the requirements on a specific
audit are unclear, advice should be sought from PSRG.
112.16 The audit opinion would also cover notes or supplementary schedules that
are cross-referenced from the financial statements. The standard provides guidance on
how this differentiation might be made. An example would be removing any cross
references from the financial statements to unaudited supplementary schedules or

unaudited notes so that the demarcation between the audited and unaudited
information is clear enough. Unaudited notes that are intermingled with the audited
notes can be misinterpreted as being audited.
Material inconsistencies and misstatements of fact
112.17 ASA 720 deals with these aspects. It covers:
a. reading other information;

b. material inconsistencies; and
c. material misstatements of fact.
112.18 It is more difficult to rectify inconsistencies identified once the financial

statements have been published as there may be unknown users placing reliance on
the financial statements to make decisions. Therefore, it is important that this
procedure is conducted in a timely manner. Close liaison with the auditee after the
signing of the audit opinion is suggested to identify to the auditee that the auditor is
required to review final drafts before their publication.
112.19 There are many mandatory provisions in the standard. Of particular concern
is that a material inconsistency may indicate that the financial statements might need
amending, and if not corrected, may lead to a qualification of the auditor’s report.
112.20 Commonwealth entity annual reports include other (unaudited) financial

summary information, as required by the PGPA Act. For this reason, the Annual Report
needs to be examined consistent with ASA 720.
Publication of annual report on the entity web site
112.21 GS 006 Electronic Publication of the Auditor’s Report provides guidance to

auditors on matters relating to the electronic publication of the auditor’s report,
including management’s responsibility for appropriate differentiation of the audited
information from other material.
113. Representation letters

Policy
113.1 All ANAO financial statements audits are to be supported by written
representations (representation letters) consistent with the auditing standards and
this policy.
113.2 Representation letters (RLs) shall be signed by management and, where

appropriate, TCWG who have appropriate responsibilities for the financial report and
knowledge of the matters concerned.
113.3 For ANAO mandated audits, representations are required from management
(preferably including those who sign the financial statements) in the form of the
relevant PSRG template as follows:
a. for non-corporate Commonwealth entities, the accountable authority and Chief

Financial Officer (CFO) sign the Management Representation Letter (MRL);33
and
b. for corporate Commonwealth entities and Commonwealth Companies, the Chief
Executive Officer (CEO) and the CFO sign the MRL.34
113.4 The representations to be obtained shall include all representations required

by the auditing standards and PSRG templates.
113.5 The auditor shall obtain any additional written representations requested by
the CFS audit team.
113.6 If management or TCWG refuse to provide a specific representation, the

auditor shall:
a. discuss the matter with management or TCWG, as appropriate;

b. re-evaluate the integrity of management and TCWG and evaluate the effect that
this may have on the reliability of representations, both oral and written, and
audit evidence in general; and
c. take appropriate action, including determining any additional effect on the
auditor’s report (which in certain circumstances shall include a disclaimer of
opinion).
113.7 The RL(s) shall be dated and signed the same date as the auditor’s report or
as near as practicable to, but not after, that date.
Guidance
113.8 The auditor is required under the auditing standards to obtain written
representations from management and, where appropriate from TCWG, that they
believe they have fulfilled their responsibilities, and to support other audit evidence in
the financial statements. The written representations are written statements from
management and, where appropriate, TCWG to the auditor which attest to having
fulfilled these responsibilities and may be used to confirm other specific audit matters.
A RL may be used to focus management’s and TCWG’s attention on particular matters
and thus cause them to specifically address those matters in more detail than would
otherwise be the case.
113.9 Written representations are requested from those responsible for the
preparation of the financial report. Those individuals may vary depending on the
governance structure of the entity and relevant law or regulation; however,
management (rather than TCWG) is often the responsible party. Written
representations may therefore be requested from the entity’s chief executive officer and
chief financial officer, or other equivalent persons in entities that do not use such titles.
In particular circumstances, however, other parties, such as TCWG, are also
responsible for the preparation of the financial report.
113.10 In rare and exceptional circumstances, the auditor may conclude that written
representations should be sought from TCWG (i.e. the board of directors of corporate
Commonwealth entities and Commonwealth companies) as additional audit evidence
to address a particular risk of material misstatement. Examples of such circumstances
include:
a. where the auditor believes that management have not discharged their
responsibility for the preparation of the financial report; or
b. where the auditor considers it necessary to request representations which only
TCWG are able to provide; for example, representations that relate to strategic
decisions by the Board of Directors which only directors are able to provide.
113.11 Each year, PSRG releases updated MRL template that reflect the latest
relevant changes to the accounting and auditing standards and the PGPA FRR 2015.
These templates should be used and tailored for individual auditees, in particular where
additional representations are required in the specific circumstances of an entity.
Rarely, a representation in the PSRG template may be omitted if it is not required by the
auditing standards and is not relevant to the entity.
113.12 PSRG does not maintain a template that can be used to obtain written
representation from directors. When an Engagement Executive decides to obtain
written representations from the directors of a corporate Commonwealth entity or a
Commonwealth company, those written representations should be in accordance with
the ANAO Auditing Standards. The Engagement Executive should consult with PSRG
before seeking written representations from directors.
113.13 When there is a delay between signing the RL(s) and the auditor’s report, the
auditor should consider the necessity to undertake additional procedures to ensure
that no matters have arisen subsequent to the date of the RL(s) which impact the
auditor’s report.
113.14 Written representations provide necessary but not sufficient audit evidence;
that is, a representation does not in itself provide sufficient appropriate audit evidence.
Circumstances where other appropriate audit evidence does not exist are anticipated
to be relatively rare. However, if they do arise, such circumstances can give rise to a
limitation of scope and, where it is material, the matter should be referred to QTAC as
per the ANAO Audit Manual - Shared Content paragraph 8.75.
113.15 If management or TCWG provide a representation which is contradicted by

other audit evidence, the auditor should investigate the circumstances and as
necessary reconsider the reliability of other representations made.
113.16 The auditor is required to disclaim an opinion on the financial statements if

there is enough doubt about the integrity of management or TCWG. This occurs when
the representations required are not reliable, or if the representations required by ASA
35
580 Written Representations paragraphs 10 and 11 are not provided. The matter
should be referred to QTAC as per the ANAO Audit Manual - Shared Content paragraph
8.75.
113.17 In considering any additional effects on the auditor’s report as directed under
paragraph 113.6(c), the auditor should consider if a refusal to provide representations
impacts on the auditor’s requirement to form an opinion on matters as required by
legislation. For example, under subsection 307(b) of the Corporations Act, the auditor is
required to form an opinion as to whether all information, explanations and help
necessary for the conduct of the audit have been given.
113.18 Pro forma representation letters are located in the TeamStore.
114. Selecting items for testing

Background
114.1 The means available to the auditor for selecting items for testing are:
a. selecting all items;

b. selecting specific items; and
c. sampling (both statistical and non-statistical).
114.2 The means by which items are selected for testing should be determined by
the most efficient and effective way to obtain the necessary audit assurance given the
characteristics of the account, class of transactions or presentation and disclosure

requirement.
114.3 In some situations, sampling may not be appropriate. For example, the auditor
may use targeted testing or 100% selection of a population where individual items in a
population are at amounts greater than performance materiality. In other situations,
sampling may be less efficient than other acceptable alternatives because of the time it
takes to examine a larger number of transactions.
114.4 When a decision is made to use audit sampling, the objective of the auditor ‘is
to provide a reasonable basis for the auditor to draw conclusions about the population
36
from which the sample is selected.’
114.5 The ANAO uses both statistical and non-statistical sampling methods. The
ANAO non-statistical sampling approach is based on statistical sampling principles.
Typically, non-statistical sampling will be more efficient than statistical sampling.
Policy
114.6 The non-statistical sampling method shall be used when undertaking tests of
controls.
114.7 Tests of controls shall be conducted using the control testing sampling
template.
114.8 When testing controls on a rotational basis, sample size and selection must
be consistent with this policy.
114.9 Exceptions identified when performing tests of controls shall be evaluated to

determine whether the exceptions are isolated instances which can be remediated by
the auditee.
114.10 Non-statistical sampling, targeted testing, accept-reject testing or a

combination of these shall be used when conducting tests of details.
114.11 The Engagement Executive shall obtain approval from the FSASG GED
before using statistical sampling method for tests of control and tests of details. The
Engagement Executive shall document:
a. the reason that it is considered necessary to use a statistical approach, which

may include circumstances where it is expected that there is a high error rate in
the population or that the account is materially misstated; or
b. the basis on which they are satisfied that the team has access to sufficient
expertise to design and execute a statistical sampling approach.
114.12 The Engagement Executive shall document their approval before any of the
following sampling strategies are applied to an audit:
a. a low or supplemental level of assurance is used to determine a representative

sample size; or
b. the ‘two-step revenue testing’ strategy.
114.13 The principal methods of selecting samples are: random selection,

systematic selection and haphazard selection. Haphazard selection of items for
testing shall only be used in rare and unusual circumstances. Each use of haphazard
selection shall have a documented basis for why this approach was determined to be
the most efficient and effective method, and shall be approved by the Engagement
Executive.
Guidance
114.14 The ANAO’s methodology for non-statistical sampling and other means of
selecting items for testing is described in the Online Audit Guide in TeamMate and is
supported by templates located in TeamStore.
114.15 The relevant references in the Online Audit Guide are:
a. Test of Controls (Non-statistical Sampling) – section 5403;

b. Test of Details (Non-statistical Sampling) – section 6201.4.1.6;
c. Test of Details (Accept-Reject Testing) – section 6201.3.1; and
d. Test of Details (Targeted Testing) – section 6201.2.
Statistical and non-statistical sampling
114.16 Although ASA 530 Audit Sampling recognises both non-statistical and
statistical sampling, the ANAO’s preferred approach is the use of non-statistical audit
sampling. The primary advantages of statistical audit sampling are a statistically
derived sample size and a statistically determined evaluation of sampling risk.
114.17 However, the advantages of statistical sampling do not outweigh the primary
disadvantages, which include the use of formal techniques to determine:
a. sample size,
b. the sample, and
c. evaluate the results.
114.18 Ordinarily, the application of non-statistical sampling will result in a sample

size comparable to the sample size resulting from an efficient and effectively designed
statistical sample, considering the same sampling parameters. Therefore, a properly
executed application of non-statistical audit sampling through the use of the test of
details sampling template will generally be the preferable approach.
114.19 In rare and exceptional circumstances the use of a statistical approach may
be appropriate where the parameters of the population are outside the range supported
by the test of details sampling template.
114.20 Samples chosen using the supplemental level of assurance, low level of
assurance and ‘two-step revenue testing’ strategies will not provide sufficient
substantive evidence on their own but may be suitable in certain parts of a broader
audit strategy in certain circumstances. The supplemental level of assurance, low level
of assurance and ‘two-step revenue testing’ strategies accept a higher level of
sampling risk on the basis that audit evidence obtained from other audit procedures is
contributing to the overall sufficiency of audit evidence. Further guidance on the levels
of assurance to be obtained from different sampling approaches is provided at
6201.4.1.6 in the Online Audit Guide.
114.21 Audit documentation evidencing the Engagement Executive’s approval to use

low or supplemental level or ‘two-step revenue testing’ strategies should identify, for
each relevant financial statement line item:
a. assertions to which the above sampling strategies will be applied; and

b. other audit procedures (tests of controls and/or substantive procedures)
performed or to be performed that, when combined with the above sampling
strategies, will provide the desired level of evidence and assurance at the financial
statement line item assertion level.
114.22 Subject to clear documentation of all of the above considerations, the

Engagement Executive’s approval can be documented by the use of a summary minute
or through timely documented approval of the relevant Bridge and does not necessarily
require the approval of each individual sampling template.
Stratification
114.23 In some circumstances it may be convenient to divide a population into

monetary or risk-based strata. The population is divided into sub-populations or strata
and each stratum is treated separately. The calculation of sample size and selection of
the items for testing for each stratum is done separately.
Sample selection techniques

114.24 Random sampling – all items in the population have the same probability of
being selected. The auditor selects a random sample by matching random numbers
generated by a computer or selected from a random number table with sequentially
numbered items in the population.
114.25 Systematic sampling – the auditor determines a uniform interval by dividing

the number of physical units in the population by the sample size. A starting point is
randomly selected in the first interval and one item is selected throughout the
population at each of the uniform intervals from the starting point.
Judgemental selection
114.26 Haphazard sampling – a sample method that attempts to approximate a

random selection by selecting sampling units without any conscious bias. This method
of sample selection is not permitted in the ANAO unless the auditor obtains the prior
approval of the Engagement Executive. A situation where haphazard selection might be
approved is in the audit procedure of stock-taking from floor to record. The rationale
and approval are required to be documented in the working papers.
114.27 Intentional bias – the auditor selects from the population based on some pre-
determined criteria. The auditor consciously selects items which are believed to be
representative. This form of selection is distinct from targeted testing which is a non-
sampling substantive technique.
114.28 Block sample – involves the selection of some contiguous items; for example,
items in sequence. It is common when conducting cut-off testing. This method of
selection is a non-sampling technique and does not result in a representative sample.
Choosing a sample before period end (Interim testing)
114.29 Sampling populations will typically be for the full financial year. Where
controls testing is to be performed before the end of the period, the auditor can
estimate the total population and determine the sample size for the estimated
population, and test those sampled items that have occurred at interim and test the
remaining sample at final.
114.30 Should an auditor wish to draw a conclusion at a point in time before the
period end, the population from which the sample is chosen needs to be defined at that
point in time and the sample size generated accordingly.
Deviations and misstatements
114.31 The following paragraphs provide guidance on evaluating deviations and

misstatements under the headings ‘controls testing’ and ‘substantive tests of detail’
respectively. When applying this guidance, regard should be given to ASA 530
paragraph 13, which requires the auditor to obtain a high degree of certainty that
deviations or misstatements are not representative of the population by performing
additional audit procedures.
Controls testing
114.32 The control testing sampling template is used for controls testing when using
ANAO non-statistical sampling. Note that the sample sizes which are typically used in
initial samples do not allow for any exceptions. The history of control deviations should
be considered in deciding whether to use this approach.
114.33 If the auditee is able to fix identified control errors which are demonstrated to
be isolated instances, the auditor can then select a ‘remediated sample’ and retest the
control to form a conclusion on its effective operation. A ‘remediated sample’ is an
additional sample selected from the population. The size of the remediated sample is
smaller than the original sample and is generated by the control testing sampling
template using the same initial parameters.
114.34 Remediation of errors is only appropriate where the auditee intends to revise
all affected control events for the period and there is an intention to rely on these
controls. Where the auditor is unable to determine if the exceptions are isolated
instances which can be remediated, it may be possible to quarantine those
transactions in which the errors where identified. For example, there may be a one-
week period where a contractor was responsible for the operation of the control and it
is possible to exclude transactions for that week from the population. The auditor can
then select a remediated sample excluding those transactions and retest the control to
form a conclusion on the controls for that part of the population not excluded.
114.35 The Online Audit Guide contains guidance on assessing exceptions in internal
control in section 6100.
Substantive tests of detail
114.36 The Online Audit Guide contains guidance on non-statistical sampling in

sections 6201.4.1 and 6201.4.2.
114.37 The sections in this guidance on ‘Sample selection techniques’ and ‘Choosing
a sample before period end’ also apply to sampling for substantive tests of detail.
Projecting errors of non-statistical sampling to the untested population

114.38 Difference estimation involves calculating the average error per sampling unit
and multiplying this average by the number of items in the population. It is appropriate
where the misstatements relate to the sampling unit itself and not to its monetary
value. An example is a processing or shipping fee incorrectly applied to all orders
regardless of value.
114.39 Ratio estimation should be used for projecting all other errors. It is done by
projecting the percentage error in the sample across the population.
114.40 An anomalous misstatement may be excluded when projecting

misstatements to the population, and is added to the projected misstatement. The
basis for concluding that an error is anomalous needs to be documented. The
aggregate misstatement is a best estimate of misstatement in the population.
114.41 Factual misstatements discovered during sampling and projected

misstatements need to be clearly distinguished and taken to the Overs and Unders
Schedule. Factual misstatements are misstatements about which there is no doubt.
The projected misstatement may not be reliable or accurate enough to determine the
amount to be corrected by the auditee. In some cases it will be appropriate to request
the auditee to investigate the factual misstatements and perform procedures to
determine the amount of actual misstatement in the population to make appropriate
adjustments (refer to Chapter 111 Evaluating misstatements.)
Targeted testing
114.42 Targeted testing is used when, in the auditor’s judgement, items within an
account balance or class of transactions are individually significant. These items are
separated from the population to which the auditor may then, if necessary, apply audit
sampling.
114.43 Targeted testing is not audit sampling as it is not intended to be a

representation of the whole population. Items to be tested are selected based on a
characteristic, usually higher value or higher risk, and the purpose of the test is to draw
a conclusion about the items tested. The results of audit procedures applied to items
selected using target testing cannot be projected to the population.
114.44 The Online Audit Guide contains guidance on targeted testing at 6201.2.
Accept-reject testing
114.45 Accept-reject testing is a substantive test of detail and is appropriate to apply

when the auditor is interested in a particular attribute of the population, rather than the
monetary balance. It should not be used to gain assurance where multiple assertions
are being tested, which include valuation or accuracy. Examples where this approach
can be used include cut-off testing, testing the accuracy of inventory counts and
testing outstanding cheques to see that they cleared after year end.
114.46 The results of accept-reject testing are not projected on the population but
are used to draw conclusions across the population about the attribute being tested.
114.47 The Online Audit Guide contains guidance on accept-reject testing at 6201.3.
Supplemental level of assurance
114.48 Supplemental sampling provides limited confidence (and therefore limited

evidence) and will not by itself provide sufficient substantive evidence at the assertion
level. Therefore, supplemental sampling would only be used when sufficient other
substantive procedures related to relevant financial statement line item assertions are
performed.
114.49 The Online Audit Guide contains guidance on supplemental sampling testing
at 6201.4.
Documentation
114.50 The applicable ANAO templates require the following to be documented

about sample selection:
a. objective of audit procedure;

b. attributes of the population – for example, number of items, dollar value, date
range, etc;
c. means of testing – for example, statistical sample, non-statistical sample;
d. how the sample size is enough to reduce sampling risk to an acceptably low level
– refer to Appendices 2 and 3 of ASA 530 for further guidance; and
e. rationale for sample selection technique.
115. Rotating control testing

Background
115.1 Under ASA 330 The Auditor’s Responses to Assessed Risks, the auditor must
design and perform tests of controls when the auditor intends to rely on the operating
effectiveness of controls in determining the nature, timing and extent of substantive
procedures or where substantive procedures alone cannot provide sufficient
appropriate evidence.
115.2 In certain circumstances, ASA 330 allows the auditor to rely on audit evidence
obtained in previous audits about the operating effectiveness of controls that have not
changed since they were last tested or controls that do not mitigate a significant risk.
115.3 Being able to rely on prior period evidence reduces audit effort in the current
year without compromising the audit’s effectiveness.
Policy
115.4 The auditor shall use audit evidence from a previous audit about the
operating effectiveness of specific controls unless:
a. significant changes in those specific controls have occurred subsequent to the

previous audit; and
b. those specific controls mitigate a significant risk.
115.5 Where there have been no significant changes to controls referred to in

paragraph 115.4, the auditor shall:
a. test those controls at least once every third audit; and

b. test some controls each audit to avoid the possibility of testing all the controls
on which the auditor intends to rely in a single audit period with no testing of
37
controls in the subsequent two audit periods.
Guidance
Using Audit Evidence Obtained in Previous Audits
115.6 Before the auditor uses the audit evidence from a previous audit about the
operating effectiveness of specific controls, the auditor needs to establish the
continuing relevance of the prior period evidence by considering:
a. whether there have been significant changes in the control since the previous
audit; and
b. whether there have been changes in circumstances which make continued
reliance on the control risk inappropriate.
115.7 The auditor should establish the continuing relevance of the prior period
evidence by performing enquiry combined with observation or inspection.
115.8 The auditor should not rely on the operating effectiveness of specific controls
where significant changes in those controls have occurred subsequent to the previous
audit. If there have been significant changes that affect the continuing relevance of the
audit evidence from the previous audit, the auditor should test the controls in the
current audit.
115.9 The auditor needs to use their professional judgement to decide what
constitutes a significant change. For example, if the auditor identified that a new sales
order processing system had been introduced at the beginning of the period, this would
be considered a significant change that would impact both manual and automated
controls, rendering evidence from prior years irrelevant for the current period.
115.10 The longer the time elapsed since the testing of the controls’ operating
effectiveness, the less assurance the results of prior year’s work may provide with
regard to operating effectiveness in the current year. At a minimum, the auditor is
required to test the operating effectiveness of the controls at least every third year, but
there may be cases where the auditor decides to test the operating effectiveness of
unchanged controls more frequently than every third year.
115.11 In general, the higher the risk of material misstatement, or the greater the
reliance on controls, the shorter the time period elapsed, if any, is likely to be. Factors
that may result in not relying on audit evidence obtained in previous audits or decrease
the period for retesting a control, include the following:
a. higher risk of material misstatement and greater reliance on the control;

38
b. a deficient control environment;
c. deficient monitoring of controls;
39
d. a significant manual element to the relevant controls;
e. personnel changes that significantly affect the application of the control;
f. changing circumstances that indicate the need for changes in the control; and
g. deficient general IT controls.
115.12 When there are a number of controls for which the auditor intends to rely on
audit evidence obtained in previous audits, testing some of those controls in each audit
provides corroborating information about the continuing effectiveness of the control
environment. This contributes to the auditor’s decision about whether it is appropriate
to rely on audit evidence obtained in previous audits.
115.13 Where the auditor plans to rely on controls, the auditor may consider testing
at least some controls within each business process. However, in some circumstances,
where the auditor has obtained evidence that the controls have not changed since they
were last tested, the auditor may consider rotating controls testing on a business
process basis, e.g. test controls within some processes in the current year audit and
test within other processes in the next year. It would be inappropriate to completely rely
on prior year testing for a business process if:
a. there are higher risks associated with that business process;

b. there is a significant manual element to the process; or
c. if there are weak entity level controls or exceptions identified in prior year tests.
Information Technology General Controls
115.14 Because of Information Technology General Controls’ (ITGCs’) pervasive

effect on application controls, the audit team needs to be more cautious about using
audit evidence obtained in prior periods regarding the continued operating
effectiveness of ITGCs. While it may not be necessary to test the operating
effectiveness of every relevant ITGC each year, consider the extent of the intended
reliance on automated application controls and the planned approach for testing the
automated controls when determining the nature and extent of evidence needed about
the operating effectiveness of ITGCs. For example, when the audit team’s approach
contemplates high reliance on numerous automated application controls based on
prior year evidence, at least relevant program change controls would ordinarily be
tested in the current period to obtain sufficient evidence that the application controls
have not changed.
Documentation
115.15 In order to evidence the consideration of the prior year audit evidence about
the operating effectiveness of controls the audit team should include:
i. the reasons why it is appropriate to place reliance on previous years’ audit

evidence of the operating effectiveness of controls; and
ii. the results of the prior year testing.
115.16 The appropriate place to record this is in the relevant bridge in column
“rotational testing”.
115.17 For further guidance on rotating control testing refer to Online Audit Guide
5406.2 “Three Year Rule for Controls Testing”.
Engagement performance — reporting

Chapters 116 to 122
116. Communicating audit findings

Background
116.1 The ANAO Auditing Standards define management and TCWG. In addition,
legislation or other authority may require or permit audit findings to be reported to a
responsible Minister and to Parliament.
116.2 The ANAO Auditing Standards require particular audit findings to be

communicated to management and TCWG, respectively.
116.3 As required by the ANAO Auditing Standards, audit findings to be

communicated to management include:
a. deficiencies in internal control, including those to prevent or detect fraud;

b. an actual or possible fraud;
c. non-compliance with laws and regulations; and
d. misstatements that are not clearly trivial for correction and material
misstatements indicative of a deficiency in internal control.
116.4 The ANAO Auditing Standards require other communications to management

in particular circumstances, including:
where going concern issues arise,

where other information accompanying the audited financial statements is
materially misstated, and
when the auditor is an incoming auditor.
116.5 As required by the ANAO Auditing Standards, audit findings to be

communicated to TCWG include:
a. most of the audit findings communicated to management, including all

significant deficiencies in internal control in writing;
b. fraud involving management or certain others;
c. intentional and material non-compliance involving management;
d. audit matters (findings per this policy) of governance interest; and
e. all uncorrected misstatements (see Chapter 111 Evaluating misstatements for
further policy and guidance on communication of misstatements to TCWG.)
116.6 Audit findings are categorised according to the criteria in paragraph 116.7
below.
Policy
116.7 Audit findings shall be categorised using the following criteria:
Category A: Issues that pose a significant business or financial management risk to

the entity. These include issues that could result in the material misstatement of the
entity’s financial statements;
Category B: Issues that pose moderate business or financial management risk to the
entity. These may include prior year issues that have not been satisfactorily
addressed;
Category C: Issues that pose a low business or financial management risk to the
entity. These may include accounting issues that, if not addressed, could pose a
moderate risk in the future;
Category L1: Instances of significant potential or actual breaches of the Constitution;

and instances of significant non-compliance with the entity’s enabling legislation,
legislation that the entity is responsible for administering, and the PGPA Act;
Category L2: Other instances of non-compliance with legislation the entity is required
to comply with, such as Occupational Health and Safety (OH&S) and privacy
legislation; and
Category L3: Instances of non-compliance with subordinate legislation such as the

PGPA Rules.
Audit findings to be communicated to management
116.8 All audit findings, categorised consistent with paragraph 116.7 above, shall be
communicated to the appropriate level of management in writing.
Audit findings to be communicated to those charged with governance
116.9 As a minimum, audit findings in categories A, B, and L1 shall be

communicated to TCWG in writing.
Audit findings to be reported to ministers
116.10 Category A, B and L1 audit findings shall be reported to the Minister in

writing.
Audit findings to be reported to the parliament

116.11 The content of Audit Reports on these matters to the Parliament is

determined by the Auditor-General.
116.12 Where an Engagement Executive considers that non-secret information shall

be excluded from a report to Parliament on the grounds that it is sensitive within the
meaning of section 37 of the A-G Act, the Engagement Executive shall provide a
recommendation to the Auditor-General for decision. Information that is of a secret or
top-secret nature shall be discussed in person with the Deputy Auditor-General or
Auditor-General.
Rule for reporting audit findings to a higher level of authority
116.13 Audit findings shall be advised in writing to the appropriate level of

management before being reported to the responsible Minister. Equally, the
responsible Minister shall be advised in writing of audit findings before the audit
findings can be reported to Parliament.
Guidance
Appropriate level of management
116.14 The determination of the appropriate level of management requires

consideration of the management structure of the entity and is a matter of professional
judgement. Ordinarily, it would include the CFO (or equivalent) and can include those
who have responsibilities for corporate functions and IT systems.
Sensitive information
116.15 Situations where information should not be included in public reports are
detailed in section 37(2) of the A-G Act. Reasons that information is sensitive are:
a. it would prejudice the security, defence or international relations of the

Commonwealth;
b. it would involve the disclosure of deliberations or decisions of the Cabinet or of a
Committee of the Cabinet;
c. it would prejudice relations between the Commonwealth and a State;
d. it would divulge any information or matter that was communicated in confidence
by the Commonwealth to a State, or by a State to the Commonwealth;
e. it would unfairly prejudice the commercial interests of any body or person;
f. any other reason that could form the basis for a claim by the Crown in right of the
Commonwealth in a judicial proceeding that the information should not be
disclosed.
Individual reports to ministers – interim and year end
116.16 Individual reports to Ministers need to include all information planned to be

tabled in the relevant parliamentary report, being:
a. Controls Report, or
b. Year End Report.
Portfolio reports to ministers
116.17 The purpose of the year end portfolio report is to provide the Minister with a
succinct report on the results of and major issues arising from financial statements
audits of entities within the Minister’s portfolio, in addition to the audit findings. The
report lists reporting entities within the Minister’s portfolio, indicating whether the audit
reports are modified and whether significant issues arose during the audit.
116.18 Portfolio wide issues should be highlighted within the report, where possible.
Reference to third parties
116.19 Where an audit finding includes a description of the role of a third party, such
as an accounting firm or IT services provider, direct reference to the third party should
be avoided where possible. In circumstances where this may not be possible without
compromising the context and clarity of the finding, this should be discussed with the
FSASG GED.
117. Distribution and timing of letters and written

reports
Background
117.1 Letters and written reports are normally provided (under legislation, auditing
standards and ANAO policy) to:
a. Management;
b. TCWG, including Audit Committees;
c. Ministers; and
d. Parliament.
117.2 Generally, the basis and nature of letters to management and TCWG are
sourced in auditing standards and will be required for all financial statements
engagements. Reports to Ministers and Parliament are sourced in legislation and are
required for financial statements audits under the Commonwealth’s financial

framework.
117.3 It is important to note that there are situations where legislation or the auditing
standards require matters to be reported promptly. Formal reports required in these
situations are in addition to the regular reports required by this policy.
117.4 Auditors may also engage in correspondence with entities to resolve particular
matters in the course of the audit, for example, about the application of accounting
policies.
Policy
Letters to management and TCWG
117.5 Letters detailing audit findings40 shall be provided to management and TCWG,
including:
a. At interim:
i. for each entity to be included in the Controls Report to the Parliament; and
ii. for each other entity for which we have completed an interim audit phase
and audit findings exist.
b. At the end of the audit:
i. for each entity where audit findings which had not been communicated at
interim exist.
117.6 Before releasing written letters to the management or TCWG of Departments

of State or other entities included in the ANAO’s Audit Work Program, a draft shall be
provided to the Engagement Executive in PASG responsible for the portfolio. Any
issues raised by PASG need to be resolved before the formal release of
correspondence.
117.7 A Closing Letter shall be provided for every financial statements audit to the
persons signing the entity’s financial statements and, if different, to TCWG. The
Engagement Executive shall issue the Closing Letter before the signing of the
financial statements.
Audit report on the financial statements
117.8 The audit report on the financial statements shall be signed and provided
within 2 business days after the financial statements are signed.
117.9 Engagement Executives shall notify the FSASG GED where the auditor’s report
will not be signed and provided within 2 business days after the financial statements
are signed.
Reporting to ministers
117.10 Ministers shall be provided a copy of extracts from any report to the
Parliament which are relevant to their portfolios at least two days before the report is
being tabled in Parliament. The extracts shall be clearly marked as being ‘final draft’
documents. Ministers shall be provided with a copy of each signed audit report and
the signed financial statements as soon as practicable after they are prepared.
Guidance
Material entity
117.11 A ‘material entity’ means an entity that is material to the Commonwealth’s

CFS as determined by the Department of Finance. Advice on entities that are material
is provided by the Engagement Executive for the CFS audit.
Reports to parliament
117.12 Reports to Parliament are issued under section 25 of the A-G Act. This
section allows the Auditor-General to cause a report to be tabled in either House of
Parliament on any matter. The A-G Act requires that a copy of such a report be
provided to the Prime Minister, the Minister for Finance and to any other Minister who,
in the Auditor-General’s opinion, has a special interest in the report.
41
Reports to ministers
117.13 Reports to Ministers are issued in support of the reports to Parliament – the
Controls Report and the Year End Report.
117.14 Section 26(2) of the A-G Act provides the legislative authority for reporting to
Ministers, in that it allows the Auditor-General to provide a report to a Minister on any
matter at any time. Reports to the Minister issued in support of the reports to
Parliament fall within this section.
117.15 Section 26(1) of the A-G Act requires the Auditor-General to bring to the
attention of the responsible Minister any important matter that comes to the Auditor-
General’s attention during the course of the audit. This section should only be used to
report matters outside the boundaries of normal financial statements audit issues.
117.16 Proforma management letter templates are located in TeamStore.
118. Signing Officer Review Memorandum

Background
118.1 The SORM is a summary document that describes the significant matters
arising during the audit and how they have been addressed.
Policy
118.2 A SORM shall be prepared by the contract firm for all contracted-out audits.
118.3 Where appointed, the EQCR or Second Reviewer shall approve the SORM
before the auditor’s report is signed.42
118.4 The Signing Officer shall approve the SORM before signing the auditor’s
report, either by signing the SORM document or providing an electronic reviewer
signoff in the TeamMate file.
118.5 The SORM shall include:
a. the nature of the proposed auditor’s report;

b. a statement regarding the extent to which the financial statements comply with
their applicable financial reporting framework (for Commonwealth entities, this
is Australian Accounting Standards and the PGPA FRR 2015);
c. the risk rating for the audit, including changes in the rating during the course of
the audit, and the rationale for the change;
d. the amounts determined and basis for:
i. overall materiality, performance materiality, particular materiality, the

clearly trivial threshold, including planned amounts and any revisions
throughout the audit; and
ii. items considered material by nature;
e. documentation of significant matters identified during the audit including:
i. how each matter was addressed;

ii. the conclusions reached; and
iii. the significant professional judgments made in reaching those
conclusions;
f. for audits that will communicate key audit matters in the auditor’s report, the
matters that required significant audit attention and the rationale for the
determination as to whether each matter is a key audit matter;

g. an analytical review of the financial statements/report;
h. an evaluation of the adequacy of the two-way communication between the audit
team and TCWG;43
i. a statement that the independence requirements of the ANAO, including APES
110 and where applicable, the Corporations Act have been met;
j. a conclusion from the Contract Partner stating that:
i. all audit work has been finalised consistent with the approved audit
strategy, as revised; and
ii. as a result of the audit work conducted, sufficient appropriate audit
evidence exists to support the issue of the proposed auditor’s report;
k. a statement that the auditor’s responsibilities under legislation or other
governing arrangements, Auditing Standards and ANAO policy have been met;
and
l. sign-off by the Contractor Partner.
Guidance
118.6 The SORM is not required to be prepared for in-house financial statement
audits, unless formally requested by the Signing Officer. Where there is a separate
Signing Officer and the Signing Officer has not requested a SORM, the Signing Officer
shall ensure that their review and approval of key aspects of the audit are consistent
with Chapter 103 Role and responsibilities of the Signing Officer and is documented in
the Audit File.
118.7 The SORM may be prepared for other audits if requested by the Engagement
Executive. However, it is expected that the review of matters included in the SORM for
all other audits will be enabled through the functionality of TeamMate.
118.8 Where the audit has objectives and reporting requirements that are additional
to the requirements provided for by the PGPA Act and this policy for financial statement
audits, these should also be stated.
Significant matters
118.9 The SORM should address the following as significant matters:
a. the outcome of the auditor’s response to significant risks (including the risk of
fraud) identified in the planning or throughout the audit, or as a result of PASG
audit or other assurance work;
b. significant findings as a result of audit procedures and whether communicated to

management or TCWG;
c. audit adjustments identified during the audit, whether they are adjusted or
unadjusted and their impact on the financial statements if material;
d. changes in accounting policies, including as a result of new financial reporting
requirements having or expected to have a significant impact on the accounts
and other (voluntary) changes in accounting policy;
e. the method used to gain assurance that the appropriation note disclosures (if
applicable) are consistent with the requirements of the PGPA FRR 2015 and that
they are complete and present fairly the appropriations (and their use) which the
auditee is responsible for;
f. material after balance date events;
g. other significant audit/accounting/disclosure issues which were resolved without
the need for formal management reporting (what the issue was and how it was
resolved); and
h. consultation undertaken during the audit and, if applicable, how significant
differences of opinion were resolved and implemented.
Financial statements analytical review
118.10 In conjunction with the SORM review, the Signing Officer needs to carefully
review and approve the audited financial statements. To support this review, the SORM
should include an analytical review of the financial statements/report, in line with ASA
520 Analytical Procedures. In conducting this analytical review, it is important to
consider whether the overall relationships and trends are consistent with our
knowledge of the government sector, benchmarks, entity history and performance for
the reporting period, audit test results, and prior audit experience. There may be
instances where individual significant differences appear to be explained by our audit
work, but overall financial statement relationships or trends appear unusual.
118.11 There needs to be enough analysis in this broader analytical review and the
movement analysis for the Signing Officer to be comfortable that:
a. all significant differences and other unusual items are adequately explained;
b. we have gained a comprehensive understanding of the financial statements,
including the inter-relationships between items; and
c. the overall financial statement presentation is consistent with the audit results,
performance of the entity’s underlying business and our knowledge of the
business and government sector.
118.12 It is useful for the SORM to provide a financial context for the reader.
Accordingly, the SORM should provide a brief explanation of the operating results,
including any relevant trends, and major balance sheet movements as well as an
explanation of the composition of any unusual/new financial statement items and an
outline of the audit approach about significant financial statement items. In most
cases this will be achieved through the analytical review required by paragraph 118.5(g)
of this policy.
Management of the audit
118.13 It is useful for the SORM to provide a summary of Audit Resourcing. The
personnel involved in the audit should be identified as well as a comparison of budget
to actual audit resources and an explanation for any significant variations.
118.14 The SORM also provides an opportunity to record lessons learned. The SORM
should include reference to the major issues noted which have implications for either
future financial statement audits with this auditee or for wider applications within the
ANAO.
Audit completion
118.15 In exceptional circumstances, it may not be possible to document work done

on the audit file before the signing of the auditor’s report. In this situation, the SORM
may be used to document audit evidence obtained and the conclusions drawn and the
engagement executive’s review.
118.16 Documentation in the SORM is not a substitute for fully documenting audit
evidence in the audit file; accordingly, the audit file needs to be updated for this
material.
118.17 A proforma SORM template is located in TeamStore.
119. Legislative compliance

Background
119.1 Commonwealth entities operate under a range of legislative provisions.
a. Many Commonwealth entities are created by legislation which specifies their

functions and powers.
b. There will be legislation affecting a Commonwealth entity because of the nature
of the entity, e.g., the PGPA Act for Commonwealth entities and the Corporations
Act for companies. Among other things, such legislation typically creates the
applicable financial reporting framework.
c. Many non-corporate Commonwealth entities, in particular Departments of State,

are allocated responsibility for the administration of legislation by the AAOs made
from time to time by the Governor-General. This legislation may give rise to
financial statement items or disclosures.
d. Like private sector entities, there will be legislation affecting a Commonwealth
entity because it is a functioning organisation with staff which transacts with
other entities in the economy, e.g., legislation imposing the Goods and Services
Tax (GST) or OH&S legislation.
119.2 In some situations, non-compliance with the legislation may not only be a
significant matter in its own right but may also affect the entity’s financial position or
financial performance. Accordingly, we need to consider the effects of non-compliance
on the financial statements. ASA 250 Consideration of Laws and Regulations in an Audit
of a Financial Report sets out the requirements of the auditing standards.
119.3 In addition, the ANAO is obliged by legislation or other arrangements under

which the audit is conducted to report on specific areas of non-compliance.
Policy
119.4 In planning an audit, consideration shall be given to the effects of non-
compliance with legislation where:
a. non-compliance represents a risk which may affect the entity’s financial position
or financial performance (the level of risk will be assessed consistent with the
ANAO’s financial statement audit approach);
b. statements or disclosures indicating compliance are included in the financial
statements; or
c. the Auditor-General is required to report on compliance.
119.5 The nature, timing and extent of audit procedures addressing compliance
with legislation depend on the risk of material misstatement arising from non-
compliance; and, about paragraph 119.4(c) above, also on the nature of the Auditor-
General’s reporting obligations.
119.6 Regarding the disclosure of appropriations in the notes to the financial

statements of Commonwealth entities:
a. the audit procedures shall include the audit team obtaining an understanding of
the nature of, basis for and extent of an entity’s appropriations;
b. including the assessed risk of material misstatement, the audit team:
i. shall understand and assess the entity’s systems for determining that:
the amount of appropriation available for spending is correct;

spending is for purpose;
spending is charged to the correct appropriation; and
spending is within appropriation limits; and
ii. shall undertake audit work which provides reasonable assurance that the
amounts of appropriation available and spent are fairly stated and that
spending has been for the appropriation’s purpose.
119.7 The FSASG GED may specify audit work programs to be followed to help
achieve the purposes of this policy. The Appropriations Test Program issued by PSRG
on Audit Central shall be completed for all financial statements audits of
Commonwealth entities which are required by the PGPA FRR 2015 to report
appropriations in their financial statements.
119.8 The audits of corporate Commonwealth entities which are directly

appropriated an amount under an Act of Parliament shall comply with FSASG policy
at paragraphs 119.6 and 119.7.
119.9 Expenditure from the CRF without the authority of an appropriation by the
Parliament shall be advised to the FSASG GED and referred to QTAC.
Guidance
119.10 The risk of non-compliance with legislation is more likely to be significant
when legislation is first introduced or is amended in important ways, and that risk
impacts on financial management and reporting.
119.11 Addressing the risks from such change is the entity’s responsibility, and the
auditor should expect to see a considered response by the entity to manage the
change. For example, revisions to the PGPA Act or any significant rules under that Act
require entities to understand the legislation, assess its impact on their operations and
to create systems and procedures to respond appropriately.
119.12 An entity might also be audited by the relevant regulator, which would provide
information against which we could evaluate our risk assessment.
119.13 Even where our assessment of the risk of material misstatement is low, we
are required to be alert for breaches of legislation and to consider their impact on the
audit and our auditor’s report.
Statements or disclosures indicating compliance
119.14 Financial statements are usually required to be prepared consistent with a

financial reporting framework specified in legislation or by some other authority. Those
responsible for the preparation of the financial statements are usually required to
assert material compliance with that framework.
119.15 In addition, financial statements may include disclosures relating to, or

assertions of, specific aspects of compliance with legislation. The most commonly
encountered of such disclosures in the Commonwealth is the disclosure of
appropriations by Commonwealth entities.
119.16 Appropriations are laws made by the Australian Parliament. Commonwealth

entities cannot spend money from the CRF without an appropriation. All appropriations
are provided for a particular purpose. Entities are not permitted to make payments
using an appropriation unless the payment is consistent with the appropriation’s
purpose. There are three main categories of appropriations: annual appropriation,
special appropriations (including PGPA Act section 58 investments) and special
accounts.
119.17 Commonwealth entities which are directly appropriated an amount from any
of the above-mentioned appropriations under an Act of Parliament are required to
make disclosures about compliance with appropriations. In addition, an entity (“the
spending entity”) which has the authority to access the appropriation of the other entity
(“the responsible entity”) is required to make appropriation disclosures. The PGPA FRR
2015 and Resource Management Guide 125 set out appropriation reporting and
disclosure requirements for Commonwealth entities.
119.18 A corporate Commonwealth entity which is directly appropriated an amount

under an Act of Parliament is required to disclose appropriations consistent with the
PGPA FRR 2015. Conversely, a corporate Commonwealth entity is not required to make
appropriation disclosures for amounts which are appropriated to the relevant non-
corporate Commonwealth entity for payment to the corporate entity.
119.19 The system of parliamentary appropriations is an important means by which

the Parliament exercises control over the Executive Government. Accordingly, we
regard the disclosure of appropriations and their use as material by nature.
119.20 A misstatement in the reporting of appropriations and their use may arise
because:
a. the amount reported as available to spend is incorrect;

b. the amount spent is misstated;
c. the amount spent is recorded against the wrong appropriation; or

d. the amount is not spent for an authorised purpose.
119.21 We need to understand the basis, nature and extent of Commonwealth

entity’s appropriations. We need to consider, as a minimum:
a. the basis on which an appropriation operates;
i. for example, entities are appropriated certain receipts under section 74 of

the PGPA Act. The conditions under which those receipts become available
to the entity are set out in section 27 of the PGPA Rule;
ii. some entities operate special accounts to which only specified receipts
may be credited and out of which only specified payments may be made.
Legislation or determinations by the Finance Minister create special
accounts and their purposes;
iii. investments of relevant money may only be made in prescribed
instruments by delegated persons in certain entities (refer to sections 58
and 59 of the PGPA Act);
iv. in these cases, we need to check that the entity’s systems and processes
are structured to comply with legislative requirements. The risk of material
misstatement is of course higher when the basis on which an appropriation
operates has changed, which in turn requires an appropriate response from
the entity;
b. the entity’s systems for ensuring that spending is for purpose and is charged to
the correct appropriations, and for preventing spending in excess of appropriation
limits;
c. reconciling the amounts spent in total to the statement of cash flows and the
balance of unspent appropriations to the balance sheet;
d. identifying formal and administrative additions and reductions to appropriation
limits;
e. when testing payments, checking the correct appropriation is charged; and
f. reviewing journal entries between appropriation accounts where appropriation
limits are approached. A misstatement may disguise a breach of an
appropriation.
119.22 It may be possible to integrate testing required for appropriations with testing
performed for other purposes during the audit.
Where the Auditor-General is required to report on compliance
119.23 In addition to the obligation to report on whether financial statements ‘present

fairly’ or give a ‘true and fair view’ of the matters required by legislation, the Auditor-
General has obligations to report on legal compliance in other circumstances, including

the following:
a. section 311 of the Corporations Act requires the Auditor-General to report to the
Australian Securities and Investments Commission (ASIC) suspected and actual
contraventions of the Corporations Act – Refer to ANAO Audit Manual – FSASG
Specific policy chapter 120 for the Auditor’s reporting obligations under section
311 of Corporations Act; and
b. in some cases, including the audit of the High Court, and certain entities which
are not subject to the PGPA Act, the Auditor-General is required to report whether
the receipt, expenditure and investment of money and the acquisition and
disposal of assets has been consistent with the enabling legislation.
119.24 The reporting obligation mentioned in paragraph 119.23(a) above is regarded

as being ‘by exception.’ It does not require a positive expression of an opinion that there
are no breaches, and therefore does not require a systematic approach to identifying
breaches. However, reporting obligations of the type described in 119.23(b) above do
require us to have reasonable assurance over the compliance matters mentioned.
Similarly, where disclosures are made in the financial statements about compliance (as
in the case of appropriations by non-corporate Commonwealth entities), enough work
is required to obtain reasonable assurance over their presenting information fairly, in all
material respects, as set out in this policy.
Communicating non-compliance to the entity
119.25 The auditing standards and ANAO policy require instances of non-compliance
to be communicated to the appropriate level within the entity. ANAO policy in Chapter
116 Communicating audit findings requires the audit team to report all issues posing a
financial reporting risk to the entity, including legislative breaches. In doing so, the audit
team must determine whether the breaches of legislation pose significant risks or not,
and Chapter 116 further stipulates how the findings are to be dealt with.
PGPA framework compliance reporting
119.26 Commonwealth entities and Commonwealth companies within the general

government sector (GGS) are not required to provide an annual report on compliance
with the PGPA framework, but are expected to have an internal compliance reporting
process to provide the accountable authority or Directors with the means to be able to
identify and report to responsible Ministers significant legislative breaches.
119.27 ANAO audit teams should seek to be kept informed of any significant
breaches of legislation discovered by Commonwealth entities and Commonwealth
companies as they arise. Entities should be encouraged to complete their internal
compliance reporting processes for the year at the time of signing the representations
letter to the ANAO and, if not finalised, obtain and assess the latest draft of their
compliance reporting at the time of the signing of the financial statements. This will
enable TCWG to be confident that there are no relevant identified breaches at the time
they sign their written representation letter to the ANAO.
120. Auditor’s reporting obligations under section 311 of

the Corporations Act
Policy
120.1 Where a member of the engagement team becomes aware of circumstances
stated in section 311 of the Corporations Act, the member shall promptly notify the
Engagement Executive. If the Signing Officer and Engagement Executive are different
people, the Signing Officer shall be promptly notified by the Engagement Executive.
120.2 The circumstances stated in section 311 of the Corporations Act are those
that:
a. the auditor has reasonable grounds to suspect amount to a contravention of the

Corporations Act; or
b. amount to an attempt, in relation to the audit, by any person to unduly influence,
coerce, manipulate or mislead a person involved in the conduct of the audit;44 or
c. amount to an attempt, by any person, to otherwise interfere with the proper
conduct of the audit.
120.3 As required by section 311 of the Corporations Act, the Signing Officer shall
notify ASIC in writing of the circumstances as soon as practicable, and in any case,
within 28 days after becoming aware of the circumstances.
Guidance
120.4 ASIC has issued RG 34 Auditor’s Obligations: Reporting to ASIC. The Guide
deals with suspected contraventions of the Act under paragraph 120.2 above. The
following sections of RG 34 are relevant to ANAO engagements:
a. Overview;
b. General obligation under section 311 and 601HG;
c. How to lodge auditor breach reports; and
d. Appendix: Examples of suspected contraventions.
Planning
45
120.5 RG 34 advises the following in regard to planning:
‘We believe that the auditor reporting obligations are a key aspect of the
auditor’s role in conducting an audit and should be included in the audit plan
and program for each entity subject to audit. We expect auditors to be vigilant
and to make appropriate inquiries where the circumstances warrant inquiry.’
‘While we do not expect auditors to engage in a systemic search for all

possible contraventions of the Corporations Act, auditors should be alert to
matters that come to their attention that may indicate such contraventions.
The auditor reporting obligations are not limited to matters that have arisen
from audit or review. Information may come to the auditor’s attention during
the audit or review, or otherwise, which gives rise to reasonable grounds to
suspect that a contravention of the Corporations Act has occurred.’
‘In addition, staff reporting to an auditor should be made aware of the extent of
the auditor’s duty.’
120.6 In planning and conducting the audit, the auditor also has regard to the
requirements and guidance of ASA 250 which deal with consideration of laws and
regulations in an audit of a financial report.
Suspected contravention of the act
120.7 If paragraph 120.2(a) above applies, section 311(1)(b) of the Corporations Act
adds the following additional requirements:
a. the contravention must be a significant one; or

b. the contravention is not a significant one, and the auditor believes that the
contravention has not/will not be adequately dealt with by commenting on it in
the auditor’s report or bringing it to the attention of the directors.
120.8 RG 34 provides guidance on the application of section 311(1)(b), including the

following examples of suspected contraventions that are likely to be significant:
a. insolvent trading by the company;

b. failure to comply with accounting standards;
c. modified audit or review reports;
d. fraud by officers or employees of the entity;
e. related party transactions;
f. composition of the board of directors;
g. failure to keep books and records;

h. non-lodgement of financial reports; and
i. ongoing failures to comply with a compliance plan.
Reasonable grounds
120.9 Note that subparagraph 311 (1)(a)(i) of the Corporations Act requires the
auditor only to have ‘reasonable grounds to suspect’ a contravention. RG 34 explains
what the courts have held to be ‘reasonable grounds to suspect’.
120.10 A proforma letter to ASIC is available in TeamStore.
46
120.11 Refer directly to the Corporations Act for additional clarity.
121. ANAO auditor’s reports on financial statements

Background
121.1 The requirement on the Auditor-General to report for most ANAO audits of
financial statements is set out in one of the following enactments:
47
a. for Commonwealth entities – section 43 of the PGPA Act; and
48
b. for companies – section 308 of the Corporations Act.
121.2 For other bodies, the requirement to report may be found in the body’s enabling
legislation or, for audits by arrangement, as agreed in making the arrangement.
121.3 The form and content of ANAO auditor’s reports on financial statements are
determined by the requirements of:
a. The legislation or arrangement under which the audit is conducted; and

b. The relevant auditing standards.
121.4 PSRG prepares proforma ANAO auditor’s reports for Commonwealth entities
and companies.
Policy
121.5 The Engagement Executive shall prepare the ANAO auditor’s report on each
set of financial statements for which the executive is responsible consistent with the
designated proforma prepared by PSRG, where such a proforma exists. If no
proforma exists, the Engagement Executive shall prepare the ANAO auditor’s report
consistent with the requirements of the auditing standards and ANAO policy and
having regard to the form and content of the proforma templates.
121.6 The Engagement Executive shall describe each key audit matter in a separate
section under the heading ‘Key Audit Matters’ of the auditor’s report of
Commonwealth entities for which key audit matters reporting was adopted by the
Auditor-General.49
121.7 Where an Engagement Executive considers that a variation to the proforma

ANAO auditor’s report is required, the proposed variation shall be approved by PSRG.
121.8 Each ANAO auditor’s report on financial statements shall make a statement
on the ANAO’s independence. Where the independence requirements applicable to
the audit cannot be met because of an unavoidable conflict between those
requirements and the Auditor-General’s obligation to audit and report, an explanation
of the conflict in the ANAO auditor’s report shall be considered.
121.9 The Engagement Executive shall confirm that the auditor’s report published
on the auditee’s website is identical to that signed for the financial statement audit.
Where differences are identified, the Engagement Executive shall request
management to correct any differences immediately. Where management does not
correct identified differences, the Engagement Executive shall notify the FSASG GED.
Guidance
Addressee
121.10 ANAO auditor’s reports on the financial statements of Commonwealth
entities are addressed to ‘the Minister who is responsible for the entity or company,
unless otherwise prescribed by the rules.’ This is the Minister that the entity presents its
50
annual report to under the PGPA Act. In some circumstances, Commonwealth entities
may address their annual report to more than one responsible Minister in which case
the ANAO’s auditor’s report should do the same.
121.11 ANAO auditor’s reports on the Parliamentary Departments are addressed to

the relevant presiding officer(s) who are regarded as the responsible Minister under the
PGPA Act.
121.12 Ministers of State are listed in the official Ministry List by portfolio
(Parliamentary Secretaries and Ministers assisting another Minister are effectively
regarded as Assistant Ministers). Where a portfolio has more than one Minister, all
those Ministers administer the department with the effect that all Ministers are
formally able to administer the legislation associated with the department. In practice,
each Minister in a portfolio will have discrete areas of policy and legislative
51
responsibility. The legislation associated with a department is given in the AAO made
from time to time by the Governor-General.
121.13 The Ministry List, the AAO and the Legislation Handbook are updated as
required and published on the website of the Department of the Prime Minister and
Cabinet at the Current Ministry list.
121.14 ANAO auditor’s reports on the financial statements of Commonwealth

companies are addressed to the members of the company in line with the
requirements of the Corporations Act.
Independence statement within the ANAO auditor’s report
121.15 ANAO policy is to make an independence statement in each ANAO auditor’s

report issued on financial statements. For financial statement audits conducted under
the Australian Auditing Standards, ASA 700 requires the auditor’s report to include a
statement on independence. Auditor’s reports prepared under ASA 700 do not need an
additional statement to achieve this policy requirement. However, auditor’s reports not
prepared under ASA 700 (for example, reports on limited assurance reviews or reviews
of a financial report) may not achieve this policy requirement unless an independence
statement has been added in addition to the requirements for the assurance report
under the relevant assurance standard.
121.16 Where there is a possibility that the applicable independence requirements

cannot be met because of an unavoidable conflict between those requirements and the
Auditor-General’s obligation to audit and report, an explanation of the conflict for
inclusion in the ANAO auditor’s report needs to be considered. Such a situation is
52
expected to be rare in practice.
121.17 If an unavoidable conflict arises in respect of an audit of a company under the

Corporations Act, the impact on the audit report should be discussed with the FSASG
GED as soon as the conflict is identified. The Corporations Act requires conflicts of
interest to be resolved within a specified short time period and reported to ASIC.
Further, the Act requires a declaration by the auditor to the directors as to compliance
with both the Act’s provisions and professional independence requirements and
provides for the updating of that declaration in the auditor’s report.
Modification of the ANAO auditor’s report
121.18 PSRG publishes, in addition to the various specific auditor’s report proforma
templates, a generic financial statement auditor’s report proforma template. It is
expected to be rare that there would not be a relevant proforma to be applied by FSASG
for financial statement audits. The ANAO auditor’s reports proforma templates include
guidance, based on the ANAO Auditing Standards, which should be followed when
drafting a modified auditor’s report (either by modifying the auditor’s opinion or adding
an emphasis of matter).
The PGPA Financial Reporting Rule
121.19 The Finance Minister is empowered to make rules under the PGPA Act
prescribing matters required or permitted by the PGPA Act. Section 42(2) of the PGPA
Act requires that Commonwealth entities’ annual financial statements comply with the
Australian Accounting Standards and any other requirements prescribed by the rules.
The PGPA FRR 2015 sets out the minimum financial reporting requirements for all
Commonwealth reporting entities in the preparation of their financial statements and
prescribes the requirements that reporting entities must comply with in preparing their
annual financial statements to present fairly the entity’s financial position, financial
performance and cash flows. The PGPA Act requires the ANAO auditor’s report to state
whether, in the Auditor-General’s (or delegate’s) opinion, the statements:
a. comply with the accounting standards and any other requirements prescribed by
the rules; and
b. present fairly the entity’s financial position, financial performance and cash flows.
Reporting on other legal and regulatory requirements
121.20 The requirement for the ANAO to report on financial statements may involve a
requirement to consider other matters in addition to the financial statements. Where
such matters are to be reported, they are to be included under a separate report
heading within the auditor’s report.
121.21 Where an audit of financial statements is undertaken according to other

legislation or by arrangement, care needs to be taken to ensure all relevant matters are
addressed in the auditor’s report.
Referral to QTAC
121.22 ANAO policy in respect of QTAC outlines when a proposed ANAO auditor’s
report is to be referred to QTAC.
121.23 Audit reporting templates are located in TeamStore.
122. Closing letter

Background
122.1 The Closing Letter is prepared to communicate matters that are directly
relevant to the financial statements, or that the auditing standards require to be
communicated before the statements are signed.
122.2 The distribution and timing of the Closing Letter are dealt with in the
Distribution and timing of letters and written reports policy (Chapter 117).
122.3 The Closing Letter may also serve to replace other letters to management or
53
TCWG that detail the audit’s findings. Matters to be communicated as audit findings
are identified in the Communicating audit findings policy (Chapter 116).
Policy
122.4 The Closing Letter shall:
a. state that sufficient appropriate audit evidence has been obtained to provide a
basis for the opinion in the auditor’s report, noting any outstanding audit work to
be finalised;
b. state whether the conclusion in the auditor’s report is unmodified, and if
modified, the nature of the modification;54
c. describe other matters required to be reported on in the auditor’s report,
including such other matters as agreed in the terms of engagement;
d. describe those matters the auditor has determined to be key audit matters (for
entities for which key audit matters reporting was adopted by the Auditor-
General);
e. include a schedule of unadjusted misstatements, and the effect that they,
individually or in aggregate, may have on the opinion in the auditor’s report (ASA
450 paragraphs 12 and 13);55
f. identify significant matters addressed during the audit (ASA 260 paragraph
16(c)(i));
g. note previously reported audit findings (part of ASA 260 paragraph 16(c));
h. note audit findings yet to be reported in detail (part of ASA 260 paragraph
16(c));
i. discuss the ANAO’s views about significant qualitative aspects of the entity’s
accounting practices, including accounting policies, accounting estimates and
financial statement disclosures (ASA 260 paragraph 16(a));
j. identify significant disagreements with management, including those regarding
accounting policy, practices and disclosures:
i. resolved during the course of the audit; and

ii. to be resolved in the future;
k. discuss significant difficulties, if any, encountered during the audit and the
quality and oversight of the financial statements preparation process (ASA 260
paragraph 16(b) & (e)); and
l. state how an uncorrected material misstatement of other information will be
addressed in the auditor’s report (ASA 260 paragraphs 16(d) and A24).
Guidance
122.5 The Closing Letter is prepared on the basis that the content of the
management representation letter and financial statements being signed are as
anticipated.
122.6 The Closing Letter refers to other matters which are to be included in the
auditor’s report. These matters can include a report required on legal or other
regulatory requirements or a matter that is relevant to the users’ understanding of the
56
audit, the auditor’s responsibilities or the auditor’s report.
122.7 The Closing Letter may also include the following elements:
a. include a schedule of audit adjustments made;

b. discuss the final audit fee;
c. acknowledgement of support received from the auditee; and
d. details of the planned beginning of the audit of the financial statements for next
financial year.
122.8 ASA 700 paragraph 12 requires the auditor, as part of the evaluation of whether
the financial statements as a whole are free from material misstatement, to consider
qualitative aspects of the entity’s accounting policies, including indicators of possible
management bias. Examples of bias are also given.
122.9 Qualitative aspects of accounting practices that might be considered for

inclusion in the Closing Letter are discussed in ASA 260 and in ASA 700. Appendix 2 of
ASA 260 includes examples of qualitative aspects of accounting practices, such as:
a. Accounting policies: the effect of significant accounting policies in controversial

or emerging areas (or those unique to an industry, particularly when there is a
lack of authoritative guidance or consensus).
b. Accounting estimates and related disclosures: management’s process for
making accounting estimates and related disclosures.
c. Financial statement disclosures: issues involved, and related judgments made, in
formulating particularly sensitive financial report disclosures (e.g., disclosures
related to revenue recognition, remuneration, going concern, subsequent events,
and contingency issues).
d. Related matters: the extent to which the financial statements are affected by
unusual transactions, including non-recurring amounts recognised during the
period, and the extent to which such transactions are separately disclosed in the
financial statements.
122.10 Closing Letter templates are located in TeamStore.
Glossary and footnotes
Glossary
AAO Administrative Arrangements Order
AASB Australian Accounting Standards Board
AASB 101 Presentation of Financial Statements
AASB 108 Accounting Policies, Changes in Accounting Estimates and

Errors
A-G Act Auditor-General Act 1997 (Cth)
ANAO Australian National Audit Office
APES 110 Code of Ethics for Professional Accountants (including

Independence Standards)
ASA Australian Auditing Standards
ASA 102 Compliance with Ethical Requirements when Performing

Audits, Reviews and Other Assurance Engagements
ASA 210 Agreeing the Terms of Audit Engagements
ASA 220 Quality Control for an Audit of a Financial Report and Other
Historical Financial Information
ASA 230 Audit Documentation
ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a

Financial Report
ASA 250 Consideration of Laws and Regulations in an Audit of a

Financial Report
ASA 260 Communication With Those Charged With Governance
ASA 300 Planning an Audit of a Financial Report
ASA 315 Identifying and Assessing the Risks of Material Misstatement
ASA 320 Materiality in Planning and Performing an Audit
ASA 330 The Auditor’s Responses to Assessed Risks
ASA 450 Evaluation of Misstatements Identified during the Audit
ASA 520 Analytical Procedures
ASA 530 Audit Sampling
ASA 540 Auditing Accounting Estimates and Related Disclosures
ASA 560 Subsequent Events
ASA 580 Written Representations
ASA 600 Special Considerations – Audits of a Group Financial Report
ASA 620 Using the Work of an Auditor’s Expert
ASA 700 Forming an Opinion and Reporting on a Financial Report
ASA 701 Communicating Key Audit Matters in the Independent Auditor’s

Report
ASA 705 Modifications to the Opinion in the Independent Auditor’s

Report
ASA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs

in the Independent Auditor’s Report
ASA 710 Comparative Information – Corresponding Figures and

Comparative Financial Reports
ASA 720 The Auditor’s Responsibilities Relating to Other Information
ASAE 3000 Assurance Engagements Other than Audits or Reviews of

Historical Financial Information
ASA 720 The Auditor’s Responsibilities Relating to Other Information
ASIC Australian Securities and Investments Commission
CEO Chief Executive Officer
CFO Chief Financial Officer
CFS Consolidated Financial Statements
Controls Report Interim Report on Key Financial Controls of Major Entities
Corporations Act Corporations Act 2001 (Cth)
CRF Consolidated Revenue Fund
DRL Director’s Representation Letter
EBOM Executive Board of Management
EQCR Engagement Quality Control Review
FSASG Financial Statements Audit Services Group
GED Group Executive Director
GGS General Government Sector
GST Goods and Services Tax
MRL Management Representation Letter

OH&S Occupational Health and Safety
PASG Performance Audit Services Group
PGPA Act Public Governance, Performance and Accountability Act 2013

(Cth)
PGPA FRR 2015 Public Governance, Performance and Accountability (Financial

Reporting) Rule 2015
PIE Public Interest Entity
PSRG Professional Services and Relationships Group
QTAC Qualifications and Technical Advisory Committee
RG Regulatory Guide
RoMM Risk of Material Misstatements
RL Representation Letter
SADA Systems Assurance and Data Analytics
SES Senior Executive Service
SORM Signing Officer Review Memorandum
TCWG Those Charged with Governance
Year End Report Audits of the Financial Statements of Australian Government

Entities for the Period Ended 30 June 20XX
Footnotes
1 ASA 210 paragraphs 13, A30.
2 ASA 220 paragraphs 17, A19-A21.
3 Adapted from AUASB Glossary (issued October 2018).
4 Under the Clarity standards, the requirements are concentrated in ASA 220 for an
individual audit and in ASA 600 Special Considerations-Audits of a Group Financial Report
(Including the Work of Component Auditors) for group audits.
5 Refer to the following:

ASA 102 paragraph 6.
ASA 230 paragraphs A7, A16, A20.
ASA 240 paragraphs 5, A6.
ASA 300 paragraphs 5, A4, A8, A11, A17.
ASA 315 paragraphs 15, 17, 18, A38, A45, A218.
ASA 540 paragraph A96.
ASA 620 paragraph A6.
6 Refer to A-G Mandate polices: Legislative Basis for ANAO Work Audits (ANAO Audit
Manual - Shared Content, paragraphs 2.108-2.109).
7 ASA 220 paragraph 14.
8 The unders and overs schedule, also referred to in external communication documents
as unadjusted differences.
9 ANAO terminology for Engagement quality control reviewer as defined in ASA 220.
10 The ANAO, for the purposes of the PGPA Act, is a listed entity. An official of a
Commonwealth entity that is a listed entity is a person who is prescribed by an Act or the
rules to be an official of the entity. Under section 38(3)(c)(iii) of the A-G Act, the persons
listed as officials of the Audit Office include persons engaged under contract as referred to
in section 27.
11 APES 110 paragraphs R400.8-AUST R400.8.1 A1.
12 Includes a listed entity as defined in section 9 of the Corporations Act.
13 This guidance is relevant to the setting of materiality with consideration for the
expectation of users. Where Parliamentary of other scrutiny is concentrated on particular
aspects of the financial statements, the audit team should consider the use of a particular
materiality in accordance with this chapter and ensure that the audit’s overall risk response
for that time is suitable.
14 Refer to Chapter 107 Engagement risk rating and public interest entity assessment,
paragraph 107.5.
15 Aggregation risk = risk that undetected & uncorrected misstatements taken together
will be material.
16 Examples of environmental factors for 10% haircut: sufficient qualified management

resources are present, there is low pressure to achieve targeted results, the entity does not
operate in a high-risk industry, there is a limited number of financial statement line items
subject to high estimate uncertainty with significant risks and/or with risks at the higher end
of the normal risk continuum.
17 Examples of environmental factors for 25% haircut: sufficient qualified management

resources are present, there is low pressure to achieve targeted results and/or the entity
does not operate in a high-risk industry, etc.
18 Examples of environmental factors for 50% haircut: such as insufficient qualitied

management resources are present, the initial audit of a company having never been
audited before, there is high pressure to achieve targeted results and/or the entity operates
in high-risk industry, etc.
19 Delegations can be found in the Public Governance, Performance and Accountability

(Finance Minister to Accountable Authorities of Non-Corporate Commonwealth Entities)
Delegation 2021, Part 5.
20 Resource Management Guide No. 301 – Investment by Commonwealth Entities

provides a useful summary of section 58 and 59 investments.
24 ASA 260 paragraphs A13, A14.
25 PSRG provides an update of changes to reporting requirements which can be tailored

to highlight any significant impact on the auditee.
28 ASA 560 paragraph A13.
29 ASA 710 paragraph A4 to A6.
31 ASA 720 paragraphs 14-15, A23-A38.
33 For a non-corporate Commonwealth entity, the CEO, however named, is normally the
accountable authority. Audit teams will need to consider, on a case-by-case basis, who to
get representations from where the chief executive and accountable authority are different,
with particular reference to who signs the financial statements on behalf of the entity.
If the Commonwealth entity is: The accountable authority is:
a Department of State the Secretary of the Department
a Parliamentary Department the Secretary of the Department
a listed entity the person or group of persons prescribed by an

Act or the rules to be the accountable authority of
the entity.
34 Because representations for those charged with governance are not required by this
policy, there is ordinarily no requirement to obtain representations from the accountable
authority for a corporate Commonwealth entity. This is because, for these entities, the
accountable authority is normally a board of directors or equivalent governance body. There
remains a requirement for corporate bodies to obtain representations from the chief
executive. In many cases, the chief executive of a corporate Commonwealth entity is a
member of the governing board, however in those cases the representations sought from
the CEO are in that officer’s capacity as the head of management and not as a board
member.
37 ASA 330 paragraph 14(b).
38 The audit team should consider the impact of any relevant existing A, B or C findings
when assessing the effectiveness of the control environment.
39 Note that not all manual controls are required to be retested every period. Routine,
transaction-level manual controls performed in a stable environment, combined with
consideration of other factors noted above may allow for reliance on previous period
testing. Conversely, complex, judgmental manual controls addressing risk areas at the
higher end of the normal continuum may not be good candidates for the reliance on
previous period testing.
40 Refer to Chapter 116 Communicating Audit Findings for policy on which findings are to
be reported and to whom.
41 For guidance on addressing members of parliament refer to Australian Parliament

House webpage: How to address Senators and Members.
42 The EQCR may be a firm partner on a project-managed audit. The contractor EQCR is
required by this policy to endorse the SORM.
44 Corporations Act section 311(1)(ii).
45 Australian Securities and Investments Commission, Regulatory Guide 34 Auditor’s

obligations: Reporting to ASIC paragraphs RG34.13-RG34.15.
46 Corporations Act, Volume 2, Chapter 2M – Financial reports and audit, Part 2M.3 –
Financial Reporting, Division 3 – Audit and auditor’s report and section 311 Reporting to
ASIC.
47 PGPA Act section 43.
48 Corporations Act section 308.
50 Under section 46 of the PGPA Act, the accountable authority of a Commonwealth

entity is required to give an annual report to the entity’s responsible Minister for
presentation to the Parliament.
51 Legislation Handbook (February, 2017) on the website of the Department of Prime

Minister and Cabinet.
52 Example wording for a modification to the independence framework statement usually

made in our auditor’s report for a Commonwealth entity could be as follows: ‘In conducting
the audit I have followed the independence requirements of the ANAO, which incorporate
the requirements of the Australian accounting profession to the extent that they are not
inconsistent with the Auditor-General Act 1997 or other relevant legislation.’
53 As required by paragraph 117.5 of the Distribution and Timing of Letters and Written
Reports.
54 Modifications of the auditor’s report involve either modification of the auditor’s opinion
or an emphasis of matter.
55 ASA 450 requires the auditor to request TCWG to correct all accumulated
misstatements. This will need to be communicated also to management in the first
instance, so that if management declines to correct, there is enough time for TCWG to
respond. The effect of uncorrected misstatements related to prior periods shall also be
communicated to TCWG.
56 Reports on other legal and regulatory requirements are dealt with in ASA 700. Matters
relevant to the users’ understanding are dealt with in ASA 706.
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26/05/2023, 14:57 ANAO Audit Manual — FSASG Specific | Australian National Audit Office (ANAO)

ANAO Audit Manual — FSASG Specific

The Financial Statements Audit Services Group (FSASG) volume of the

ANAO Audit Manual

Shared content FSASG specific PASG specific

Engagement performance — general

101. Terms of audit engagement

a. a change in legal or regulatory requirements, including significant changes in

i. (the head of) the accountable authority for a Commonwealth entity, or

101.4 The Engagement Executive shall consider whether the circumstances

101.5 When the audit engagement is undertaken according to legislation, including

of engagement should be agreed when the Auditor-General undertakes a new

101.7 The engagement letter is sent to the accountable authority of a

a. a change of several Board members (other than the Board Chair);

101.13 Pro forma engagement letters are located in Teamstore.

102. Roles and responsibilities of the Engagement

a. the responsibilities of the ‘engagement partner’ under the ANAO Auditing

i. Audit Strategy Document;

i. Interim Management Letter;

i. For contract-out audits, the Signing Officers Review Memorandum

102.7 Consistent with the responsibilities of an engagement partner under the

a. Where an Engagement Quality Control Reviewer (EQCR) is appointed to the

i. through their actions and appropriate messages to the engagement team,

ensuring that the audit is performed consistent with ANAO standard

i. these include the principles of integrity, objectivity, professional

i. these procedures should include consideration of the integrity of those

i. the Engagement Executive is required by the ANAO Auditing Standards to

Relationship with engagement quality control review

102.13 Where an EQCR has been appointed:

a. significant issues arising on an engagement should be considered by the

Date of signing the auditor’s report

103. Role and responsibilities of the Signing Officer

a. the Signing Officer shall be briefed by the Engagement Executive at appropriate

i. key aspects of the audit approach;

103.12 Where the Signing Officer is the Auditor-General or Deputy Auditor-General,

103.14 Signing Officer templates are located in the TeamStore.

104. Role and responsibility of the Second Reviewer

104.4 In particular, the aims of this policy are:

104.6 In the year in which an outsourced audit engagement of a material entity

104.7 The Second Reviewer shall be an Executive Director or higher.

104.15 A Senior Executive may be involved in an engagement, as a Second Reviewer,

104.17 Second Reviewer templates are located in TeamStore.

105. Project managed audits

Minimum requirements for contracts

a. the ANAO Auditing Standards;

Signing Officer and Engagement Executive responsibilities

a. the Engagement Executive shall be briefed by the contract engagement partner

i. key aspects of the audit approach, including audit responses to significant

iii. the schedule of uncorrected misstatements;8

Further engagement executive responsibilities

105.5 The Engagement Executive shall:

a. gain an understanding of the Auditee to be comfortable that the risk

a. meeting the ANAO Auditing Standards; and

Legal basis for contracting

Minimum requirements for contracts

Signing Officer and Engagement Executive responsibilities

105.20 The Engagement Executive is required by ASA 220 to be satisfied that

a. the execution and conclusions reached on audit procedures identified and

a. the level of materiality of components (i.e. contracted-out audits) is reviewed by

i. discussion with the component auditor of those of the business activities

a. the size of the audit relative to the CFS;

105.28 The expected level of ANAO involvement should be communicated to the

105.31 Contractor audit templates are located in TeamStore.

106. Role and responsibilities of the SADA Executive