The FRC is urging enhanced audit oversight by ASIC.

The Financial Reporting Council (FRC), responsible for auditing and accounting standards, has issued a call to action to bolster audit quality oversight. 

In a recent report, the FRC highlighted concerns about the Australian Securities and Investments Commission (ASIC) reducing the number of audit files it evaluates for quality, deeming this approach inadequate.

The FRC report noted that ASIC's audit surveillance program lacks proactive statutory requirements and is influenced by strategic priorities and budgetary constraints. Consequently, the number of audit working papers reviewed by ASIC has diminished significantly, from 45 sets in the 2021-22 fiscal year to just 15 in 2022-23.

To address these issues, the FRC recommends implementing a broader audit working paper review process. 

The report suggests that the government should decide whether ASIC should expand its program and receive adequate funding or if a new independent entity should be established with a legislated responsibility for conducting an audit surveillance program. 

It says the scope of this program should extend to all registered company auditors (RCAs) over a defined timeframe, potentially requiring all auditors to be members of a professional accounting body or meet specific competency standards.

Additionally, the FRC has highlighted the need to give legal force to relevant ethical standards and subject them to compliance reviews by regulators. 

The review says professional bodies should also evaluate the extent of their reviews and how they report on the scope and findings of their practice quality review programs. 

More details are accessible here.