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GAAPALERT
Authors: Colin Parker, Sonya Sinclair, Stephen Newman and Carmen Ridley
advice •
# 8 /2 0 1 7
training •
Consulting
risk management •
31 AUG U ST 2 0 1 7
information
Uncertain tax positions have far-reaching INSIDE THIS ISSUE
implications
Financial reporting
It might be unclear as to how tax law applies to a particular
transaction or circumstance. The acceptability of a particular • ASIC notes corporate re-statements
tax treatment under law might not be known until a taxation • Interpretation 23 Uncertainty over Income Tax
authority or a court takes a decision some time later. Treatments
A dispute or examination of a particular tax treatment by • Recently approved AASBs
COLIN’S an authority may affect an entity’s accounting for a current • Get a map that works – IFRS SYSTEM
or deferred tax asset or liability. AASB interpretation
CORNER
23 Uncertainty over Income Tax Treatments addresses these
circumstances with far-reaching implications that will ASX
significantly affect many entities. • Continuous-disclosure publication released
Interpretation 23 incorporates interpretation 23 Uncertainty
over Income Tax Treatments of the international financial- Governance
reporting interpretations committee and issued by IASB.
• AUSTRAC seeks civil-penalty orders against CBA
Interpretation 23 clarifies how to apply the recognition and • APRA probes CBA
measurement requirements in AASB 112 Incomes Taxes
when there is uncertainty over income-tax treatments. In
such a circumstance, an entity must recognise and measure Regulators
its current or deferred tax asset or liability, applying the • ASIC reports on corporate-finance regulation and
requirements in AASB 112 based on taxable profit (or loss), enforcement
tax bases, unused tax losses, unused tax credits and tax rates
• ASIC says prospectuses need to improve
determined in applying Interpretation 23.
• APRA aims to lift ‘operational governance’
An ‘uncertain tax treatment’ is a tax treatment for which
• APRA releases proposed implementation on
there is uncertainty over whether the relevant taxation
authority will accept the treatment under law. counterparty credit risk
• ACNC update
Interpretation 23 specifies that an entity must:
• Identify uncertain tax treatment(s)
ASF licensees
• Determine whether treatments should be assessed • PI insurance meets regulatory requirements
separately or together based on an approach that better
predicts the resolution of the uncertainty
Fraud
• Assume that a taxation authority will examine amounts
• ASIC bans Tasmanian adviser after fraud conviction
it has a right to examine and have full knowledge of all
related information when making those examinations • Other fraud cases
• Conclude whether it is probable or not that the taxation
authority will accept an uncertain tax treatment Audit
• Three SMSF auditors disqualified
• Where it is not probable that the taxation authority will
accept an uncertain treatment, the effect of uncertainty • Enhancing professional scepticism
must be reflected in determining the related taxable profit • PCAOB releases brief on auditors
(or loss), tax bases, unused tax losses, unused tax credits or • Improved UK auditing
tax rates by either the most likely amount or the expected
value. The choice of method depends on which method
the entity expects to better predict the resolution of the Inside GAAP Consulting
uncertainty • What we’ve been up to
• Reassess a judgement or estimate if the facts and • Let GAAP Consulting unravel your AASB 15 contracts
circumstances change or as a result of new information • NFP Risks and Compliance newsletter
that affects the judgement or estimate, and
• Face-to face training on AASBs 15, 9 and 16
• Apply the interpretation’s transitional provisions. • Registrations open for our November – December
GAAPinars
PA GE 1
GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
Interpretation 23 applies for annual reporting • Entities will need to consider the tax Directors and CFO’s should also be mindful
periods beginning on or after 1 January 2019. office’s public guidance as to what it is of the AASB Invitation to Comment Draft
likely to dispute and its success in disputed Appendix to the Tax Transparency Code. The
Implications include:
matters in determining the likely resolution Board of Tax requested that the AASB
• Directors will have to assess continually the develop guidance to assist businesses meet the
• Listed companies will also need to ensure
aggressiveness of tax positions taken TTC recommendations for the suggested tax
that they appropriately disclose uncertain
reconciliation and calculation of the TTC
• The probability threshold for deferred tax and disputed tax positions under their
ETR.
liabilities will be applied at an earlier point continuous-disclosure obligations, and
and could result in more tax liabilities being Entities would be well advised to begin
• Consideration of ‘issued but not yet
recognised considering the interpretation’s implications as
operative accounting standards and
well as forthcoming Tax Transparency Code.
interpretations’ as well as the disclosures of
accounting estimates and judgements, and
contingencies.
Financial reporting
ASIC notes corporate restatements The GAAP Consulting team shared ASIC Get a map that works – IFRS
targets and findings and several financial- SYSTEM
The Australian Securities and Investments
reporting, ethical and auditing considerations
Commission has noted a decision by AusTex While model and illustrative financial
in a Special GAAP Report Financial reporting
Oil Limited (AusTex) to make a US$6.17 statements can be very helpful, they are like a
and audit considerations for 30 June 2017. Missed
million impairment charge against oil and gas map that shows only the destination. Rarely
it? Contact Colin or visit
assets in its financial report for the half-year do they include guidance on how to get
www.gaap.com.au.
ended 30 June. there.
Interpretation 23 Uncertainty over
The commission had raised concerns about IFRS SYSTEM’s Construction of Financial
Income Tax Treatments
the value of oil and gas assets in AusTex’s Statements changes all that. Click on the
financial report for the year ended 31 The AASB has issued interpretation 23 link http://files.ifrssystem.com/PFS/
December. Uncertainty over Income Tax Treatments, which ConstructionOfFinancialStatements.pdf to
will be effective from 1 January 2019. See download the booklet.
ASIC has also noted an announcement by
Colin’s corner Uncertain tax positions have far-
Webjet Limited (Webjet) to reduce revenue
reaching implications.
by $11.9 million for the year ended 30 June
over a contract with Thomas Cook. The
commission was concerned about Webjet’s Recently approved AASBs
recognition of revenue. Its inquiries followed
The AASB has recently approved the following standards, exposure drafts and other documents:
the company’s announcement of 28 July
about its accounting treatment for the contract Date approved Standard Effective date
and its dispute with the auditors. Auditors 14 July AASB 1059 Service Concession Arrangements: Grantors 1 January 2019
have won with ASIC assistance.
19 July AASB 17 Insurance Contracts 1 January 2021
As outlined in ASIC media release 17-162MR
19 July AASB 2017-3 Amendments to Australian Accounting Standards – 1 January 2018
ASIC calls on preparers to focus on the quality of Clarifications to AASB 4
the financial report information, impairment and
31 July AASB Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019
revenue-recognition remaining a focus of its
surveillances. 31 July AASB 2017-4 Amendments to Australian Accounting Standards – 1 January 2019
Uncertainty over Income Tax Treatments
ASX
Continuous-disclosure publication Australia’s system of fair, open and efficient While the compliance requirements are
released capital markets. It is essential to ensuring that by definition very serious, they need not
markets are fully and equally informed. hamstring an entity’s operations. This
The Governance Institute of Australia has publication is essential reading for companies’
released Continuous Disclosure: listed and There are also obligations that apply to certain
officers, directors, senior executives and
other disclosing entities, an invaluable guide to non-listed entities, and it’s important to know
auditors.
the essentials of continuous disclosure and how and when these apply.
particularly what it involves in practice. They are, after all, the people whose
The regime has been amended many times
knowledge, actions and decisions are vitally
Listed entities have been obliged to disclose in recent years. Increasingly high standards of
important to ensuring compliance.
information to the market for many years. disclosure are demanded by the Corporations
Continuous disclosure is a cornerstone of Act 2001, particularly according to their
interpretations in several court cases.
PA GE 2GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
Governance
AUSTRAC seeks civil-penalty orders AUSTRAC alleges that the bank failed to APRA chairman Wayne Byres said the
against CBA report suspicious matters either on time or at decision to inquire followed several issues
all involving transactions totaling more than that had raised concerns about the group’s
AUSTRAC, Australia’s financial intelligence $77 million. governance, culture and accountability and
and regulatory agency, has initiated civil the damage caused to the bank’s reputation
proceedings in the Federal Court against the Even after CBA had become aware of
and public standing.
Commonwealth Bank of Australia (CBA) for suspected money laundering or structuring
serious and systemic non-compliance with the on CBA accounts, it did not monitor its Mr Byres said: ‘The overarching goal of the
Anti-Money Laundering and Counter-Terrorism customers to mitigate and manage any possible prudential inquiry is to identify any core
Financing Act 2006 (AML/CTF Act). money laundering and terrorist financing organisational and cultural drivers at the heart
risk, including the risks of continuing to do of these issues and to provide the community
AUSTRAC acting CEO Peter Clark said business with the customers concerned. with confidence that any shortcomings
that court action had followed the agency’s identified are promptly and adequately
investigation into CBA’s compliance, Mr Clark said that the action should send a
addressed.
particularly concerning its use of intelligent clear message to all reporting entities about
deposit machines. the importance of meeting their AML/CTF ‘CBA is a well-capitalised and financially
obligations. sound institution. However, beyond financial
AUSTRAC’s claim alleges that the CBA had measures, it is also critical to the long-
committed more than 53,700 contraventions ‘By failing to have sound AML/CTF systems
run health of the financial system that the
of the AML/CTF Act. In summary: and controls in place, businesses are at risk
Australian community has a high degree of
of being misused for criminal purposes,’ Mr
• CBA did not comply with its own AML/ confidence that banks and other financial
Clark said.
CTF program because it did not carry out institutions are well governed and prudently
any assessment of the money laundering ‘AUSTRAC’s goal is to have a financial sector managed.
and terrorism financing risk of IDMs before that is vigilant and capable of responding,
‘The Australian community’s trust in the
their rollout in 2012. CBA took no steps to including through innovation, to threats of
banking system has been damaged in recent
assess the risk until mid-2015 – three years criminal exploitation.
years, and CBA in particular has been
after the machines’ introduction ‘We believe this can be achieved by working negatively impacted by a number of issues
• For a period of three years, CBA did not collaboratively with and supporting industry. that have affected the reputation of the
comply with the requirements of its AML/ We will continue to work in this way with bank. Given its position in the Australian
CTF program relating to monitoring our industry partners who also share this aim financial system, it is critical that community
transactions on 778,370 accounts, and and demonstrate a strong commitment to it.’ trust is strengthened. A key objective of the
inquiry will be to provide CBA with a set of
• CBA failed to give 53,506 threshold APRA probes CBA recommendations for organisation and cultural
transaction reports to AUSTRAC on time change, where that is identified as being
The Australian Prudential Regulation Authority
for cash transactions of $10,000 or more necessary.’
has announced the establishment of an
through IDMs from November 2012 to
independent prudential inquiry into the CBA, It would include, at a minimum, considering
September 2015.
focusing on the group’s governance, culture and whether the group’s organisational structure,
These late reports represent about 95 per accountability frameworks and practices. governance, financial objectives, remuneration
cent of threshold transactions that occurred and accountability frameworks are conflicting
The inquiry will be conducted by an
through the bank’s IDMs between November with sound risk management and compliance.
independent panel to be appointed by APRA.
2012 and September 2015 and had a total
Subject to settling the final terms of reference, The independent panel would not be tasked
value of around $624.7 million.
it is expected that the panel will report to with making specific determinations on matters
APRA around six months after it begins subject to legal proceedings, actions by other
work. The report will be made public. regulators and customers’ individual cases.
Regulators
ASIC reports on corporate-finance The report provides statistical data, highlights It sets out information on the imminent
regulation and enforcement focus areas, and includes guidance about implementation of the industry-funding
ASIC’s regulation of fundraising transactions, model and a new regime for crowd-sourced
ASIC has released its seventh report on the mergers and acquisitions, corporate- funding by public companies. It highlights
regulation of Australian corporate-finance governance issues, related-party transactions regulatory initiatives regarding emerging
issues. and financial reporting. market issuers, initial public offerings and
Report 539 ASIC regulation of corporate finance: financial reporting for the year ended 30 June.
The report also details the commission’s
January to June 2017 provides companies and approach, including the types of issues that ASIC has also released its enforcement report
their advisers and auditors with insights into have caused it to intervene and its response to for the period 1 January to 30 June.
the commission’s regulatory approach to novel transactions. The report also provides an
corporate finance and should help them with overview of ASIC’s current policy initiatives.
legal and compliance obligations.
PA GE 3GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
They were: ‘We believe that ASIC’s regulation of of quality, value for money outcomes to
IPOs is sound. [The commission] will members.
• 57 investigations begun and 80 completed
continue to review a significant proportion
‘The superannuation industry is going through
• Five people face criminal proceedings, and of prospectuses, given their importance to
a period of significant evolution, and it is
there were 32 criminal charges laid, 23 investors and to maintaining the reputation of
incumbent on RSE licensees to be focused on
people removed from financial services, and Australia’s capital markets.
meeting the best interests of members […]
11 infringement notices issued
‘The qualitative research reinforces that
‘This extends to RSE licensees making
• $618.8m compensation/remediation and prospectuses can be challenging documents
decisions about the use of members’ money
$1.4m of infringement notices paid, and for retail investors and particular areas of
in a manner that provides appropriate
our guidance on prospectus disclosure
• 203 persons charged in summary transparency and accountability, and is
should be carefully considered by issuers
prosecutions for strict liability offences and demonstrably in [their] best interests […]’
and their advisers to produce more effective
399 criminal charges were laid in summary
[disclosures].’ APRA will consult over coming months
prosecutions for strict liability offences.
on proposed changes to the prudential
In 2016, ASIC ordered corrective disclosures
ASIC commissioner Cathie Armour said: framework, including:
from issuers on 134 occasions, making 56
‘This report covers some of the important
interim stop orders and five final stop orders. • Requiring RSE licensees to have an
work done by ASIC over the [past] six
Most orders were against IPOs. operational governance framework, which
months across a wide range of areas. We
covers the policies and processes that
will continue to detect misconduct and take ASIC proposes to:
support strategic and business planning,
enforcement action where necessary to ensure
• Engage with stakeholders to encourage and ensure rigour in operational decisions,
investors and consumers can have trust and
greater accessibility to management for particularly those related to expenditure and
confidence in our financial system.’
investors reserving
ASIC says prospectuses need to • Increase its reviewing of online investor • Expanding the existing business-planning
improve forums and social media requirements to ensure RSE licensees
While prospectuses are important for people appropriately implement, monitor and
• Broaden its regular media monitoring to
considering investing in initial public review their business plans in the context of
include investment magazines and online
offerings, ASIC reports that their practicality clear strategic objectives
subscription services, and
and credibility need to improve. • Requiring RSE licensees to meet minimum
• Provide retail investors with extra
REP 540 Investors in initial public offerings expectations when making decisions on
information about the IPO process.
contains ASIC’s analysis of findings from fund expenditure, with a view to ensuring
interviews conducted with institutional The report complements others such as Sell- that there is adequate rigour in decision-
investors and qualitative research that it side research and corporate advisory: Confidential making, monitoring and transparency of
commissioned. information and conflicts, Due diligence practices members’ money, and
in initial public offering and Marketing practices in
The report explains how ASIC will use the • Requiring RSE licensees to undertake an
initial public offering of securities.
findings to enhance its regulation of IPOs. It outcomes assessment for [their] members.
also explains how companies, their advisers APRA aims to lift ‘operational APRA expects to provide guidance to
and other market participants can help governance’ support this assessment, including with the
investors. proposed MySuper outcomes assessment.
The Australian Prudential Regulation
In the 2016 calendar year: Authority has outlined proposed changes to APRA expects to release a detailed package
the superannuation prudential framework of draft standards and prudential guidance for
• 133 companies listed on the Australian further consultation later this year.
to lift ‘operational governance’ practices of
Stock Exchange, raising a total of $6 billion
APRA-regulated superannuation trustees
APRA releases proposed
• 115 companies listed on the HKEX, raising (RSE licensees).
implementation on counterparty
$25 billion
‘Operational governance’ refers to how credit risk
• 66 companies listed on the London Stock an RSE licensee determines its strategic
APRA has released a package that sets out
Exchange, raising $4 billion, and objectives, undertakes business planning and
its proposed implementation of the Basel
runs its business operations on a day-to-day
• 37 companies listed on the New York Committee on Banking Supervision’s
basis. While many RSE licensees have sound
Stock Exchange, raising $13 billion. Standardised approach for measuring counterparty
practices, APRA has identified weaknesses in
credit risk exposures (SA-CCR) and Capital
Many retail investors said prospectuses were others.
requirements for bank exposures to central
hard to read and could not be relied on to tell
APRA deputy chairman, Mrs Helen Rowell counterparties.
the whole truth about an IPO.
said the authority had identified areas where
The package contains:
ASIC aims to buttress confidence in Australian the superannuation prudential framework
capital markets by regulating IPOs. ASIC could be enhanced to reflect better practice • A discussion paper setting out both its
commissioner John Price said: ‘The project’s and public expectations for the prudent and response to submissions on its September
findings allow us to have an understanding of the efficient operation of funds. 2016 paper Counterparty credit risk for ADIs
[…] factors and types of information that investors and several revised proposals for further
‘RSE licensees are expected to operate in a
rely on when investing in IPOs, and will allow us consultation
manner that supports long-term sustainability
to enhance our regulation of [them].
of their business operations and delivery
PA GE 4GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
• Revised drafts of Prudential Standard ACNC update • Issued 190 registered charities (‘double
APS 112 Capital Adequacy: Standardised defaulters’) with a notice of intention to
Approach to Credit Risk (APS 112) and The Australian Charities and Not-for-profits revoke their charity status
Prudential Standard APS 180 Capital Commission (ACNC) has:
• Sent notices to 1500 charities about errors
Adequacy: Counterparty Credit Risk, which • Released a new report Australia’s non- in their 2016 annual information statements
incorporate changes to APRA’s proposed profit organisation sector: money laundering
new counterparty credit risk requirements and terrorism financing risk assessment with • Revoked the charity status of Survivor
for authorised deposit-taking institutions Australia’s financial-intelligence agency Foundation Incorporated, and
(ADIs), and AUSTRAC
• Warned charities to watch out for scam
• Three draft reporting standards, which set • Entered into a compliance agreement with intellectual-property letters.
out proposed revisions to the corresponding the new board of RSL SA
These developments and other NFP issues
reporting requirements as well as proposed
• Noted that ASIC has advised the ACNC of will be explored in depth in the 30 September
reporting requirements on margining for
new obligations for charitable-investment edition of NFP Risks and Compliance as well as
non-centrally cleared derivatives.
fundraisers in our next GAAPinar series.
AFS licensees
PI insurance meets regulatory costs requirements in regulatory guide 126 • Read regulatory guide 126 to understand
requirements Compensation and insurance arrangements for AFS the level of PI insurance required
licensees. Following ASIC’s intervention, the
An ASIC review of professional indemnity • Document the annual review of PI
licensees have obtained improved PI insurance
(PI) insurance has found that most small insurance needs
or are doing so.
companies holding Australian financial • Obtain defence-costs cover as well as the
services (AFS) licensees had PI insurance that Following the conclusions in report 459,
minimum indemnity level
met regulatory requirements. which highlighted fraud and dishonesty cover
as a particular risk, ASIC has worked with • Check if the policy covers acts of fraud
‘Small’ licensees were designated as retail the two insurance companies to help them or dishonesty by directors, employees and
providers that had 20 or fewer authorised make changes to their standard policy terms other representatives
representatives and revenue of $2 million or to ensure that their fraud and dishonesty
less. • Be aware of limitations and exclusions in
cover allows insured licensees to comply with
the PI policy
The review focused on the adequacy of regulatory guide 126.
cover for defence (legal) costs and fraud • Inform the PI insurance provider of any
The review also highlighted that AFS licensees
and dishonesty in policies offered by two material changes to your business, such as
do not appear to always fully understand
insurance companies. It follows ASIC’s report an increase in the number of advisers or
their PI insurance cover as the policies are
459 Professional indemnity insurance market for revenue, and
complex and their terms may be subject to
AFS licensees providing financial product advice of different interpretations. As well as this, there • Remember that, while you can work with
December 2015, which highlighted areas of are also inconsistencies in the approaches an insurance broker, you cannot rely on the
concern. AFS licensees take to document their annual broker to ensure that your policy complies
The review found that three of the 56 review of their PI policies. with the regulatory guide. Ultimately,
AFS licensees reviewed did not have PI licence holders are responsible for obtaining
Following the review, ASIC has encouraged
insurance that complied with the defence- compliant PI insurance.
AFS licensees to:
Fraud
ASIC bans Tasmanian adviser after The charges related to Mr Noonan’s Other fraud cases
fraud conviction misappropriating a total of $2,495,117 from
14 clients over nine years. During that period, A propos of the Noonan case, here are fraud
ASIC has permanently banned Daniel Joseph Mr Noonan was employed by AMP Financial headlines you might have missed:
Noonan, a former financial adviser based in Planning Pty Ltd. • ‘Nant whisky to be investigated by
Hobart, from the credit and financial-services Tasmania Police over alleged fraud’
industries. He used the ill-gotten gains to gamble or
• ‘AUSTRAC and ACNC Risk Assessment
replace sums already misappropriated. When
Mr Noonan was banned after pleading guilty shows criminals are targeting charities and
sentencing, Justice Escourt described Mr
and being convicted of 97 counts of fraud and non-profit sector’
Noonan’s crimes as ‘egregious violations of his
10 counts of stealing in the Supreme Court fiduciary duty to his clients’. • ‘Department of Human Services conducting
of Tasmania following an investigation by internal fraud probe’
Tasmania Police. Mr Noonan was sentenced ASIC deputy chairman Peter Kell said: ‘ASIC • ‘ICAC finds former Department of Justice
to six-and-a-half years’ imprisonment with a will act to remove people from the credit and officer corrupt’, and
non-parole period of half the sentence. financial-services industry who act dishonestly
• ‘AFP to examine Iluka bribery concerns in
and breach the trust of their clients.’
Africa’.
PA GE 5GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
More about these in GAAP Consulting’s • Corruption ReportFraud’s motto is the core of what
forthcoming ReportFraud (and NOCLAR) • Non-compliance of laws and regulations, it does: If you see something, say something.
whistleblowing service. and Can you afford NOT to investigate how
• Unethical behaviour. ReportFraud can help your organisation?
Fraud costs companies an average of 5 per
cent of their revenue every year. There’s A whistleblowing service is a necessary The ReportFraud website will be launched this
fraud’s financial cost as well as the cost of a component of any robust corporate- month and we would be delighted to get your
damaged reputation. ReportFraud is designed governance framework. A healthy and open comments and queries.
to safeguard your organisation from these culture is one where people are encouraged
We would also like to hear from forensic
potential risks. to raise concerns and are confident that they
accountants who might like to undertake
can do so without adverse repercussions. By
Our new initiative is a cutting-edge investigations of alleged frauds identified by
subscribing to ReportFraud, you will be seen
whistleblowing service that operates on a 24/7 our service.
to be taking governance obligations seriously.
basis via hotline, online, smartphone access,
Questions? Andrew Parker, chief
email and post. It allows employees and A ReportFraud subscription will allow you to
executive officer, ReportFraud,
stakeholders to report wrongdoings such as: report on five channels. But it will also provide
Andrew@reportfraud.org.au or 0401 858 889
a policy framework, annual heath checks and
• Fraud or Colin colin@gaap.com.au or 0421 088 611.
practical material to create awareness of fraud
• Theft
among management and employees.
• Asset misappropriation
Audit
Three SMSF auditors disqualified • Audit evidence requirements of Australian PCAOB releases brief on auditors
auditing standards.
ASIC has disqualified Chiu Man from being The US Public Company Accounting
an approved self-managed superannuation ASIC commissioner John Price said: ‘SMSF Oversight Board (PCAOB) has published a
fund auditor. The commission found that auditors play a fundamental role in promoting brief about its 2017 inspections of auditors of
Mr Man had breached fundamental audit confidence in the SMSF sector so it is crucial public companies and other issuers.
requirements and was otherwise not a fit and that they adhere to ethical and professional
standards. ASIC will continue to take action The brief is intended to help investors,
proper person.
where the conduct of SMSF auditors is auditors, and others to understand the areas
In particular, ASIC found that Mr Man had inadequate.’ of significant audit risks targeted by PCAOB
not: inspectors and encourage auditors to improve
Enhancing professional scepticism audit quality.
• Complied with the audit evidence
requirements of Australian auditing The International Auditing and Assurance ‘These staff inspection briefs highlight what
standards, and Standards Board (IAASB), the International PCAOB inspectors look for in inspections,
Ethics Standards Board for Accountants such as, Does the auditor understand how
• Appropriately responded to inquiries from
(IESBA), and the International Accounting the issuer developed its estimates? Are they
the Australian Taxation Office and ASIC.
Education Standards Board (IAESB) have addressing pending accounting changes with
ASIC has also disqualified John Evennett from jointly published Toward Enhanced Professional the issuer? Have the software audit tools used
being an approved SMSF auditor, determining Scepticism. in the audit to analyse data met the audit
that Mr Evennett had breached fundamental objectives?’, said Helen A. Munter, director of
The importance of professional scepticism is
independence and audit requirements. registration and inspections.
underscored by the increasing complexity of
The commission found that Mr Evennett had business and financial reporting, including PCAOB inspectors focused on:
breached: the greater use of estimates and management
• Audit areas where inspectors have identified
judgment, business-model changes due
• Auditor independence requirements of deficiencies in the past, such as assessing and
to technological developments, and the
APES 110 Code of Ethics for Professional responding to risks of material misstatement
fundamental reliance of the public on
Accountants when he audited the fund of an
dependable financial reporting. It lies at the • Audit areas affected by recent economic
immediate family member, and
heart of a quality audit. developments, including the high rate
• Audit evidence requirements of Australian of merger and acquisition activity and
‘When this initiative began, the boards were
auditing standards. fluctuations in oil and natural gas prices
looking for input on whether and how
Ross Russo was disqualified from being an each of their standards could contribute • Financial-reporting areas that require
approved SMSF auditor, ASIC determining to strengthening the understanding and significant judgment, including going
that Mr Russo had breached fundamental application of professional scepticism as it concern considerations and income-tax
independence and audit requirements. applies to an audit,’ said Professor Annette disclosures
Köhler, joint working group chair. ‘We have
Mr Russo had breached: • An audit firm’s compliance with new
shared our observations and recommendations
transparency rules
• Auditor independence requirements of with the boards, and professional scepticism
APES 110 Code of Ethics for Professional now features prominently in each of [their] • Preparation for new accounting standards
Accountants when he audited the fund of a strategic considerations.’ for revenue recognition and lease
close family member, and accounting
PA GE 6GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
• Work by other auditors on multinational reviews of quality, thematic reviews and Investor and public confidence in
audits audit-committee and investor feedback. audit quality remains vulnerable where
circumstances indicate a failure by auditors
• The auditor’s use of information Improvements are inconsistent across firms,
to be sufficiently independent or to provide
technology, particularly software audit market sectors and audit procedures, however.
robust challenging. The FRC has enhanced
tools, and High-profile accounting failures and audit
its enforcement procedures and is working
monitoring continue to expose cases in which
• The audit firm’s system of quality control. to improve its speed of action, issuing more
auditors have not met expectations. While
than £14.2 million of sanctions on auditors
In 2017, the PCAOB plans to inspect there is evidence of greater professional
and audit firms in 2016-17. It summarises the
some 195 registered firms that audit public scepticism, the FRC continues to find it the
lessons to be learned from its investigations.
companies, of which 11 are subject to annual biggest problem area.
inspection. About 55 are non-USA firms in
Setting out what is being done to drive
26 countries or jurisdictions.
improvements to audit quality, the report The FRC will focus on promoting
The appendix to the staff inspection brief includes an overview of the FRC’s work in scepticism, quality-control standards, auditors’
contains additional information on the setting policy and standards, how the council adherence to the spirit as well as the letter
inspection program, industry sector and is working to enhance the effectiveness of independence requirements, the impact
market-capitalisation demographics and of audit committees, its oversight of of mandatory rotation on quality and fees,
inspection data for public company audits the profession, and its monitoring and harnessing technology, and the culture of
from 2014 to 2016. enforcement activities. audit firms that support audit quality.
Improved UK auditing Confidence in auditing in the UK is changing Melanie McLaren, the FRC’s executive
significantly, the impact of tendering director for audit and actuarial regulation,
Britain’s Financial Reporting Council has and rotation requirements seeing greater said: ‘In our monitoring of audit quality we
released evidence of improved auditing and a competition among the biggest firms. have yet to see overwhelming evidence of
culture that aims for higher standards. improvement in all sections of the market
Greater transparency of audits has been
The FRC says that higher standards are or the consistency of performance we want
achieved through extended reporting.
especially noticeable in larger companies’ between different firms. Firms are […]
Broadened perspectives on quality through
audits. investing in improvement measures, and
the challenge and support of independent
[audit committees] surveyed report that they
In the audit regulator’s second annual report, non-executives at larger audit firms ensure a
are seeing evidence of good quality[…]’.
FRC Developments in Audit report, the council focus on sustained improvement.
sets out evidence from its own and other
I N S I D E G A A P C O N S U LT I N G
What we’ve been up to even the most serious and professional of us for. And implementation dates are fast
can also be charming and respectful when we approaching. Let the experts at GAAP
Colin Parker enjoyed a 25-day trip to Italy meet clients. He is working on GAAPinars Consulting get you on track with an analysis
during which he followed his passion for that will deliver specific ‘soft’ skills. of one of your contracts.
Roman ruins – a legacy of doing Latin
in school. He struck very hot weather Revenue recognition has been at the forefront Our AASB 15 team is led by Carmen
in Sicily but still enjoyed the history and of the work Stephen Newman has done this Ridley, AASB member. Check out our
hilltop towns. He caught up with friends past month with various auditors. This has contract-review service and book us today.
in Positano and fell in love with Naples’s involved contract reviews and interpretation
A leading auditor said of our service: ‘I
architecture and Herculaneum history, of relevant standards. Requests for contract
think this is an excellent idea, and I will
climbing Mt Vesuvius. He also visited two reviews generally are definitely on the rise,
certainly mention it to our clients.’
of his favourite cities, Florence and Venice. particularly in the context of AASBs 9,15
The holiday was bookended by a discussion and 16. Stephan also participated in webinars The GAAP Consulting team can also assist
in Sydney on a proposed litigation brief. He on NOCLAR and gave a presentation on you with:
is back at work so soon, he says with a sigh. the soon to commence Privacy Amendment
• AASB 15 and AASB 1058 training
(Notifiable Data Breaches) Act 2017.
Carmen Ridley has taken time out to
• Reviewing and monitoring of your
attend a yoga retreat, which she says On the personal front, with no children at
implementation plan
was incredibly relaxing, a highlight the home for the time being, his wife and he are
wonderful healthy food. She has spent learning to be empty nesters. Not as bad as • The development of detailed accounting
August answering calls from clients on feared thanks to Whats App, Facetime and the policies, and
technical matters and spring-cleaning her good old mobile phone.
• Reviewing your financial-reporting
house.
Let GAAP Consulting unravel your template.
Stephen Downes was heartened to learn AASB 15 contracts
Contact Colin to discuss our contract-
of recent interest in so-called ‘soft skills’
Do you know how to implement AASB 15 review service and how we can help you to
by several accounting and auditing bodies.
Revenue from Contracts with Customers? It’s not implement AASB 15.
His view has always been that people do
easy – every contract needs to be understood
business with people, and it’s a bonus if
according to how it is to be accounted
PA GE 7GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
NFP Risks and Compliance The next edition will be released in October. Registrations open for our
newsletter For further information on use of content November-December GAAPinars
for your accounting practice, please contact
We recently released our June-quarter Colin. Those of us who provide professional
edition of our NFP Risks and Compliance training – face-to-face or digitally delivered
newsletter to accounting-firm subscribers. Face-to face training on AASBs 15, – confront difficult questions each time we
9 and 16 think about new presentations. What topics
Our aim is for accounting-firms’ to
do accounting and auditing professionals
keep their NFP clients informed. It Members of the GAAP Consulting team will
want covered? What do they need to
helps enormously when accountants can soon be sharing their insights and discussing
know? What has changed that they must be
demonstrate expertise and experience your implementation issues concerning AASB
brought up-to-speed about?
for current and potential clients. At last 15 Revenue from Customer Contracts, AASB 9
count, there were about 600,000 NFPs Financial Instruments and AASB 16 Leases. We use a two-pronged approach to answer
in Australia, including more than 54,000 these questions. First, we ask our clients
Up to 14 hours of CPD/CPE are available.
charities. what they’d like to know more about. And
Each session is bookable separately. The
they’ll come back with lists of questions:
The June-quarter edition had more than 20 sessions are targeted at senior auditors, CFOs
What are the hazards in a new accounting
news items. and members of their finance teams.
standard? Does it have complexities that
Topics were: Course material has been updated. Examples we haven’t noticed? Is there an area of
and case studies will be provided and emphasis accounting that we’ve neglected? Have we
Governance
placed on implementation. Participants are overlooked the ramifications of introducing
• Accountants must act on suspicions
encouraged to provide questions in advance. new systems, programs and standards?
• Guidance on board remuneration
We’ve heard a lot about NOCLAR and
• DGR discussion paper released Melbourne
audit quality lately, but can you tell us
• FIA to release new fundraising code • 21 November – Masterclass on AASB 15
more?
• Charitable investment fundraisers Revenue from Customer Contracts (all day)
transitional relief extended • 11 December – Introduction to AASB 16 Then we sit around the virtual table and
• New privacy legislation passed Leases (half-day) and Introduction to AASB – adding our expertise and knowledge –
9 Financial instruments (half-day) come up with a list and content that we
ACNC
hope will answer all the questions. Our aim
• ACNC guides on crowd funding Brisbane
is to tell you what you need to know.
• New report on our smallest charities • 6 December – Masterclass on AASB 15
• Recent compliance action on three Revenue from Customer Contracts (all day) If estate agents harp on about location,
Queensland charities • 7 December – Introduction to AASB 16 location and location, at GAAP Consulting
• Hundreds of charities revoked Leases (half-day) and Introduction to AASB our chant is relevance, relevance and even
• AIS release set for July 9 Financial instruments (half-day) more relevance. With your assistance we
• Charities must meet governance standards have identified 12 GAAPinar topics for
Sydney
• ACNC financial-reporting obligations our November-December series. On 2
• 15 December – Masterclass on AASB 15
November, the first – a what’s-new wrap
Financial reporting Revenue from Customer Contracts (all day)
– is free.
• Financial-reporting considerations for • 18 December – Introduction to AASB 16
30 June Leases (half-day) and Introduction to AASB Registrations are open.
• New guidance issued for management 9 Financial instruments (half-day)
In this year’s second GAAPinar series, we’re
representations
Anchor presenters are Carmen Ridley offering 18 hours of CPD/CPE. Watch
• Standards modified for NFPs
(current AASB member) and Colin Parker them in your boardroom or on your laptop.
Audit (former AASB member) with support Log in from somewhere remote. Watch
• Enhanced audit-reporting standards apply from Sonya Sinclair (Sydney) and Stephen recorded sessions later.
Newman (Melbourne).
Governments The expertise of our presenters Carmen
• Reduced red tape for ACT’s charities Numbers are strictly limited. A brochure will Ridley (current AASB member), Sonya
• Red-tape reduction progress in Victoria be available shortly. Express your interest now Sinclair, Stephen Newman and Colin
• RSL under investigation to Andrew Parker 0401 858 889 or andrew@ Parker (former AASB member) is our
gaap.com.au. Content queries? Please contact GAAPinars’ trump card.
Subscribers are free to delete material
Colin Parker (0421 088 611 or colin@gaap.
that is not suited to their needs, rearrange
com.au).
the order, or use another heading – the
flexibility is all theirs. They can add their
own firm’s news.
PA GE 8GAAP ALERT # 8 /2 0 1 7 3 1 A U G U ST 2 0 1 7
Topics and dates are:
GAAPinaar Date Sessions 4 and 5 and 8 and 9 are double-
headers, the first session starting at noon and
1. What’s new in GAAP, GAAS, APES and the regulators? 2 November the next at 2.30pm.
2. Implementation of NOCLAR for accountants 7 November
Each session costs $297, discounts available,
3. Implementing AASB 9 Financial Instruments 9 November including for sole practitioners and multi-
4. Accounting for sale of goods under AASB 15 Revenue from 16 November offices. Contact me if you’d like to know
Customer Contracts more or download our GAAPinar brochure
5. Accounting for long-contracts under AASB 15 Revenue from 16 November from www.gaap.com.au.
Customer Contracts
Lock in the dates and register today.
6. NOCLAR for auditors 21 November
7. NFP reporting and ACNC activities 28 November
8. Financial reporting and auditing update for 31 December 30 November
2017
9. Preparing for the transition into AASB 17 Leases 30 November
10. Knowing your AFSL risks? 5 December
11. Business law for accountants and auditors 7 December
12. Learning the lessons from ASIC audit inspections 14 December
Contact Us Sponsored by
Should you require any further information about the
services provided or our team, please contact:
Colin Parker
Principal, GAAP Consulting
Consulting
Head of the GAAP Consulting Network
Email colin@gaap.com.au
Mobile 0421 088 611
Colin Parker Postal GPO Box 1497, Melbourne, Victoria 3001
advice • training • risk management • information
GAAP Consulting Website www.gaap.com.au This communication provides general information
current at the time of release. It is not intended that the
information provide advice and should not be relied on
as such. Professional advice should be sought prior to
GAAP Consulting GAAP Consulting ®
Colin Parker actions on any of the information contained herein.
PA GE 9
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