NZAuASB Meeting 8 February 2018

Event Date 08 February

Date And Time

Location:
Level 7
50 Manners Street
Wellington

Here is a summary of the main matters considered. 

Amendments approved – Auditor rotation and Definition of Public Interest Entities (PIEs)

Professional & Ethicial standards icon

The NZAuASB approved the long association amendments to PES 1 (Revised) to adopt the revised international requirements.

The biggest impact of the auditor rotation changes will be to extend the cooling-off period of the engagement partner to five years and the cooling off period of the engagement quality control reviewer to three years for engagements of public interest entities.

The amendments are effective for audits of financial statements for periods beginning on or after 15 December 2018. Early adoption is permitted.

We have prepared a series of Frequently Asked Questions (FAQs) to assist firms and other stakeholders to adopt and implement the revised long association provisions. The Board is exploring adding additional FAQs to deal with dual-listed entities. 

The Board also approved an amendment to the definition of a PIE as defined in the Professional and Ethical Standards to exclude entities that opt (rather than being obliged) to report in accordance with Tier 1.

You may recall that the amendment was prompted by submissions on the long association changes, to lessen their impact on auditor supply.

The approved revised definition defines a PIE as any entity that meets the Tier 1 criteria in accordance with XRB A1, Application of the Accounting Standards Framework and is not eligible to report in accordance with the accounting requirements of another tier. 

The Board has issued a single amending standard.  This combines the final approved text of the new auditor rotation provisions and the amended PIE definition.  In addition, the Board has issued an explanation for decisions made to finalise the New Zealand auditor rotation amendments. 

Examination of prospective information

Other Assurance Standards icon

The NZAuASB has started a project to develop an assurance standard in response to an increased demand for assurance over prospective financial information. There is currently no standard on prospective financial information in the New Zealand suite of standards.

The Board considered issues around the scope, application, and the type of assurance over prospective financial information that a new standard should address, recognising that the standard may have application in relation to corporate fundraisings and situations such as local authorities’ long-term plans.

The audit of service performance information

Auditing icon

The NZAuASB noted the submissions received in response to ED NZAuASB 2017-2 New Zealand Auditing Standard XX The Audit of Service Performance Information. The Board will consider a detailed analysis of the responses and recommendations from its sub-committee at the April meeting.

Independence requirements in PES-1 for other assurance engagements

Professional & Ethicial standards icon

Historically, the Board has extended the independence requirements applicable to audit and review engagements to all assurance engagements. 

PES -1 (Revised) therefore has some stricter independence requirements than those in the International Code of Ethics for assurance practitioners conducting other assurance engagements.

Recent research commissioned by the Board has provided valuable insight about other assurance engagements, including the types of engagements that are being carried out. 

The Board therefore decided to review whether applying the provisions for audit and review engagements to other assurance engagements remains appropriate.

The Board considered work undertaken by a subcommittee on the topic, and will further deliberate the subcommittee’s recommendations at its next meeting.