Audit transparency report

Transcription

1 Audit transparency report For the year ended 30 June Serious about Success

2 Page Title Contents I am pleased to present our third Audit Transparency report for the year ended 30 June 2015, which has been prepared in accordance with the requirements set out under section 332B of the Corporations Act Whilst the last financial year has seen changes to the composition of the membership of the Australia network, one thing that has remained a constant, is our pursuit to deliver the highest levels of quality in all areas of our business, which include the provision of audit, assurance and related services. With the constant advances in technology, the nature of work being performed by our clients and the systems and controls they put in place to govern their businesses is changing. It is therefore incumbent on us that we also move to ensure that our systems and framework of quality control move in step with the changes occurring within the broader market place. International Relationship 4 Australian Network 5 MSA Governance 6 Maintaining Quality 8 Firm Details Perth 12 In addition, training and development of our people is an area which remains a focus for our business. Our investment in programs designed to ensure our staff are appropriately equipped to effectively undertake their roles, involves collaboration from across the entire network and includes various functions of the business. We look forward to taking further strides forward in all areas of our business over the course of this year and to reporting our achievements to you in next year s report. In the interim, thank you for your interest in our business and hope you enjoy reading the attached report. Don Boyd Executive Chairman Australia 2 3

3 International Relationship Australian Network Each firm within the Australia ( MSA ) network is an independent member firm of International Limited ( MSIL ), which comprises 292 separate and independent member firms operating locally in countries around the world. Member firms offer assurance, accounting, tax and a range of other international business services across 103 countries through an aggregate of some 626 offices and 26,290 personnel (based on worldwide statistics for Moore Stephens International Member Firms reported at 31 March 2015). MSIL is a limited liability company registered in England and Wales and is owned by the member firms. The company does not provide professional services in any jurisdiction. Its role is to promote the co-ordination of member firms professional strategies and this is led by an International Policy Committee comprising of regional representatives. Member firms are divided into eight regions, each with their own co-ordinating committee comprising elected members from firms in that region. Some individual countries also have similar co-ordination structures, according to national circumstances. Broadly, coordinating committees meet quarterly, with intervening electronic contact as considered necessary. MSIL also has an International Technical Committee comprising representatives from each of the regions. This Committee reports to the International Policy Committee. Operating through the eight regions, its main role is to monitor the adherence by member firms to the quality obligations set by ISQC 1: Quality Control for Firms that Perform Audits and Reviews of Financial Statements and Other Assurance and Related Service Engagements, and to assess the suitability of candidate firms for admission. Each member firm of MSIL is separate and independent from both MSIL and other member firms. Member firms of MSIL do not share their respective profits or losses, they are not under common ownership or control and each member firm appoints its own management. Member firms are expected to comply with applicable regulatory and professional obligations including, where relevant, those established by the International Federation of Accountants ( IFAC ) and its affiliated bodies. Membership also requires compliance with various administrative obligations, but these do not expand upon the requirements of relevant professional bodies. Concerning the delivery of assurance services, member firms are required to complete and maintain compliance questionnaires and are subject to periodic monitoring visits. The nature of monitoring procedures gives recognition to the professional environment in which individual firms operate. Equivalent procedures are applied where firms are candidates for admission. Where deficiencies are identified at a member firm, remedial recommendations are made. If deficiencies are not resolved, then the International Policy Committee may determine that the firm be excluded from membership. Neither MSIL nor any role within it carries any executive authority over the operations of individual member firms. All member firms and correspondent firms are independent entities owned and managed in each location. Their membership of MSIL should not be construed as constituting or implying any partnership between them. As at 30 June 2015, the MSA network comprised five firms: Adelaide Perth Sydney Perth National Head of Professional Standards Adelaide Canberra Queensland These firms operate across 12 office locations throughout Australia. MSA is a limited liability company registered in Australia and is owned by the member firms within Australia. The company does not provide professional services in any jurisdiction. Each member firm with firm revenue exceeding $4m is entitled to have a firm appointed Director on the Board of MSA to represent their interests. Changes to member firm representation during the transparency reporting period On 1 March 2015, Melbourne practice left the network to become ShineWing Australia, one of the branch offices of ShineWing, with headquarters in Beijing. Changes to member firm representation after the transparency reporting period On 1 July 2015, Perth office merged with UHY Haines Norton s Perth practice to become Moore Stephens Western Australia. MSA Board Chief Executive Officer National Head of Technical Accounting Services Canberra MSA Board Members as at 30 June 2015 Australia Adelaide Queensland Sydney WA National Head of Communications Sydney Queensland Don Boyd (Executive Chairman) Jim Gouskos Ken Pickard Robert Southwell Neil Pace MSA Board members nominate suitable candidates for its Executive Chairman, who is appointed via a resolution of the Board for a period of two (2) years subject to satisfactory performance. The Executive Chairman is appointed as a Director of the Company and has the same voting rights equivalent to those of other directors. The Executive Chairman is not a shareholder however and therefore has no votes upon the call for a poll. The Executive Chairman also serves as the representative for the Australasian region on MSIL s International Policy Committee. MSA also has a Chief Executive Officer ( CEO ) who is not a Board member. The CEO Is appointed by the Board and has overall responsibility to provide leadership and strategic direction for the network and overseeing its day to day operations. Authority to act is granted to the CEO by the Board; hence the CEO ultimately remains accountable to the Board. On 1 October 2015, Nexia Melbourne commenced trading as Victoria and is represented on the MSA Board by Steve Sakkas, the firm s Chief Executive Officer. Cairns Innisfail Townsville Burdekin On 16 October 2015, Canberra practice left the network after being acquired by Canberra based Synergy Group. Perth Toowomba Parramatta Brisbane Gold Coast Sydney On 31 October 2015, Sydney practice left the network and merged with Pitcher Partners Sydney practice. Adelaide Canberra 4 5

4 MSA Governance The role of the Board of MSA is to serve the interests of all its stakeholders, provide strategic direction for member firms and manage risks associated with being a part of the network within Australia. Resolutions made by the Board are expected to be adopted by all member firms. Each Board member has the responsibility to communicate resolutions to their respective firms and to ensure they are actioned. Prior to admission into the network, all prospective member firms are required to be approved by both the MSA Board and the MSIL International Policy Committee ( IPC ). If the approval process is successful, the prospective member firm must enter into a Member Firm Agreement with MSIL and a Deed of Accession, whereby the new member firm agrees to be bound by the MSA Members Agreement. MSA s constitution is contained in the Members Agreement, which includes processes for the appointment of directors, voting rights, and meeting expectations. The Board is required to meet at least three times in any one financial year. For this financial year past, the Board has met four times. MSA has a number of committees/groups which have operated during the transparency reporting period. Each committee/group has its own Charter which outlines its primary purpose/s and details relevant duties and responsibilities which align with the expectations of the Board. Each committee/group provides regular updates to the Board, and each Charter is reviewed at least annually to ensure its ongoing relevance. In promoting quality, the Board actively monitors each group to ensure: They have the necessary leadership, skills and knowledge to ensure delivery of their Charter and the promoting of a quality-focused culture; They have clear roles and accountabilities and well understood processes for escalating and resolving issues; and MSA Board The Board itself is sufficiently aware of quality matters relevant to each committee/group. Risk Management The MSA Board established the national Risk and Quality Committee in 2013, with the following key responsibilities: Confirming effective risk management as a national responsibility; Establishing MSA s risk culture, defining its appetite for risk and ensuring alignment with the MSA Board s vision and mission; and Identifying, assessing and responding to those risks which have an impact on MSA s ability to achieve our organisational objectives and strategic goals. Risks have been identified, assessed and categorised under the following: Governance Business Business continuity Human resources Regulatory Financial Technology Due to the various changes to member firms since the last transparency reporting period, the MSA Board has assumed operational responsibility for and oversight of the risks affecting the network during this transitional period. It is expected that the Risk and Quality Committee will reassume these responsibilities during the 2016 transparency reporting period. Quality Assurance MSA s established Quality Control Review Committee, holds the following key responsibilities: Providing the platform to undertake the role of overseeing and managing the Australasian region s second tier review program on behalf of MSIL; Enabling MSIL to meet their reporting requirements to IFAC as a member of the forum of firms in respect of Australian and New Zealand member firms and their compliance with respective standards on quality control, ASQC1 and PES 3 over the course of a defined three year cycle; Enabling each firm within the Australasian region to meet the requirements of professional bodies and regulators within the region; Reporting in general terms on the progress and outcomes of the review program and by exception, on failed reviews or other matters as deemed necessary by the committee, and providing recommendations which promote continual improvement in quality; and Considering the adequacy and effectiveness of policies and procedures to manage audit regulatory risks facing the MSA network and to liaise with the Risk and Quality Committee and relevant risk owners as appropriate. Audit and Assurance MSA s established External Audit Champion Group, holds the following key responsibilities: Developing and monitoring the MSA network s systems, controls and procedures for compliance with legal and regulatory obligations with respect to external audit engagements; Promoting continuous improvement, and fostering adherence to, the Network s policies, procedures and practices with respect to external audit engagements; Creating a forum for the tabling of external audit related issues, challenges, opportunities and sharing of technical knowledge, experiences and resources between all the offices; Sharing external audit marketing strategies and initiatives and identifying opportunities to grow the Network s fee base and brand awareness; and Liaising with the Quality Control Review Committee on matters relating to the networks compliance with legal and regulatory requirements with respect to external audit engagements. Risk and Quality Committee Quality Control Review Committee External Audit Champion Group Perth Adelaide Canberra Sydney Queensland 6 7

5 Maintaining Quality Each member firm in the MSA network provides a comprehensive suite of audit and other assurance services. Each member firm has adopted a nationally consistent approach to managing quality control. Our quality control system includes policies and procedures which ensure we meet the requirements of Auditing Standard ASQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, Other Assurance Engagements and Related Service Engagements. Key drivers of audit quality across our audit firms, include: Top-down culture of and commitment to audit quality and independence; Skills and competencies of our people; Effectiveness of audit processes; and Understanding factors outside of our control. Top-down culture of and commitment to audit quality and independence Our partners and senior executives recognise audit quality and independence as being fundamental to the ongoing strength of our brand, and success of our business. This is front of mind in all formal and informal communication to people, and is embedded in our training and technical materials, throughout our documented policies and procedures, and permeates the entire network. Skills and competencies of our people We have a diverse mix of partners and senior executives allowing us to meet the challenges of operating in an evolving profession. The perception that auditing is a tick the box profession is outdated, and auditors are increasingly expected to be analytical, rational, critical, technical, naturally inquisitive and sceptical thinkers, with excellent communication skills. A national technical training program is run and available to all our auditors, which compliments each firm s established learning and development framework. We recognise the importance of attracting and retaining a diverse mix of high performing individuals, who are afforded opportunities to develop genuine industry specialisations to further strengthen our brand in key strategic markets. Partners and staff are evaluated regularly, taking into account their performance in the period under review, and aiming to identify any ways the firm and broader network can assist in ensuring individuals continue to progress to be able to meet their full potential. The frequency of evaluations will vary from firm to firm, but typically more junior staff will be assessed at the end of larger individual assignments, and at six-monthly intervals, whilst more senior staff will be assessed six-monthly or on an annual basis. Effectiveness of audit processes Our risk-based methodology follows a proven structured approach. Our methodology focuses on examining key business processes that are critical to achieving the goals and objectives of our clients. Our audit approach is designed to be closely aligned with the underlying risks of an organisation. In this way, we focus our risk assessment and related audit activities on each client s risks and how well management addresses those risks. By understanding the underlying risks that impact an organisation s business drivers, we develop a more comprehensive and effective audit strategy that provides our clients with comprehensive risk coverage and increased value. The audit methodology adopted by the network has been developed nationally by MSA to comply with Australian Standards of Auditing ( ASA s ) and align with MSIL s methodology. During the year, our auditors have completed our staged transition from using PROaudit to CaseWare Working Papers. Our audit methodology is continually reviewed and updated centrally by MSA to ensure compliance with new and emerging audit requirements, including both International Standards of Auditing ( ISAs ) and ASAs. Understanding factors outside of our control There are factors that exist in relation to an entity that are largely outside our control. By obtaining an in-depth understanding of our clients and the environments in which they operate, we are able to determine the extent to which these factors may have an impact on the risks of material misstatement in the engagement. The nature and extent of audit procedures undertaken are intrinsically linked to the identification and assessment of such risks. OUR AUDIT APPROACH OUR RISK-BASED AUDIT METHODOLOGY AUDIT PLANNING Understanding your business Perform analytical review Determine the information required for the audit Establish timelines Assess industry knowledge and staffing requirements BUSINESS AND RISK ASSESSMENT Identify, assess and document business risks external and internal Document audit and accounting risks Determine audit implications Systems documentation and controls testing Draw conclusions and report any findings to Management DEVELOP AUDIT PLAN Identify audit procedures to be performed Determine scope of procedures Allocate resources Confirm scope of audit with Management Report to the Audit Committee PERFORM TESTS Address risk areas identified throughout the planning process and control testing phase Verify transactions and balances Draw conclusions REPORTING Audit Report on financial statements and Remuneration Report Report findings to Management and the Audit Committee Annual Management Letter 8 9

6 Maintaining Quality Relevant Ethical Requirements The provision of our audit services is subject to our strict policies in respect to maintaining our independence. This is achieved through the application of our Quality Assurance Policies and Procedures and Independence Policy to ensure each firm s compliance with the requirements of APES 320 Quality Control for Firms, the Corporations Act 2001 (where applicable) and APES 110 Code of Ethics for Professional Accountants ( the Code ). The MSA Quality Assurance Policies and Procedures and Independence Policy, including all policies and procedures contained therein, is adopted by all member firms of the MSA network, thus ensuring that we are compliant with the network firm requirements of the Code. Compliance is facilitated through our webbased proprietary platform IQA Monitor. The following safeguards are enforced within IQA Monitor to ensure our objectivity is maintained and we are free from conflicts of interest when discharging our professional responsibilities: Partners or staff do not act in a managerial or decisionmaking capacity, and are not involved in processing or originating transactions for our audit clients; Where non-audit services are provided to our audit clients, we are satisfied that these services do not have a material impact on our planned audit procedures and we will not express any assurance in relation to these procedures; and Partners and staff involved in the provision of non-audit services to our audit clients do not have the authority to accept these engagements without preliminary authorisation from the audit partner. As auditors, direct and material financial interest in our assurance clients or controlled entities and material associates is prohibited to us. This prohibition extends to: All partners and professional staff of any firm within the MSA network, and any superannuation fund, companies or trusts controlled by them; Partners and dependents of our partners and professional staff; Certain other relatives of partners and professional staff who directly provide any professional services to the client and its controlled entities; and The firm and all other firms within the MSA network including controlled entities. The following policies and procedures are undertaken to ensure compliance with our Quality Assurance Policies and Procedures and Independence Policy: Six-monthly declarations are signed by all partners and staff confirming they hold no prohibited financial or employment relationships with assurance clients of any firm within the MSA network; Independence declarations are signed by all engagement team members confirming their independence; Conflict checks are performed on all new clients to identify any potential conflicts of interest; Where non-audit services are to be provided to an audit client that might place at risk our audit independence, approval by the firm s Quality Assurance Partner is obtained prior to the commencement of the engagement, to ensure compliance with the requirements of the Quality Assurance Manual and Independence Policy; All new partners and professional staff undertake mandatory ethics and independence training when joining a firm; All partners and staff are provided refresher training and updates on their mandatory ethics and independence responsibilities annually; and Monitoring processes are applied to ensure compliance with the requirements of the Quality Assurance Policies and Procedures as documented in IQA Monitor. Monitoring External Accountability and Monitoring ASIC Most recent inspection commenced in April 2014 and was completed in July CAANZ Follow up from the completion of the 2013 Audit Quality Survey in January Those findings from external reviews and follow up action required is communicated to network firms via members of the EACG, biennial audit conferences, and the national audit training program. The successful implementation of remedial action required is reviewed as part of the combined MSIL/MSA internal monitoring program. Internal Accountability and Monitoring MSIL MSIL is a member of IFACs Forum of Firms. As a member, MSIL is required to coordinate regular global internal quality assurance reviews, which includes reviewing each firm in Australia over the course of their defined review cycle. Each audit partner is subject to an annual file inspection review which is co-ordinated by MSA. In addition, MSA may conduct additional reviews of each firm s compliance with its ASQC1 obligations. Follow up visits are undertaken as, and when, required at the discretion of the MSA. MSA runs a financial statement surveillance program which includes an extensive pre-signing review of the financial statements of all new audit clients. This is performed by MSA s Head of Technical Accounting Services. In addition, all existing audit clients are subjected to a detailed review by the Head of Technical Accounting services at least once over a rolling three year period. As part of our ongoing commitment to quality, every listed audit client of the network is subject to an Engagement Quality Control Reviews ( EQCR ) for both the annual audit and half-year review in accordance with ASQC1. There are also a suite of other entities subject to EQCRs as and when required: Where uncertainty around going concern exists; Where certain types of modified audit opinions are being considered; In instances where it is required to safeguard against a potential threat to independence; Where the audit risk associated with the engagement has been deemed high; and Otherwise, at the lead engagement partner s request. Quality Control System We believe that our quality control system operates effectively and enables us to meet our obligations under ASQC1. Notwithstanding the above, we are always seeking to improve the quality and effectiveness of our quality controls system to meet the changing dynamics of our industry

7 Firm Details Perth Legal Structure During the year ended 30 June 2015, Perth operated through Perth Pty Ltd, which is a private company. All shareholders are associated investment entities of directors of the company. There are no outside shareholders. Audit services were conducted by Moore Stephens Perth, a partnership of individuals, comprising all of the directors of Perth Pty Ltd. Audits were conducted by designated audit partners all of which are registered company auditors. Governance Perth Pty Ltd has a board of directors which oversees the governance of the organisation. It comprises; Five internal representatives who are elected by the shareholders; and One of the directors, out of the five noted above, is appointed as Managing Director. The key roles of the Board are; Governance; Setting strategic direction; Ensuring the Managing Director executes the Company s business strategy; Approving plans and budgets to support the business strategy; Monitoring financial compliance; and Appointment of the Managing Director. The Managing Director, who is responsible for the day to day operations of the firm, is appointed by and accountable to the Board of Directors. The company s Managing Director is Neil Pace. The key roles of the Managing Director are; Leadership and vision; Propose and execute approved strategies; Propose business plans and budgets to support strategies; and Operate the business in accordance with the strategies and plans approved by the Board. Merger 1 July 2015 From 1 July 2015, Perth merged with the Perth office of UHY Haines Norton with the merged firm retaining the name. The combined firm has total revenue of approximately $16 million and a team of nearly 90 staff led by 15 directors including a Chief Executive Director. Further details of the merged entity s legal and governance structures shall be included in the subsequent transparency report for the year ended 30 June Names of Relevant Entities Audited (of the kinds mentioned in subsection 332A (1) of the Act) This list includes those clients to which the firm issued an audit report in accordance with the requirements of Division 3 of Part 2M.3 of the Corporations Act 2001 for the transparency reporting year. Entity Name Advanced Braking Technology Ltd Anatolia Energy Ltd APAC Coal Ltd Aquis Entertainment Ltd (formerly Discovery Resources Limited) Altech Chemicals Ltd (formerly Australia Minerals and Mining Group Ltd) Bauxite Resources Ltd Ephraim Resources Ltd FFI Holdings Limited Frontier Resources Ltd Ultima United Ltd (formerly United Uranium Ltd) Volta Mining Ltd Wavenet International Ltd Windward Resources Ltd Yonder & Beyond Ltd (formerly Quintessential Resources Ltd) Financial Information Services Provided Audits and reviews of financial statements Other assurance and non-audit services Revenue from Services 2015 ($ 000) 2014 ($ 000) 3,334 3,028 3,329 3,332 Total fees 6,663 6,350 Basis for Partner Remuneration Global Gold Holdings Ltd Directors of Perth Pty Ltd are remunerated by the following components; International Equities Corp Ltd MACA Ltd Platypus Minerals Ltd A fixed salary; and Dividend payments. The fixed salary is determined annually by the Board of Directors. No part of remuneration is incentive based Refresh Group Ltd Richfield International Ltd Audit partners and staff are not remunerated by reference to non-audit services sold to audit clients. Dividends are approved by the Board, based on the profitability and cashflow of the Company

8 Contact us We have offices located across Australia who can provide tailored services to your business. For more information on how we can help you succeed contact us on the information below. NATIONAL Australia Suite 1413, 530 Lt Collins Street Melbourne VIC 3000 T +61 (0) F +61 (0) msa@moorestephens.com.au VICTORIA Victoria Level 18, 530 Collins street Melbourne VIC 3000 T +61 (0) F +61 (0) victoria@moorestephens.com.au SOUTH AUSTRALIA Adelaide Level 4, 81 Flinders Street Adelaide SA 5000 T +61 (0) F +61 (0) adelaide@moorestephens.com.au WESTERN AUSTRALIA WA Level 3, 12 St Georges Terrace Perth WA 6000 T +61 (0) F +61 (0) perth@moorestephens.com.au WESTERN AUSTRALIA WA Unit 16 Lakeside Corporate 24 Parkland Road Osbourne Park WA 6000 T +61 (0) F +61 (0) perth@moorestephens.com.au QUEENSLAND - BRISBANE Brisbane Level 12, 10 Eagle Street Brisbane QLD 4000 T +61 (0) F +61 (0) brisbane@moorestephens.com.au QUEENSLAND - BURDEKIN Burdekin 167 Queen Street Ayr QLD 4807 T F burdekin@moorestephens.com.au QUEENSLAND - CAIRNS Cairns 473 Mulgrave Road Cairns QLD 4870 T +61 (0) F +61 (0) cairns@moorestephens.com.au QUEENSLAND - GOLD COAST Gold Coast Suite 403, Pivotal Point, 50 Marine Parade, Southport QLD 4215 T F goldcoast@moorestephens.com.au QUEENSLAND - INNISFAIL Innisfail 88 Rankin Street Innisfail QLD 4860 T +61 (0) F +61 (0) innisfail@moorestephens.com.au QUEENSLAND - TOWNSVILLE Townsville Level 5, 280 Flinders Street Townsville QLD 4810 T +61 (0) F +61 (0) townsville@moorestephens.com.au QUEENSLAND-TOOWOOMBA Toowoomba 632 Ruthven Street Toowoomba QLD 4350 T +61 (0) F +61 (0) toowoomba@moorestephens.com.au Serious about Success