ASIC RG 180 — ASIC Regulatory Guide – RG 180 Auditor registration

Page 1 REGULATORY GUIDE 180 Auditor registration June 2016 About this guide This is a guide for auditors and prospective auditors who wish to audit companies and other entities under the Corporations Act 2001 (Corporations Act). This guide explains what an applicant must do when applying for registration as a registered company auditor (RCA) or as an authorised audit company (AAC), and how we may exercise our power to approve an auditing competency standard, which may be relied on by individual applicants for registration. This guide also covers the lodgement of annual statements by RCAs and AACs. Page 2 REGULATORY GUIDE 180: Auditor registration © Australian Securities and Investments Commission June 2016 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This version was issued in June 2016 and is based on legislation and regulations as at the date of issue. In August 2024 we updated Document C: Capability report in Appendix 1. Previous versions:  Superseded Regulatory Guide 180, issued 29 October 2007, reissued 24 January 2008, 15 April 2010 and 28 September 2012  Superseded Policy Statement 180, issued 1 July 2004, 21 December 2004 and rebadged as Regulatory Guide 180 5 July 2007 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 180: Auditor registration Contents A Overview .................................................................................................4 Registering as a registered company auditor ..........................................4 Registering as an authorised audit company ..........................................5 Approval of an auditing competency standard ........................................5 Lodging annual statements......................................................................6 Underlying principles ...............................................................................6 B Registering as a registered company auditor ..................................10 How to apply for registration ..................................................................10 Qualifications and experience: s1280(2)(a) ...........................................12 Skills: s1280(2)(b) ..................................................................................16 Capable, fit and proper: s1280(2)(c) ......................................................25 Other eligibility requirements .................................................................29 Overseas applicants ..............................................................................29 Conditions on registration ......................................................................31 New Zealand auditors ............................................................................32 C Registering as an authorised audit company ...................................34 How to apply for registration ..................................................................34 Fit and proper: s1299B(a) ......................................................................36 Professional indemnity insurance: s1299B(d) .......................................37 Conditions on registration ......................................................................40 D What happens next ..............................................................................43 How we will deal with your application ..................................................43 Decision to grant or refuse registration ..................................................45 Cancellation or suspension of registration.............................................46 Applying for deregistration as a company .............................................47 E Approval of auditing competency standards ...................................48 Verification of competency.....................................................................48 Consistency ...........................................................................................48 Skills.......................................................................................................48 Harmonisation ........................................................................................49 Competency standards we have approved ...........................................50 F Lodging annual statements ................................................................51 How to lodge your statement .................................................................51 Extensions of time .................................................................................51 Appendix 1: Sample documents (registered company auditor) .............52 Document A: Practical auditing and other equivalent experience .........53 Document B: Supervisor declaration .....................................................59 Document C: Capability report...............................................................61 Document D: Capability declaration ......................................................63 Document E: Auditor competencies logbook.........................................65 Appendix 2: Minimum insured amounts for professional indemnity insurance cover (authorised audit companies) ................................77 Appendix 3: 2004 competency standard (issued 24 November 2004) ...78 Key terms .....................................................................................................83 Related information .....................................................................................86 © Australian Securities and Investments Commission June 2016 Page 3 Page 4 REGULATORY GUIDE 180: Auditor registration A Overview Key points To register an individual as a registered company auditor (RCA), we must be satisfied that the person meets the requirements in s1280 of the Corporations Act 2001 (Corporations Act): see RG 180.1. To register a company as an authorised audit company (AAC), we must be satisfied that the company is eligible to be registered under s1299B of the Corporations Act: see RG 180.2. We may approve an auditing competency standard if we are satisfied that the standard meets the requirements in s1280A of the Corporations Act: see RG 180.3–RG 180.5. RCAs and AACs must lodge annual statements with ASIC: see RG 180.6. Registering as a registered company auditor RG 180.1 Before we can register you as an RCA, we must be satisfied that you meet the statutory requirements in s1280 of the Corporations Act, as summarised in Table 1. You must give us evidence that you satisfy these requirements. If you do not meet the requirements, we must refuse your application. Note 1: For a discussion of these requirements and how we will assess them, see Section B. Note 2: References in this guide to s1280 (for example) are to a section of the Corporations Act. Table 1: Eligibility requirements for registration as an RCA Qualifications: s1280(2)(a) Skills: s1280(2)(b) Capable, fit and proper: s1280(2)(c) You must:  have the prescribed academic qualifications AND have completed a prescribed course in auditing; OR  have other qualifications and experience that ASIC considers equivalent to both these requirements. You must:  satisfy all the components of an ASIC-approved competency standard (see RG 180.3– RG 180.5); OR  have the prescribed level of practical experience OR experience that ASIC considers equivalent. You must:  be capable of performing the duties of an auditor; AND  be a fit and proper person to be registered as an auditor. © Australian Securities and Investments Commission June 2016 Page 4 Page 5 REGULATORY GUIDE 180: Auditor registration Registering as an authorised audit company RG 180.2 Before we can register your company as an AAC, we must be satisfied that it meets the statutory requirements in s1299B as summarised in Table 2. You must give us evidence that your company satisfies these requirements. If your company is not eligible for registration under s1299B, we must refuse your application. Note: For a discussion of these requirements and how we will assess them, see Section C. Table 2: Eligibility requirements for registration as an AAC Directors: s1299B(a) Share structure and voting rights: s1299B(b)–(c) Professional indemnity insurance: s1299B(d) External administration: s1299B(e) Each director must:  be an RCA; AND  not be disqualified from managing a corporation. Each share must be held and beneficially owned by a person who is:  an individual; OR  the legal personal representative of an individual. The majority of the votes at a general meeting must attach to shares that are owned by RCAs. The company must have professional indemnity insurance that is:  adequate; AND  appropriate. The company must not be an externally administered body corporate. Approval of an auditing competency standard RG 180.3 Auditing competency standards provide an alternative means by which you may satisfy us that you have the skills (demonstrated by sufficient practical experience) to be registered as an RCA. RG 180.4 Under s1280A, we may approve an auditing competency standard if we are satisfied that: (a) the standard provides that your performance against each component of the standard is to be appropriately verified by an assessor who is an RCA and has sufficient personal knowledge of your work to be able to give that verification; (b) the standard is not inconsistent with the Corporations Act or any other law of the Commonwealth under which we have regulatory responsibilities; (c) the standard adequately addresses the level of skill needed for registration as an RCA; and (d) the standard is harmonised to the greatest extent possible with other approved auditing competency standards. Note: For a discussion of these requirements and how we will assess them, see Section E. © Australian Securities and Investments Commission June 2016 Page 5 Page 6 REGULATORY GUIDE 180: Auditor registration RG 180.5 We also have power to approve a variation of an approved standard and to revoke our approval of an auditing competency standard. Note: See RG 180.16–RG 180.17 for competency standards that we have approved and revoked. Lodging annual statements RG 180.6 RCAs and AACs must lodge an annual statement with ASIC within one month of the anniversary of their registration. These statements help us to monitor the activities of RCAs and AACs after registration. Note: For a discussion of this requirement, see Section F. Underlying principles RG 180.7 An audit of an Australian company, disclosing entity, registered scheme or Australian financial services (AFS) licensee for the purposes of the Corporations Act may only be undertaken by an RCA or AAC. Individuals (see Pt 9.2) may be registered as RCAs and companies may be registered as AACs (see Pt 9.2A). The qualifications, experience and other requirements for registration are set out in the Corporations Act. Registration of registered company auditors RG 180.8 Our policy aim is to interpret and apply the law in line with the objectives of the legislature. The Explanatory Memorandum to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 (CLERP 9 Bill), which amended the auditor registration provisions of the Corporations Act, states that the CLERP 9 Bill ‘will update and enhance the qualification requirements applying to accountants who seek registration as company auditors’: para 5.77. RG 180.9 Our policy on the registration of RCAs aims to reflect these objectives by imposing minimum standards of both competence and integrity. This will help protect investors and other users of financial reports. Specifically, a person who applies to be registered as an RCA must demonstrate sufficient competence and integrity to express a professional opinion that the financial report of a company, registered scheme or disclosing entity is reliable and prepared in accordance with the Corporations Act. To do this, they need to fully understand Australian auditing requirements and practices. © Australian Securities and Investments Commission June 2016 Page 6 Page 7 REGULATORY GUIDE 180: Auditor registration Registration of AACs RG 180.10 The CLERP 9 Bill also introduced the concept of an ‘authorised audit company’ to help accounting firms better manage risks of professional liability by providing an additional option of incorporation. Paragraph 5.201 of the Explanatory Memorandum to the CLERP 9 Bill states that: Allowing auditors to incorporate will address some of the concerns relating to the professional liability of auditors. Incorporation will also provide accounting firms with an additional option in terms of how they structure their operations. RG 180.11 Companies, unlike individuals, may have limited liability. Without adequate and appropriate professional indemnity insurance arrangements, an audit client may experience difficulty claiming against the AAC where the AAC’s professional services have caused the client economic loss. The insurance requirements seek to ensure that an audit client obtaining services from an AAC is in a similar position, in terms of the client’s ability to recover for economic loss, to an audit client obtaining like services from an individual RCA or firm of auditors. RG 180.12 We consider that the purpose of the ‘adequate and appropriate insurance’ requirement, set out in the CLERP 9 Bill, is to ensure that AACs can meet claims reasonably anticipated to arise from their auditing work under the Corporations Act. This is why we have imposed specific conditions on registration dealing with the adequacy and appropriateness of the mandatory professional indemnity insurance: see Pro Forma 215 Company auditor registration conditions (PF 215) and Pro Forma 216 Authorised audit company registration conditions (PF 216). RG 180.13 We may review these conditions from time to time. In particular, we may review the professional indemnity insurance requirements in light of any substantive changes in the nature or availability of professional indemnity insurance, or changes to any state or territory legislation or policy that sets out minimum insurance requirements for auditors or accountants generally. We may also review our policy to ensure consistency with international best practice or the recommendations of relevant professional bodies. Auditing competency standards Approval and revocation of auditing competency standards RG 180.14 The competency standard regime provides an alternative to complying with the time-based practical experience requirements prescribed in the Corporations Regulations 2001 (Corporations Regulations): see reg 9.2.01. Accordingly, a competency standard may not necessarily require that an applicant meet the same minimum time period of practical experience as in reg 9.2.01. However, the competency standard must be sufficiently rigorous, © Australian Securities and Investments Commission June 2016 Page 7 Page 8 REGULATORY GUIDE 180: Auditor registration transparent and objective to ensure that a person’s practical experience is adequate for registration as an RCA. Note: References in this guide to reg 9.2.01 (for example) are to a regulation of the Corporations Regulations. RG 180.15 To demonstrate that a competency standard is ‘sufficiently rigorous, transparent and objective’, an application to approve a competency standard should include an analysis of the underlying methodologies that were used in developing the standard to meet these key objectives. The analysis should also include a discussion of what consultation was undertaken in developing the competency standard. RG 180.16 We approved the Auditing competency standard for registered company auditors, issued by CPA Australia (CPAA) and the former Institute of Chartered Accountants in Australia (ICAA), on 24 November 2004 (2004 competency standard). Note: ICAA is now the Chartered Accountants Australia and New Zealand (CA ANZ). RG 180.17 On 27 June 2016, we made ASIC Corporations (Approval of Auditing Competency Standard) Instrument 2016/474 approving the Auditing competency standard for registered company auditors, issued by CPAA, CA ANZ and the Institute of Public Accountants (IPA) (2016 competency standard). On the same day, we made ASIC Corporations Revocation and Repeal) Instrument 2016/475 revoking the 2004 competency standard: see RG 180.18–RG 180.20 for transitional arrangements that apply. Transitional arrangements RG 180.18 Transitional arrangements for applications under the auditing competency standards will apply for 12 months until 30 June 2017 (transition period): see Section E. RG 180.19 We will continue to accept applications lodged under the 2004 competency standard during the transition period: see Appendix 3. RG 180.20 From 1 July 2017, following the end of the transition period, you can only make applications under the 2016 competency standard: see RG 180.41– RG 180.68. Lodgement of annual statements RG 180.21 One of the purposes of lodging annual statements with ASIC is to provide us with up-to-date information that may, if necessary, be used as the basis for targeted monitoring purposes. RG 180.22 The content of the annual statement is prescribed in the Corporations Regulations only for AACs: see reg 9.2A.03 and Form 912B Annual © Australian Securities and Investments Commission June 2016 Page 8 Page 9 REGULATORY GUIDE 180: Auditor registration statement by an authorised audit company. Annual statements from RCAs should be submitted using Form 912A Annual statement by an auditor. You can download a copy of Form 912A or Form 912B at www.asic.gov.au/forms under Form 912. © Australian Securities and Investments Commission June 2016 Page 9 Page 10 REGULATORY GUIDE 180: Auditor registration B Registering as a registered company auditor Key points To be registered as an RCA, you must satisfy us that you meet the requirements in s1280. You must: • meet the educational requirements prescribed by the Corporations Regulations OR have qualifications and experience that are, in our opinion, equivalent to those requirements (see RG 180.24–RG 180.35); • meet an approved competency standard OR have practical experience as prescribed by the Corporations Regulations (see RG 180.36–RG 180.96); • be capable of performing the duties of an auditor AND be a fit and proper person (see RG 180.97–RG 180.115); and • satisfy the other eligibility requirements relating to disqualifications and residency in Australia (see RG 180.116–RG 180.117). Overseas applicants must also satisfy the requirements in s1280: see RG 180.118–RG 180.130. We will impose conditions on all registrations: see RG 180.131–RG 180.134. Special arrangements exist for the registration of individuals licensed to audit issuers under the Auditor Regulation Act 2011 (NZ) (Auditor Regulation Act (NZ)). How to apply for registration Table 3: Lodging your application for registration as an RCA Step 1 You must apply using Form 903AA Application for registration as an auditor. You can either:  complete and lodge the form online at www.asic.gov.au/auditregistration; or Note: Even if you lodge Form 903AA online, you must still send us a copy of your completed form, signed and dated in the spaces provided together with the supporting material. Our preference is for you to send us your signed application and supporting material by email in PDF format or, alternatively, by post: see Step 4.  complete and lodge the paper form—download a copy of Form 903AA at www.asic.gov.au/auditregistration, obtain a copy from an ASIC Service Centre or call ASIC on 1300 300 630. Note: You will need to send us your signed paper application form and supporting material by post: see Step 4. Note: It is more expensive to lodge a paper application. Step 2 Your application (i.e. the completed Form 903AA and supporting material) must:  include the information or documents that we need to decide whether you meet the eligibility requirements in the Corporations Act (see this section and Appendix 1);  be dated not more than three months before the application is lodged; and  be accompanied by the application fee (see www.asic.gov.au/fees for the current fee). © Australian Securities and Investments Commission June 2016 Page 10 Page 11 REGULATORY GUIDE 180: Auditor registration Step 3 You should ensure the application (and supporting material) lodged with us is correct and complete, and copies are provided where required: see RG 180.163–RG 180.164. Under s1308, there may be serious consequences if you provide, or authorise the provision of, a false, incomplete or misleading statement in a document lodged with us: see RG 180.165– RG 180.168. If the application is not complete we may refuse to register or receive it. In this case, you would need to re-submit an application for registration. Step 4 Send a copy of your online application and supporting material by email as a PDF file to: auditor.registration@asic.gov.au. You can pay the application fee for your online application using the payment options available at the point of submission. OR send your paper application, supporting material and a cheque for the application fee by post to: Auditor Registration Team Australian Securities and Investments Commission PO Box 4000 Gippsland Mail Centre VIC 3841 It is more expensive to lodge a paper application. Note: We can only start processing your application after we have received the application fee. Table 4: Meeting the eligibility requirements in s1280 for registration as an RCA Eligibility requirement Explanation in this guide Sample documents in Appendix 1* to include in your application Qualifications and experience: s1280(2)(a) Prescribed academic qualifications: s1280(2A)  RG 180.24;  Table 5; and  RG 180.25–RG 180.28 N/A Equivalent qualifications and experience: s1280(2B)  RG 180.24;  Table 6; and  RG 180.29–RG 180.35 N/A Skills: s1280(2)(b) Approved auditing competency standard: s1280(2)(b)(i)  RG 180.36;  Table 7; and  RG 180.37–RG 180.68 Note: See Appendix 3 for details of the 2004 competency standard (which may be applied during the transition period).  Document E (details of your competency under the 2016 competency standard) Note: You can obtain a copy of the 2004 logbook from the CPAA and CA ANZ websites (details of your competency under the 2004 competency standard during the transition period). Prescribed practical experience: s1280(2)(b)(ii) and reg 9.2.01(a)  RG 180.36;  Table 7; and  RG 180.69–RG 180.96  Document A, Tables A1.1 and A1.2 (details of your practical and supervisory experience); and  Document B (supervisor declaration) Equivalent practical experience: s1280(2B) and reg 9.2.01(b)  RG 180.36;  Table 7; and  RG 180.69–RG 180.96  Document A, Tables A2.1, A2.2 and A2.3 (details of your equivalent practical, overseas and supervisory experience); and  Document B (supervisor declaration) © Australian Securities and Investments Commission June 2016 Page 11 Page 12 REGULATORY GUIDE 180: Auditor registration Eligibility requirement Explanation in this guide Sample documents in Appendix 1* to include in your application Capable, fit and proper: s1280(2)(c) Capable  RG 180.97;  Table 8; and  RG 180.98–RG 180.106  Document C (capability report); and  Document D (capability declaration) Fit and proper  RG 180.97;  Table 8; and  RG 180.107–RG 180.115  Document D (capability declaration) Other eligibility requirements: s1280(3)–(4) Not a ‘disqualified’ person/resident in Australia  RG 180.116–RG 180.117; and  question 9 in Form 903AA N/A * Word versions of the sample documents in Appendix 1 are reproduced on our website at RG 180. RG 180.23 In this section, we summarise the information you must include with your application to show us that you meet each of the eligibility requirements in s1280 for registration as an RCA, and how we will assess this information. Qualifications and experience: s1280(2)(a) RG 180.24 To satisfy us that you meet this requirement, you must show that you have either: (a) prescribed academic qualifications under s1280(2A) as summarised in Table 5; or (b) equivalent qualifications and experience under s1280(2B) as summarised in Table 6. © Australian Securities and Investments Commission June 2016 Page 12 Page 13 REGULATORY GUIDE 180: Auditor registration Table 5: Summary of prescribed academic qualifications under s1280(2A) What you need to have What you must include in your application You must hold a degree, diploma or certificate from a prescribed university or another prescribed institution in Australia: see reg 9.2.02. AND Your degree, diploma or certificate must represent a course of study in:  accountancy (including auditing) of not less than three years duration; and  commercial law (including company law) of not less than two years duration. AND You must have completed a course in auditing prescribed by the Corporations Regulations: see reg 9.2.03.  A copy of your degree, diploma or certificate from the prescribed university or prescribed institution that has given you the qualification on which you rely: see reg 9.2.02.  A copy of your statement of academic record certified by that university or institution which indicates: − the subjects you have undertaken for that qualification; − the results you obtained; and − a legend explaining what the results represent. Note: A statement of academic record certified by that university or institution satisfies s1280(2A)(b). In this guide, ‘certified’ generally means a copy of the certification by a person authorised to do so on behalf of the university or institution.  The certified statement of academic record from the university or institution should indicate that you have passed examinations in such subjects as represents a course of study in: − accountancy (including auditing) of not less than three years duration; and − commercial law (including company law) of not less than two years duration.  A copy of a certificate or statement of academic record certified by that university or institution indicating that you have satisfactorily completed a course in auditing prescribed by reg 9.2.03. © Australian Securities and Investments Commission June 2016 Page 13 Page 14 REGULATORY GUIDE 180: Auditor registration Table 6: Summary of equivalent qualifications and experience under s1280(2B) What you need to have What you must include in your application You may be eligible for registration if you can satisfy ASIC that you have qualifications and experience equivalent to the requirements in s1280(2A). If you hold one, but not both, prescribed qualifications under s1280(2A), we will assess your other qualifications and experience to see whether they are equivalent to the prescribed qualification that you do not hold. If you obtained your university or other qualifications overseas, we will assess your qualifications and experience to see whether they are equivalent to the prescribed qualifications.  A statement setting out: − the qualifications and experience you rely on for your knowledge of accountancy and commercial law (including company law); and − the reasons we should treat those qualifications and experience as equivalent to s1280(2A). Note: If you are relying on an overseas accounting and legal qualification, you may have to provide an assessment letter from a relevant assessing authority. The Australian accounting bodies are relevant assessing authorities for this purpose. This letter should confirm the comparability of your qualifications and an Australian undergraduate degree from a prescribed university or institution: see www.internationaleducation.gov.au/services-and- resources/pages/qualifications-recognition.aspx  A copy of your degree, diploma or certificate from the university or institution that has given you the qualification on which you rely.  A copy of your statement of academic record certified by each university or institution that has given you a qualification on which you rely, which identifies the subjects you have undertaken for that qualification and explains your results. Note: In this guide, ‘certified’ generally means a copy of the certification by a person authorised to do so on behalf of the university or institution.  A copy of your certificate or statement of academic record certified by each university or institution indicating that you have satisfactorily completed a course that you rely on as being equivalent to a course in auditing prescribed by reg 9.2.03. Note: If you are relying on an overseas auditing course, you may have to provide an assessment letter from one of the Australian accounting bodies that conducts such courses in Australia, confirming the comparability of your course and the course conducted by the Australian body.  A copy of your certificate of membership of one of the professional accounting bodies or other professional body. Prescribed academic qualifications: Meeting the requirements in s1280(2A) Degree, diploma or certificate from a prescribed institution RG 180.25 If you have not completed a degree, diploma or certificate from a prescribed university or prescribed institution, you do not hold the prescribed qualifications for the purposes of s1280(2A). However, you can still apply for registration based on equivalent qualifications and experience under s1280(2B): see Table 6 and RG 180.29–RG 180.35. Statement of academic record RG 180.26 If you are unable to provide a copy of your statement of academic record certified by the prescribed university or institution indicating the subjects undertaken in obtaining your qualification, you may not satisfy s1280(2A)(b). However, you can prepare a statement stating the subjects © Australian Securities and Investments Commission June 2016 Page 14 Page 15 REGULATORY GUIDE 180: Auditor registration undertaken and lodge it together with a copy of the course content or syllabus, if available. We may request you provide a letter from the prescribed university or institution confirming your enrolment in that course of study: see Table 6. Auditing course RG 180.27 If you have not completed a prescribed course in auditing, you do not hold the prescribed qualifications for the purposes of s1280(2A). However, you can still apply for registration based on equivalent qualifications and experience under s1280(2B): see RG 180.29–RG 180.35. RG 180.28 Our view is that most people will not have the qualifications necessary for registration unless they have completed a prescribed course in auditing or an equivalent qualification after completing their degree. Equivalent qualifications and experience: Meeting the requirements in s1280(2B) RG 180.29 In assessing whether qualifications and experience are equivalent under s1280(2B) to the prescribed academic qualifications and experience in s1280(2A), we will focus on whether the applicant has both: (a) qualifications and training relevant to company auditing; and (b) experience in the conduct of audits in Australia under Australian regulatory requirements. Note: For overseas applicants, see RG 180.118–RG 180.121 Statements showing equivalent qualifications and experience RG 180.30 You must state which subjects referred to in your academic record are accounting subjects, and which are legal subjects. You must also state the duration of each of these subjects (e.g. one semester or one year). RG 180.31 You must identify: (a) which of the accounting subjects included auditing; and (b) which of the legal subjects included company law. Do not refer to subjects that are not accounting subjects or legal subjects. RG 180.32 If you are relying on meeting an ASIC-approved competency standard to satisfy the skills requirement (see RG 180.37–RG 180.68 or Appendix 3), you do not have to repeat details of your audit experience in your statement for this requirement if you are already providing these details under the relevant competency standard (e.g. in a logbook). RG 180.33 If you are relying on practical experience to satisfy the skills requirement (see RG 180.69–RG 180.96), you do not have to repeat details of your © Australian Securities and Investments Commission June 2016 Page 15 Page 16 REGULATORY GUIDE 180: Auditor registration practical experience in your statement for this requirement if you are also providing this information in sample document A in Appendix 1. RG 180.34 However, in both the above cases, you must still give reasons in your statement for this requirement as to why we should treat the experience in your logbook or in sample document A as being equivalent to the educational qualifications under s1280(2A). RG 180.35 There is no preferred format for the statement. It may, for example, be in the form of a letter or in a table. However, you must sign and date this statement. Skills: s1280(2)(b) RG 180.36 To satisfy us that you meet this requirement, you must show that you either: (a) comply with an approved competency standard under s1280(2)(b)(i) (see RG 180.37–RG 180.68); or (b) have: (i) prescribed practical experience in auditing under s1280(2)(b)(ii) (see reg 9.2.01(a)); or (ii) experience we consider equivalent under s1280(2B) to that required by reg 9.2.01(a) (see reg.9.2.01(b)). These skills requirements are summarised in Table 7. Table 7: Summary of skills requirement under s1280(2)(b) Eligibility requirement* What you need to have What you must include in your application Approved auditing competency standard: s1280(2)(b)(i) OR You must satisfy all the components of an approved competency standard. OR  Your completed 2016 logbook (see sample document E in Appendix 1), including your statement by assessor and/or statement(s) by referee. Note: Alternatively, you can lodge a completed copy of the 2004 logbook (available from the CPAA and CA ANZ websites) during the transition period.  A copy of your certificate of membership of CPAA, CA ANZ, IPA or other professional body. Prescribed practical experience: s1280(2)(b)(ii) and reg 9.2.01(a) OR You must have at least 3,000 hours work in auditing during the five years immediately before the date of your application, including at least 750 hours spent supervising audits of companies. OR  A statement setting out details of your practical and supervisory experience. See Tables A1.1 and A1.2 in sample document A in Appendix 1 for the preferred format of this statement.  A supervisor declaration from each RCA who supervised your work. See sample document B in Appendix 1 for the preferred format of this statement. © Australian Securities and Investments Commission June 2016 Page 16 Page 17 REGULATORY GUIDE 180: Auditor registration Eligibility requirement* What you need to have What you must include in your application Equivalent practical experience: s1280(2B) and reg 9.2.01(b) You must have practical experience that, in our opinion, is equivalent to the practical experience in reg 9.2.01(a).  A statement setting out details of your equivalent practical, overseas (see RG 180.118–RG 180.130) and supervisory experience. See Tables A2.1, A2.2 and A2.3 in sample document A in Appendix 1 for the preferred format of this statement.  A supervisor declaration from each RCA who supervised your work. See sample document B in Appendix 1 for the preferred format of this statement. * To satisfy the skills requirement, you need only meet one of the eligibility requirements listed in this table: see RG 180.36. How we will assess compliance with an approved competency standard under s1280(2)(b)(i) RG 180.37 You must satisfy us that you meet all the components of an approved competency standard. RG 180.38 On 27 June 2016, we made a legislative instrument approving the 2016 competency standard for RCAs, issued by CPAA, CA ANZ and IPA. On the same day, we also made a legislative instrument revoking the 2004 competency standard. RG 180.39 During the transition period until 30 June 2017 (see RG 180.18–RG 180.20), we will continue to accept applications under either the 2004 competency standard or the 2016 competency standard: see Appendix 3 for the requirements under the 2004 competency standard. RG 180.40 The 2004 competency standard will not apply beyond the transition period. Applications lodged after the transition period (i.e. from 1 July 2017) will therefore need to be made under the 2016 competency standard. 2016 competency standard RG 180.41 You, your assessor and/or referee do not have to be members of CPAA, CA ANZ or IPA to rely on the 2016 competency standard. However, your assessor and/or referee must be an RCA. RG 180.42 We will generally accept that you meet all components of the 2016 approved competency standard if: (a) you have been employed by an accounting firm for at least five years OR you have been admitted as a member of CPAA, CA ANZ or IPA for at least two years; Note: You must provide a copy of your certificate of membership of one of the professional accounting bodies in Australia or other professional body. AND (b) your auditor competencies 2016 logbook (sample document E in Appendix 1) shows that you have demonstrated competency in all of the © Australian Securities and Investments Commission June 2016 Page 17 Page 18 REGULATORY GUIDE 180: Auditor registration tasks/activities to the satisfaction of your assessor on a continuous basis over a 3–5 year period starting on the first date you demonstrated competency in a task/activity; AND (c) your statement by assessor and/or statement(s) by referee contain all relevant information required by the 2016 competency standard. Employment or membership RG 180.43 We will look at the documents you lodge with your application to confirm your employment by an accounting firm or membership of a professional body. RG 180.44 In our view, most people will not have obtained sufficient knowledge and skills to begin demonstrating competence in any of the tasks/activities within the first five years of their first employment by an accounting firm, or before being admitted as a member of a professional body for at least two years. RG 180.45 During this period in their career, most people will generally still be acquiring the appropriate knowledge and skills necessary to competently perform the various tasks in the particular activity. Their work on an audit engagement will generally not be at the decision-making level inherent in many of the activities. Note: See paras 4.5–4.6 of the 2016 competency standard. Assessment period RG 180.46 We will generally require you to demonstrate auditing competency on a number of audit engagements over the 3–5 year period preceding your application. We will generally take the earliest date on which you first demonstrate competency in one of the tasks/activities as being the start of the 3–5 year period. RG 180.47 To ensure that your assessment was over a continuous 3–5 year period, we will look at the dates on which your assessor assessed you as being competent in each task/activity. If you are also relying on earlier audit work, we will look at the earliest date that your statement by referee indicates you gained competency in that task/activity. RG 180.48 You should submit a statement by referee attesting that you have acquired and retained the competency necessary to perform a task/activity, as well as the basis for this opinion, if: (a) you last demonstrated competency in that task/activity more than five years before applying for registration—this is because your competency may have lapsed over time; or © Australian Securities and Investments Commission June 2016 Page 18 Page 19 REGULATORY GUIDE 180: Auditor registration (b) you demonstrated competency in that task/activity: (i) within a period of less than two years, starting from the date you were first admitted as a member of a professional accounting body (CPAA, CA ANZ or IPA); and/or (ii) within a period of less than five years, starting from the date you were first employed by the accounting firm at which you acquired that competency. Note: See paras 4.5–4.6 and 7.9 of the 2016 competency standard. Types of audits RG 180.49 You may rely on Corporations Act or other audits to demonstrate competency under the 2016 competency standard where the task/activity permits. RG 180.50 This includes audits of non-reporting entities (e.g. self-managed superannuation funds, solicitor’s trust accounts, real estate agency trust accounts and incorporated associations). RG 180.51 You are expected to acquire and demonstrate your audit competencies on a number of audit engagements, at appropriately senior levels, over a continuous period of time. We consider that it will be very difficult for you to demonstrate competency in all tasks/activities if you have not undertaken any Corporations Act audits, or only a small number of audits generally, or you have not identified any reasonably complex audit issues in your capability report: see RG 180.100–RG 180.103. RG 180.52 If this is the case, you or your assessor may have to provide more information about how your competency was assessed. Assessors RG 180.53 Your application must include details of your assessor. If these details are incorrect, we may treat your application as incorrect: see RG 180.167. The 2016 competency standard explains an assessor’s obligations—in particular, the assessor should consider your demonstration of professional scepticism, ethics and values in the performance of an audit. Before they take on this role, an assessor should make sure they have a strategy in place for your assessment generally over a continuous period of 3–5 years. They must plan and document the assessment process and methods. Note: See Sections 5 and 6 of the 2016 competency standard (in particular, paras 5.3, 6.5 and 6.7). RG 180.54 In some cases, we may ask you or your assessor to provide details of the assessment process and methods (e.g. where you rely heavily on non- Corporations Act audits). © Australian Securities and Investments Commission June 2016 Page 19 Page 20 REGULATORY GUIDE 180: Auditor registration RG 180.55 Under the 2016 competency standard, you can have only one assessor at any one time. If you have more than one assessor over the 3–5 year period, each assessor, at the relevant time, should: (a) ensure that your logbook is correctly completed during the course of their assessment; and (b) sign off on your competency in a task/activity in Table E1 and complete, sign and date the statement by assessor (see sample document E in Appendix 1). Self-employed RG 180.56 If you have been self-employed for the past five years, you will not have an assessor and will not have undertaken any Corporations Act audits. In this case, you must: (a) complete your logbook providing details of audit engagements over a 3–5 year period where you have performed each of the tasks/activities; and (b) provide us with any further information we may require. RG 180.57 However, we consider that it will be very difficult for you to demonstrate competency in all tasks/activities if you have not undertaken any Corporations Act audits, or only a small number of audits generally, or if you have not identified any reasonably complex audit issues in your capability report: see RG 180.100–RG 180.103. Completing your 2016 logbook RG 180.58 The 2016 competency standard requires you to keep evidence of your competency and this may be documented in the format of a logbook: see sample document E in Appendix 1. This logbook lists eight tasks you must perform, as well as the indicative activities within each task. RG 180.59 Your logbook must be a contemporaneous record over 3–5 years of when you first attained competency in and subsequently performed a task/activity competently. RG 180.60 It is not acceptable to complete your entire logbook on one particular date, as you must demonstrate competency over a continuous period of 3–5 years under formal assessment. RG 180.61 For each task/activity, you must record: (a) the name of the audit engagement(s) during which the activity was performed; (b) the financial year end(s) for the audit engagement(s); and (c) your performance of the activities and demonstration of your competency. © Australian Securities and Investments Commission June 2016 Page 20 Page 21 REGULATORY GUIDE 180: Auditor registration RG 180.62 You must record all audit engagements over the 3–5 year period where you demonstrated competency in a task/activity to your assessor, and subsequently performed the task/activity competently. RG 180.63 When you are competent in a task/activity, your assessor should sign the summary of auditor competencies at Table E1 in sample document E in Appendix 1 for that task/activity. When you have completed the logbook, your assessor must complete, sign and date the statement by assessor. If you have more than one assessor, each assessor must complete a separate statement by assessor. Note: See para 6.5 of the 2016 competency standard for assessment methodologies. RG 180.64 After your assessor has certified your competency in a task/activity, they do not need to sign the statement again for that task/activity. However, you must continue to record in your logbook other audit engagements where you perform that task/activity competently. RG 180.65 We will look at your logbook to see that you have demonstrated competency in a task/activity on several occasions over the 3–5 year period: see sample document E. RG 180.66 The number of entries will obviously depend on how often your employer can assign you to audit engagements. However, it is generally insufficient to record only one audit engagement for a task/activity over the 3–5 year period because this range of work is unlikely to demonstrate all competencies consistently. RG 180.67 When naming an audit engagement, include the ACN/ARSN (if the entity is a company) or the entity’s ABN and a description of the type of entity or audit (e.g. incorporated association, self-managed superannuation fund). Note: See paras 4.3 and 4.8 of the 2016 competency standard. RG 180.68 Your logbook must be typed to ensure legibility. Handwritten logbooks will be returned. If your logbook is incorrectly completed, you may have to resubmit it, or we may refuse your application. Practical experience: Meeting the requirements in s1280(2)(b)(ii) and s1280(2B) Direction of a registered company auditor RG 180.69 You can only rely on auditing work undertaken under the direction of an RCA. This means that the auditor has: (a) provided instruction about how the audit is to be undertaken; and (b) actively supervised, reviewed and monitored your work on a continuous basis during the audit. © Australian Securities and Investments Commission June 2016 Page 21 Page 22 REGULATORY GUIDE 180: Auditor registration Five years practical experience: reg 9.2.01(a) RG 180.70 You must satisfy us that during the five years immediately before the date of your application, you have undertaken at least 3,000 hours of audit work under the direction of an RCA, including: (a) appraising the operations of companies and forming opinions on matters specified in s307, 308 and 309 of the Corporations Act; AND (b) spending at least 750 hours supervising audits of companies. RG 180.71 Your hours must be based on contemporaneous time records kept for each audit engagement at the relevant time. If you do not have contemporaneous time records, your supervisor may provide an estimate of the number of hours you have spent and must disclose this in the supervisor declaration. RG 180.72 For the preferred format of this information, see Tables A1.1 and A2.1 in sample document A in Appendix 1. Audits under reg 9.2.01(a) RG 180.73 You can rely only on audits of entities that must have their financial report for a financial year audited under s301 of the Corporations Act—namely: (a) disclosing entities; (b) public companies; (c) large proprietary companies; (d) registered schemes; (e) small proprietary companies that have been directed under s293 and 294 to prepare a financial report and have it audited; and (f) small proprietary companies that are or have been controlled by a foreign company and that must prepare a financial report under s292(2). RG 180.74 For the preferred format of this information, see Table A1.1 in sample document A in Appendix 1. RG 180.75 If you include audits of other entities, we may treat your application as incorrect: see RG 180.167. You cannot rely on overseas audit experience for the purposes of reg 9.2.01(a). Note: Do not include overseas audit experience in Table A1.1. The overseas audit experience can be included in Tables A2.1 and A2.3 (see sample document A). Equivalent experience: reg 9.2.01(b) RG 180.76 If you cannot satisfy reg 9.2.01(a), you may be able to satisfy us that you have practical experience equivalent to these requirements. We will consider a broader range of audits under reg 9.2.01(b). © Australian Securities and Investments Commission June 2016 Page 22 Page 23 REGULATORY GUIDE 180: Auditor registration RG 180.77 If you are relying on overseas auditing experience, we will assess your experience to see whether it is equivalent to these requirements. RG 180.78 You must still have undertaken at least 3,000 hours of audit work under the direction of an RCA (or equivalent) during the five years immediately before the date of your application, including 750 hours supervising audits. RG 180.79 For the preferred format of this information, see Tables A2.1 and A2.3 in sample document A in Appendix 1. Audits under reg 9.2.01(b) RG 180.80 We may consider that you satisfy this requirement if you have, for example, 2,500 hours experience that meets the requirements in reg 9.2.01(a) and 500 hours in equivalent practical experience. RG 180.81 We will not generally consider as equivalent: (a) practical experience undertaken more than five years before the date of your application; or (b) accounting experience. RG 180.82 Experience we have previously, or may, recognise as equivalent includes: (a) audits of proprietary limited companies undertaken at management’s request (not s293 direction); (b) audits other than s302 audits, but that are still required to be performed under the Corporations Act (e.g. audits of AFS licensees); (c) audits of companies reporting under the Australian Charities and Not- for-profits Commission Act 2012 (ACNC Act); (d) expert reports provided for the purposes of court proceedings; and (e) audits of other reporting entities that are not companies but have significant gross operating revenue, substantial gross assets, and/or a large number of employees. RG 180.83 If you include these audits, we will need to decide whether or not to count them. You may have to provide more information—for example: (a) the basis on which the entity is considered a reporting entity under Statement of Accounting Concepts SAC 1 ‘Definition of the reporting entity’; (b) the legislation requiring the audit; and (c) the complexity of the particular audit. RG 180.84 For the preferred format of this information, see Tables A2.1 and A2.3 in sample document A in Appendix 1. © Australian Securities and Investments Commission June 2016 Page 23 Page 24 REGULATORY GUIDE 180: Auditor registration RG 180.85 Experience we have previously not, and generally will not, recognise as equivalent includes: (a) solicitors’ trust account audits; (b) real estate agents’ trust account audits; (c) self-managed superannuation fund audits; (d) incorporated association audits for non-reporting entities that have insignificant gross operating revenue, insubstantial gross assets, and/or a small number of employees; and (e) compliance audits (including compliance plans of managed investment schemes). RG 180.86 Legal decisions have established that experience in these audits is not equivalent to the experience required by law: see Re Bird: Bird v NCSC (1985) 3 ACLC 24, Re Murphy: Murphy v ASIC [2004] AATA 1371. This is because the scope of this audit work is generally much more narrow than audits under the Corporations Act. Work under previous laws: reg 9.2.01(c) RG 180.87 We consider that only in rare circumstances would an applicant rely on work of the kind and duration in reg 9.2.01(c) undertaken under previous laws corresponding to s307, 308 and 309 of the Corporations Act. If you wish to rely on this option, please contact us before lodging your application. Supervisory experience RG 180.88 The supervisory requirement of 750 hours relates only to audits of companies (not registered schemes or disclosing entities that are not companies): see reg 9.2.01(a). RG 180.89 If you include audits of entities other than companies, we may treat your application as incorrect: see RG 180.167. RG 180.90 However, you can include audits other than those required under s301 of the Corporations Act (e.g. audits of small proprietary companies undertaken by resolution of the board of directors). RG 180.91 In our view, supervisory experience must involve supervising other professional members of the audit team: see s324AE. This excludes supervision of non-professional persons who may perform other functions for the audit. RG 180.92 For the preferred format of this information, see Tables A1.2 and A2.2 in sample document A in Appendix 1. © Australian Securities and Investments Commission June 2016 Page 24 Page 25 REGULATORY GUIDE 180: Auditor registration Supervisor declaration RG 180.93 To satisfy us that you have the required practical experience under either reg 9.2.01(a) or 9.2.01(b), you must provide a supervisor declaration from each RCA who supervised your work, verifying the information you have provided about the audit(s). RG 180.94 We will generally only consider practical experience for the purposes of our assessment if it is verified by a supervisor declaration. RG 180.95 For the preferred declaration format, see sample document B in Appendix 1. RG 180.96 If you are relying on overseas auditing experience, you must still provide a supervisor declaration from your overseas supervisor in a form acceptable to us. Note: You may need to contact ASIC to discuss what modifications, if any, you should make to the declaration in sample document B. Capable, fit and proper: s1280(2)(c) RG 180.97 In addition to being satisfied that you hold the necessary qualifications and have the necessary competency or practical experience, we must also be satisfied that you: (a) are capable of performing the duties of an auditor; and (b) are otherwise a fit and proper person to be registered as an auditor. These requirements are summarised in Table 8. Table 8: Summary of character requirements in s1280(2)(c) Eligibility requirement What you must include in your application For more details Capable Capability report—A capability report explaining the scope and complexity of your audit experience. See RG 180.100–RG 180.103. See sample document C in Appendix 1 for the preferred format of this report. Capable and fit and proper Capability declaration—A statutory declaration from the person named in Form 903AA as your supervisor or referee for the audits described in your capability report. See RG 180.104–RG 180.105. See sample document D in Appendix 1 for the preferred format of this declaration. Fit and proper A signed statement from you containing details of any:  previous disqualifications;  disciplinary action taken;  litigation matter;  administration;  conviction;  previous application for registration; or  resignation or removal. See RG 180.111–RG 180.114. © Australian Securities and Investments Commission June 2016 Page 25 Page 26 REGULATORY GUIDE 180: Auditor registration How we will assess whether you are capable of performing the duties of an auditor RG 180.98 We consider you are ‘capable’ of performing your professional responsibilities as an RCA if you can perform your duties in a manner that is not negligent. RG 180.99 We will only consider you to be capable of performing your professional duties in a manner that is not negligent if you can demonstrate you have performed audit work exposing you to a sufficient range of audits and auditing issues relative to the type of audit engagements. We will make this assessment on a case-by-case basis. What you must include in your application Capability report RG 180.100 You should prepare a capability report to explain the scope and complexity of your audit experience: see sample document C in Appendix 1. You must give a copy of your capability report to ASIC. RG 180.101 In this report, you should describe your role and work in three of the most significant audits you have worked on under the supervision of the RCA who is providing a supervisor declaration, or who assessed you under the competency standard. RG 180.102 In completing the capability report, you should consider providing details on the following: (a) the complex issues addressed; (b) what role you played in the scope/planning of the audit; and (c) the type of opinion issued and the basis for the opinion. RG 180.103 You must also provide details of the continuing professional development activities relating to auditing (including quality assurance) that you have undertaken in the five years immediately preceding the date of your application. Capability declaration RG 180.104 Your supervisor, or assessor for the audits described in your capability report, should sign a declaration to verify that you are capable of performing the duties of an auditor and are a fit and proper person: see sample document D in Appendix 1. RG 180.105 If you are relying on overseas auditing experience, you must still provide capability declarations from your overseas supervisor or assessor in a form acceptable to us. Note: You may need to contact ASIC to discuss what modifications, if any, you should make to the declaration in sample document D. © Australian Securities and Investments Commission June 2016 Page 26 Page 27 REGULATORY GUIDE 180: Auditor registration Final checks: Capability RG 180.106 We may contact you—or your supervisor, assessor or referees—for further information if we do not think you have satisfactorily demonstrated your capability to perform the duties of an RCA. How we will assess whether you are a ‘fit and proper’ person RG 180.107 We will only be satisfied that you are a fit and proper person to be registered as an RCA if we are satisfied as to your honesty, integrity and good reputation. This is in addition to our being satisfied about your overall capability. RG 180.108 When we assess whether you are a fit and proper person to be registered as an RCA, we will regard favourably current membership of one of the professional accounting bodies, because such bodies usually require their members to be fit an