Note 3: Audit fee revenue
Accounting policy
The specific accounting policies for audit fee revenue are explained below:
Fee revenue generated by the Office for audits and other assurance work
Fee revenue is recognised when earned, by reference to the stage of completion of audit and other assurance work, if the outcome can be estimated reliably. Revenue accrues as the audit activity progresses by reference to the value of work performed, and as direct expenses that can be recovered are incurred. If the outcome of an audit cannot be estimated reliably, revenue is recognised only to the extent of the direct costs incurred in respect of the work performed. If there are significant uncertainties regarding recovery, or if recovery is contingent on events outside our control, no revenue is recognised.
Fee revenue generated by contracted audit service providers for audits
Fee revenue generated by contracted audit service providers (other than Audit New Zealand) for audits of public entities is also recognised as the work progresses, based on advice from the contracted audit service providers. Contracted audit service providers invoice and collect audit fees directly from public entities.
Critical accounting estimates and assumptions
Assessing the value of audit fee revenue and associated work in progress or income in advance for engagements open at balance date is the most significant area where such judgements, estimations, and assumptions are made. This involves estimating the stage of completion of each engagement based on the value of work completed at balance date and the expected work to complete the engagement. A different assessment of the outcome on an engagement may result in a different value being determined for revenue and also a different carrying value for income in advance or work in progress.
Breakdown of fee revenue
| Actual 2015/16 $000 | Actual 2014/15 $000 | Main Estimates 2015/16 $000* | Main Estimates 2016/17 $000* | |
|---|---|---|---|---|
| Fee revenue generated by the Office for audit and assurance services | 43,593 | 44,774 | 43,031 | 42,471 |
| Fee revenue generated by other contracted audit service providers for audits of public entities** | 34,705 | 33,363 | 32,191 | 32,824 |
| Total audit fee revenue | 78,298 | 78,137 | 75,222 | 75,295 |
*All Estimates information is unaudited.
** Revenue generated by contracted audit service providers (other than Audit New Zealand) does not involve any cash transactions with the Office.