Monitoring audit quality

Our work

Our ability to deliver high-quality audits depends on the quality of work carried out by the auditors the Auditor-General appoints and their firm.

The auditors appointed by the Auditor-General are subject to our internal quality reviews, as well as their firm’s own internal quality review processes.

What do we mean by "audit quality"?

It means that:

  • Both the auditor and firm are independent from the organisation they audit.
  • An appropriate audit opinion is issued.
  • The Auditor-General’s Auditing Standards (which include New Zealand auditing and assurance standards) are followed.
  • The auditor demonstrates appropriate levels of professional scepticism and professional judgement.
  • The auditor collects enough appropriate audit evidence for the risk assessments they make.
  • The auditor reports on where improvement can be made.

We have a quality control system that supports auditors and other staff in complying with auditing standards and meeting relevant ethical, legal, and regulatory requirements.

That system includes:

  • a committee (the Audit Performance and Quality Governance Committee) of senior and suitably qualified staff who monitor the quality of audit products and provide the Auditor-General with assurance that we’re complying with auditing standards;
  • internal quality reviews;
  • external quality reviews;
  • processes for providing support to auditors (Opinions Review Committee); and
  • systems for monitoring our independence.

Internal quality reviews

audit-quality-stepsEach year, we review 50-60 audits of public sector entities. These reviews can happen before the audit report is issued, but are usually after the audit is finished.

The reviews cover audits carried out on behalf of the Auditor-General by external firms and our internal firm, Audit New Zealand. We assess all firms on a cyclical basis or more frequently based on our assessment of their audit quality.

We assess audit files to see if they comply with the Auditor-General’s auditing standards.

Our audit quality reviews provide the firms with insights about where to improve their overall quality review systems. We also monitor progress to check improvements have been made.

The results of the reviews are reported to the Audit Performance and Quality Governance Committee. It makes sure that the conclusions and any remedial actions are communicated to the Auditor-General, the Office’s Audit and Risk Committee, audit teams, and the firms.

We carry out reviews of performance audits on a cyclical basis. We also ask the Australian National Audit Office to review two performance audits and provide us with feedback and suggestions.

External quality reviews

External reviews provide additional scrutiny of our quality control systems and processes and help benchmark their effectiveness.

For example, in the last few years we have been subject to, or participated in:

  • a review by the Financial Markets Authority of Audit New Zealand’s system of quality control and a sample of issuer audits, carried out in 2017;
  • a review by the Financial Markets Authority of two audits on our behalf by EY and Deloitte in 2017 and 2019; and
  • a review of our practices by the Chartered Accountants of Australia and New Zealand in 2017.

Firms are also subject to reviews by the Financial Markets Authority and professional bodies (including the Chartered Accountants of Australia and New Zealand and CPA Australia).

Opinions Review Committee

To maintain consistency as well as high quality, we have a committee that deals with complex technical matters that our auditors come across. The Opinions Review Committee is responsible for considering matters involving significant accounting judgements and estimates, complex transactions, modifications to our auditor’s reports, and issues creating precedent or affecting a range of organisations that we audit.

An important role of the Opinions Review Committee is to ensure that the judgements made by the auditor are appropriate and fair. The committee includes senior members of the Office of the Auditor-General, including the Auditor-General or the Deputy Auditor-General. The Audit Quality Group provides technical support.

Safeguarding our independence

Independence is fundamental to our work. We have strong policies to safeguard our independence, including requirements to declare conflicts of interest and limits on the number of years that senior team members can audit the same organisations.

Auditing firms are sometimes asked to carry out reviews or provide consultancy advice to the organisations that they audit. We have a standard that covers whether those other engagements can be accepted. They can only be accepted when the independence of the audit opinion is properly protected and preserved.

Our standard is higher than the auditing standards applicable to private organisations.

The auditing firms have to get our approval before they can accept those other engagements. We approve these requests only after a rigorous assessment to ensure that our independence – through the independence of auditing firms – is preserved.

We monitor compliance with these policies and our approach to accepting (or approving our Audit Service Providers to accept) other engagements so our independence is beyond reproach.

Page last updated: 2 February 2021