Ensuring quality annual audits

All auditors in New Zealand must comply with auditing standards issued by the External Reporting Board (the XRB). The professional, ethical, auditing, and assurance standards of the XRB do not always take full account of the scope and nature of public sector audits. Therefore, the Auditor-General issues his own standards for all public sector auditing work done on his behalf. The Auditor-General’s auditing standards supplement the auditing standards issued by the XRB.

The Auditor-General also appoints and oversees auditors who carry out audits on his behalf.

Independence

The Auditor-General’s auditing standard on independence is stricter than the one for the private sector. The standard restricts the non-assurance work that audit service providers can do for the public organisations they audit.

This position has been taken to mitigate the risk of conflicts of interest occurring, safeguarding the independence of auditors working on public sector audits.

We monitor the services that audit service providers carry out for public organisations they audit on behalf of the Auditor-General. We also pre-approve or decline work that audit service providers propose to carry out that could cause people to question their independence.

In recent years, the Auditor-General has increased expectations of audit service providers to ensure that commercial interests do not undermine their independence.

Updated auditing standards

The Public Audit Act 2001 requires us to report each year on any significant changes made to the Auditor-General’s auditing standards. In March 2023, we published an updated version of the standards (see Changes to standards in Our services, Service 3).

The changes we made to the Auditor-General’s auditing standards included a new code of ethics that sets out the reasons for the high expectations and standards we have, particularly for independence.

Maintaining quality audits

We carry out quality assurance reviews of our auditors. A significant part of these reviews is ensuring that the auditor has complied with the Auditor-General’s auditing standards. Our quality assurance reviews are in addition to audit providers monitoring their own quality control systems and complying with professional ethical standards.

As well as quality assurance reviews of auditors, we periodically invite the Financial Markets Authority and the New Zealand Institute of Chartered Accountants Practice Review Group to carry out quality reviews of Audit New Zealand. Both organisations were invited to carry out their reviews of Audit New Zealand during 2022.

The Financial Markets Authority reviewed our quality control system, and both the Financial Markets Authority and New Zealand Institute of Chartered Accountants reviewed a sample of Audit New Zealand’s audit files. The resulting reports showed that Audit New Zealand maintained a robust system of quality control and completed quality work.