No, the two accounting bodies conduct reviews of all areas of accounting practice and focus on members, under their self regulation professional obligations. ASIC is concerned to ensure adherence to the particular rules and standards in the Corporations Act.

AQRB is focused on the quality of audit and independence processes of the participating firms’ audits of listed entities. Its work reviews the effectiveness of firm wide systems that assist the firm and its auditors to comply with all the relevant codes and rules. The AQRB work aims to enhance overall effectiveness of firm processes and encourage the continual improvement of auditing practice.

Will AQRB be advising ASIC of any breaches of auditing standards or Corporations Law of which it becomes aware?

AQRB will first bring the matter to the attention of the relevant firm so that firm may deal with the issue in accordance with the law and their obligations to the relevant professional bodies. If the matter is not appropriately addressed by the firm, AQRB will report the matter to the relevant professional accounting body for action. AQRB has no legal relationship with ASIC but has entered into Memorandums of Understanding with ICAA and CPAA.

Is AQRB really independent of the firms when the firms are directly funding the reviews?

Yes. The Board of AQRB controls all the activities of AQRB. Each of the Board members has been selected because of their high level of integrity and personal commitment to independence.

A majority of Board members, including the Chairman, must be persons who have never been practicing accountants. The firms have no role in the selection of Board members. See also question 22.

Funding is kept at arms length though Perpetual Trustees. In addition, AQRB may invite the St James Ethics Centre to participate in consultations with the Auditor Consultation Group, over funding

Will directors of AQRB, who are former partners of firms, be on review panels reviewing their former firms?

No. Directors are required to declare all relevant interests and these are taken into account in establishing Review Panels, to ensure that there are no conflicts of interests.

Will AQRB have access to ASIC or ICAA reviews?

Yes, as each of the firms subject to AQRB review are required to make such reviews available to AQRB as part of the AQRB review process.

Will AQRB public reports include details of breaches of auditing standards or independence laws?

The AQRB annual public report will indicate the nature of the breaches and actions taken by the relevant firm on the matters. The AQRB annual report will not identify the names of the auditor or auditee.

Will AQRB’s public reports on reviews it carries out include recommendations for improvements in auditing processes?

No. Any suggestions will be raised with the relevant firm for consideration.

The AQRB review is designed to gain a reasonable level of assurance that the firm has in place, in relation to its audits of listed companies, systems and processes that are effective in ensuring compliance with applicable professional standards and legal obligations regarding independence and audit quality.

AQRB may include general comments about industry quality practices in its published Annual Report.

Will there be memoranda of understanding (MOU) with the accounting bodies, ASIC or FRC?

MOUs have been entered into with ICAA, CPA Australia and NIA. At this stage it is not anticipated that there will be agreements with ASIC or FRC. However, informal meetings will be held with ASIC and FRC to discuss general matters of mutual interest relating to auditing standards and independence. ASIC and FRC have separate and independent rights and entitlements to obtain information from the Australian Accounting Bodies and from the firms.

Most of the ex-auditor directors have been retired for a number of years. Are they up-to-date with laws and best practices and have the “independent” directors any knowledge of the relevant standards and laws?

The AQRB directors have been selected because of their ongoing involvement in business law. In addition, all directors will be required to undertake up-date education on the relevant standards and law. The first of these education sessions took place in early 2006.

10.

What are the particular standards that AQRB will be focussing on?

The overall standards follow the requirements of corpotae law. The professional standards are “F1” Independence, AUS 206 “Quality Control for Audits of Historical Information” and APS5 “Statement of Quality Control for Firms”. These will change in future years as standards develop.

11.

AQRB is focussing on audits of listed companies. Do you expect that AQRB’s role will be extended to other areas where the general public have money invested – eg unlisted disclosing entities, superannuation funds, etc?

No, not at this stage.

12.

Has ASIC welcomed the formation of AQRB?

Yes, ASIC, in their press release of 17 February 2006, has welcomed the formation of AQRB as an initiative of the profession to improve the quality of auditing.

AQRB will ensure that ASIC is kept informed of the work of AQRB.

13.

Will the names of any firm’s clients, whose files AQRB will review, be revealed in the reports?

No.

14.

How does the AQRB structure and process compare with what happens in UK, US and, say, Canada?

A. United Kingdom - the Professional Oversight Board (POB) is part of the UK Financial Reporting Council.
The key objecticves of the POB are:

Providing independent oversight of the regulation of the auditing profession by the recognized supervisory and qualifying bodies:
Monitoring the quality of the auditing function in relation to economically significant entities; and
Providing independent oversight of the regulation of the accountancy profession by the professional accountancy bodies.

B. United States - the Public Company Accounting Board (PCAOB) is a private sector corporation created by the Sarbanes-Oxley Act of 2002 to oversee the auditors of public companies.
The PCAOB has a very broad mandate under the legislation which:

Prohibits accounting firms that are not registered with the PCAOB from preparing or issuing audit reports on US public companies or from playing a substantial role in these activities. Registered firms are subject to the PCAOB's oversight, including its inspections and enforcement authority.
Requires the PCAOB to conduct annual inspections of registered firms that audit more than 100 public companies. Under the Act, other firms that audit any public companies are required to be inspected at least once every three years. The PCAOB also has authority to conduct special inspections as is necessary or appropriate to address issues that come to the PCAOB's attention.
Directs the PCAOB to establish auditing and related attestation, quality control, ethics, and independence standards and rules to be used by registered public accounting firms in the preparation and issuance of audit reports.
Authorises the PCAOB to investigate auditor conduct that may violate the laws, rules, or standards within the PCAOB's jurisdiction. The PCAOB is further empowered to impose a range of disciplinary sanctions against registered accounting firms and associated persons.

C. Canada - The Canadian Public Accountability Board (CPAB) oversees auditors of Canadian reporting issuers, that is, companies that have raised funds from the Canadian investing public and who, for that reason, must file financial statements with one or more provincial securities commissions. Under Canadian Securities Administrators Rule 52-108, accounting firms that audit reporting issuers must be participants in CPAB's oversight program.
CPAB conducts inspections of the firms over which it has oversight responsibility. Firms with 50 or more reporting issuer clients are inspected annually while those with less than 50 are inspected on a three year cycle.
CPAB can impose, where appropriate, sanctions and restrictions on public accounting firms that audit reporting issuers and, where necessary require remedial action and refer matters, as appropriate, to securities regulators and provincial accounting organizations for discipline purposes.

It is understood that PwC and KPMG had independent boards in place. Why change to this combined approach?

AQRB will bring a consistency in approach to the monitoring of all participating firms. The individual firms’ arrangements reflected the respective firms’ approach to the review issues.

16.

Does this mean that ICAA will do less reviews or that the firms will do less internal reviews?

The ICAA will have regard to the reviews by AQRB going forward. The internal reviews conducted by the respective firms are a necessary business control within those firms and they will continue.

17.

Will firms have the opportunity to respond to the AQRB reports?

Yes and their responses will be published on the AQRB website with the AQRB report on the firm.

18.

When will the first reports be available and will they be on a website?

The first reviews commenced in April/May 2006, so the first AQRB reports are likely to be published before the end of calendar 2006.

19.

What is AQRB’s annual budget?

Expenditure for the 2006 calendar year is budgeted for $1.45M. This will change each year depending on inflation and the number of firms joining the AQRB process.

20.

Who is the auditor? Any conflict?

The AQRB auditors are Jacoby Cameron & Co. Chartered Accountants. That firm does not audit any listed entity and, therefore, is not eligible to participate in the AQRB review process.

21.

What is St James Ethics Centre’s role?

St James Ethics Centre is the foundation member of AQRB, a public company limited by guarantee. St James will adjudicate on ethical issues arising from the AQRB reviews and be involved in dispute resolution between AQRB and any participating firm. St James may be invited to participate in consultations regarding the annual budget to ensure AQRB is appropriately funded to complete the AQRB remit.

22.

How are persons appointed to the AQRB Board?

The Directors appoint persons to be Directors, but can only appoint a person who has been nominated by the Nominations Committee.

The Committee is comprised of the following persons:
Mr A. Cameron (Chairman)
Mr. R. Lynn
Mr. J. Richardson
Dr. S Longstaff (CEO of St James Ethics
Centre)

(See Articles 6.1, 6.2 and 7.3 of the Constitution.)