Disclosure of auditors’ remuneration in 30 June 2020 financial reports – More detail required for ASX entities

Background

As part of its review of audit quality in Australia, and specifically looking at threats to auditor independence, the Parliamentary Joint Committee on Corporations and Financial Services Regulation of Auditing in Australia, in its interim report (February 2020), has recommended that disclosure of auditors’ remuneration be expanded to include more detailed information about the split between audit and non-audit services.

In advance of amendments being made by the Australian Accounting Standards Board to the audit fee disclosure requirements in AASB 1054 Australian Additional Disclosures, the Australian Securities and Investments Commission (ASIC) has drafted recommendations on what these disclosures should look like for ASX entities. We encourage entities to consider these in preparation of their 30 June 2020 financial report.

Categories

ASIC would like to see auditors’ remuneration disclosure split into the following categories:

  1. Fees to the group auditor for:
    1. Auditing the statutory financial report of the parent covering the group
    2. Auditing the statutory financial report of any controlled entities
  2. Fees for assurance services required by legislation to be provided by the auditor (e.g. reporting to APRA for ADIs, or to ASIC for the purposes of Form FS 71 for an AFS licensee)
  3. Fees for other assurance services and agreed-upon procedures services under other legislation or contractual arrangements (e.g. assurance on revenue information relating to contingent rental in a lease agreement) where there is discretion as to whether the service is provided by the auditor or another firm, and
  4. Fees for other services (e.g. tax advice, tax compliance, consulting, etc.).

Example disclosure

The following disclosure provides an example of how ASX listed entities can apply the recommendations:

2020
$
2019
$
Auditors of the Group – BDO and related network firms    
Audit and review of financial statements    
Group
500,000 450,000
Controlled entities and joint operations
250,000 200,000
Total audit and review of financial statements 750,000 650,000
Other statutory assurance services (e.g. for AFS licensees) 50,000 40,000
Other assurance services (e.g. for turnover rental agreements) 5,000 5,000
Non-audit services    
Taxation advice
30,000 25,000
Taxation compliance services
90,000 85,000
Consulting services
40,000 60,000
Total non-audit services 160,000 170,000
Total services provided by BDO 965,000 865,000
     
Other auditors and their related network firms    
Audit and review of financial statements    
Controlled entities and joint operations
100,000 90,000
Other statutory assurance services (e.g. for AFS licensees) 20,000 10,000
Other assurance services (e.g. for turnover rental agreements) 5,000 5,000
Non-audit services    
Taxation compliance services
20,000 25,000
Total services provided by other auditors (excluding BDO) 145,000 130,000
This publication has been carefully prepared, but is general commentary only. This publication is not legal or financial advice and should not be relied upon as such. The information in this publication is subject to change at any time and therefore we give no assurance or warranty that the information is current when read. The publication cannot be relied upon to cover any specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances.

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