The Financial Reporting Council (FRC) is responsible for conducting practice reviews of licensed auditors and audit firms in discharging their duties and determine, when conducting practice reviews, whether a licensed auditor or an audit firm has complied with Quality Control, IFAC Code of Professional Conduct and Ethics and any International Standards on Auditing. These functions shall be undertaken in such a manner as to promote the highest standards among licensed auditors, including licensing practices that promote the integrity and competence of auditors.
The Financial Reporting Act 2004 (FRA / the Act) prescribes the establishment of an Audit Practice Review function within the FRC and an Audit Practice Review Panel (APRP), to advise and provide guidance on the review of the audit practice of licensed auditors in Mauritius.
2.0 FRC Responsibilities in relation to the Audit Practice Review (APR)
The responsibilities of the FRC, in relation to APR include:-
(I) review the practice of an auditor; and
(ii) Investigate or cause to be investigated –
- any complaint of dishonest practice, negligence, professional misconduct, or malpractice made against a licensed auditor; or
- any breach of the IFAC Code of Professional Conduct and Ethics by a licensed auditor; or
- any material irregularity notified to it pursuant to section 40(2).
3.0 Specific Responsibilities of the Audit Practice Review Panel
The specific responsibilities of the APRP encompass:-
- monitoring the practice of auditors with a view to maintaining high standards of auditing practices and ensuring compliance with the Quality Management System, IFAC Code of Professional Conduct and Ethics and with auditing standards;
- enforcing compliance with this Act and the rules of the Council by conducting investigations;
- advising the Council and other panels of the FRC on any matter relating to audit practices
- providing information to and otherwise coordinating activities, as appropriate, with other panels of the FRC, including activities related to matters for corrective action.
4.0 Establishment of the Audit Practice Review Panel
There will be established an Audit Practice Review Panel for the purposes of application of the Act. It shall comprise a total of 10 individuals, suitably qualified and experienced in the field of business, finance, accountancy, audit or law preferably with knowledge of financial reporting in the private or public sector, the Chief Executive Officer and officers designated by the FRC.
5.0 APRP Meetings
The APRP shall regulate its meetings and proceedings in such manner as it thinks fit.
The Panel shall meet as often as is necessary and at least once every 3 months at such time and place as the Chairperson shall determine.
Four members shall constitute a quorum except to meetings where matters pertaining to cancellation and suspension refer.
6.0 FRC Approach to the Audit Practice Review
- The policy of the APRP shall comply with and be governed by the powers and responsibilities of the APRP as set forth in its charter, the policies established by the FRC and the Financial Reporting Act of 2004 (the “Act”).
- The APRP shall assist and advise the FRC in conducting practice reviews of licensed auditors, audit firms of licensed auditors, affiliates of licensed auditors or audit firms of licensed auditors, to determine whether the audit participants have complied with Quality Control, IFAC Code of Professional Conduct and Ethics and any applicable auditing standards issued by IFAC and /or the FRC.
- In exercising the policy set forth in paragraph (a) above, the FRC, when conducting a practice review, inform the licensed auditor, audit firm, and other assisting entities that said audit participants may make representations to the FRC with regard to matters appropriate to practice review process or the specific audit practices that are the subject of the review.
- The practice reviews conducted under this policy will focus on the audit participants’ policies and procedures applicable to assurance services. A review of other assurance services may be conducted on an exception basis at the request of the Council.
- For purposes of the practice review, the authorised representatives of the FRC may request and inspect any relevant book, document and record of the audit participants, take an abstract or copy of such documents, and seek information of any partner or employee designated by the partner.
- The APRP shall, as appropriate, submit its findings and recommendations arising from practice reviews to the FRC in accordance with procedures established for that purpose.
- In order to facilitate meeting the objectives set forth in its charter, the FRC will endeavor to establish a collaborative relationship with licensed auditors and audit firms under its jurisdiction. This will require an open and constructive communication with the auditing profession. Accordingly, questions regarding apparent practice deficiencies shall first be addressed with the audit participants and shall remain confidential within the Panel. Communication of such issues outside the Panel may be permitted, on a “hypothetical” basis, in the event outside technical guidance is required.
- This confidentiality policy does not apply where there are practice deficiencies and/or non-compliance with auditing standards or the Code of Professional Conduct and Ethics.
- As further set forth in the procedures for the APRP, the audit inspections will emphasise substantive issues revealed or omitted in the practices of the audit participants. Such practices entail a broad range of policies and procedures applied by the audit participants in the overall conduct of their business as well as specific audit engagements to include, among other things.
- Policies of the auditing firm regarding maintaining and monitoring competencies and independence.
- Conduct of a specific engagement to include planning, risk assessment, staffing, and audit/verification procedures applied.
- Documentation and soundness of judgments applied and conclusions reached regarding audit and reporting issues revealed during the course of the audit.
- All matters undertaken by the APRP that pertain to specific audit participants shall remain confidential within the FRC pursuant to the FRC’s Code of Ethics. Any release of information pertaining to such manners can only be authorised by the Council.
- This policy recognizes that matters can be brought to the attention of the APRP from sources outside of its normal inspection procedures. Such sources include:
- Notice of a material irregularity under Section 40 of the Act
- Complaints from stakeholders
- Other regulatory agencies
- News releases
If such matters pertain to the conduct of an audit participant, then the issue of follow-up should be discussed with the FRC’s CEO, and the chairperson of Panels to determine the appropriate course of action.
7.0 APRP Accountability, Transparency and Communications
The APRP will report as required in writing on its activities to the Council. It will also provide to the Council an annual report on its activities by the end of July each year.
The APRP will provide, report and maintain current information on its activities through contributions to the FRC Bulletin and to the FRC website.
In order to provide timely and cost effective information with constituents, communications as far as possible shall be in electronic format.
8.0 Date of application
This policy is approved by the FRC and is effective on and from June 2008.