Date posted: 30/09/2022

Submission on disclosure of fees paid to audit firms

Amendments proposed in response to post-implementation review

The XRB is proposing amendments to FRS-44 New Zealand Additional Disclosures (Tier 1 for-profit entities) and PBE IPSAS 1 Presentation of Financial Reports (Tier 1 public benefit entities) to increase the transparency of fees paid to an entity’s audit or review firm for other services. The extant requirement is to disclose fees to each audit or review firm, including any network firm, separately for: (a) the audit or review of the financial statements; and (b) all other services. The proposals are to further breakdown the “other services” into specified categories – (i) Audit or review related services (ii) Other assurance services (iii) Taxation services; and (iv) Other services.

We support greater disaggregation of the disclosure of fees paid or payable to an entity’s external audit firm in its financial statements. We believe this will provide greater transparency around the nature of the non-audit services being provided by the entity’s external auditor. 

We support the proposed specified categories but believe that agreed-upon procedures services should be included in the list of examples of ‘audit or review related services’ to avoid inconsistent disclosures. Agreed-upon procedures services meet the criteria in paragraph 8.17(b)/116.19(b) to be audit or review related services because “it is reasonable to expect such services to be carried out by the entity’s auditor or reviewer”. 

We do not support the proposed disclosure about how the entity manages possible threats to auditor or reviewer independence when taxation services or other services are also provided as we believe it potentially poses several issues.

We also make several recommendations to streamline the guidance material to reduce its length and complexity.

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