21 March 2005

Ms Merran Kelsall
Chair
Auditing and Assurance Standards Board
530 Collins Street (Level 4)
MELBOURNE VIC 3000

Dear Ms Kelsall

Compliance with AASB 1047

The Group of 100 (G100) is concerned about different practices that have arisen in respect of the audit status of quantitative disclosures required by AASB 1047 “Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards”. During the recent reporting season some of our members having a 31 December 2004 annual reporting date provided quantitative disclosures in accordance with AASB 1047 while other members have been advised by their auditors that the provision of quantitative disclosures would lead to the inclusion of an emphasis of matter in their audit report. Our understanding is that it is a matter of professional judgment in the light of the circumstances in each case two of the Big 4 audit firms took this latter approach. The G100’s concern is that if these differences in practice are repeated for 30 June 2005 balancers it is possible that the audit reports of a significant number of listed entities will include an emphasis of matter where quantification occurs.

This concern is heightened by the fact that ASIC has indicated its expectation that the impact of adopting Australian equivalents to IFRSs is properly quantified (see AFR 11 March 2005). When taken in conjunction with the approach of some firms to determining an emphasis of matter, companies are placed in an invidious position. It appears that if a company does not show quantitative information it may need to respond to queries from ASIC. However, if a company does provide quantitative information it faces the prospect of an emphasis of matter being included in its audit report.

It is unfortunate that this situation has occurred and is likely to continue in the absence of the Auditing and Assurance Standards Board clarifying the guidance in Assurance Alert 14 “The Implications for Auditors of the Transition to Australian equivalents to IFRSs” in respect of this issue. In this regard we note that both the Audit Alert and the Highlights of the AUASB's meeting on 1 March 2005 focus on the application of AASB 1 “First-time Adoption of Australian Equivalents to International Financial Reporting Standards” and not on the information prepared in compliance with AASB 1047 which does not apply once an entity has adopted the Australian equivalents to IFRSs. Whether or not the existence of uncertainties about the requirements of Australian equivalents of IFRSs and their implementation, in particular the suite of Year 2005 Standards, is grounds for an emphasis of matter should be resolved as a matter of urgency.

The G100 believes that clarification of the AUASBs requirements and guidance would be helpful to preparers and their auditors in meeting the requirements of AASB 1047 and providing relevant and reliable information to shareholders and other users of financial reports about the impacts of adopting Australian equivalents to IFRSs.

Yours sincerely

John V Stanhope
National President

Cc  Mr Jeffrey Lucy, Chairman, ASIC
Mr David Boymal, Chairman, AASB