GS 003 31-10-07 - AUASB

1 GS 003 (October 2007) Guidance Statement GS 003 Audit and Review Requirements for Australian Financial Services Licensees under the Corporations Act 2001 Issued by the Auditing and Assurance Standards Board Obtaining a Copy of this Guidance Statement This Guidance Statement is available on the AUASB website: Alternatively, printed copies of this Guidance Statement are available by contacting: Auditing and Assurance Standards Board Level 7 600 Bourke Street Melbourne Victoria 3000 AUSTRALIA Phone: (03) 8080 7400 Fax: (03) 8080 7450 E-mail: Postal Address: PO Box 204 Collins Street West Melbourne Victoria 8007 AUSTRALIA COPYRIGHT 2007 Auditing and Assurance Standards Board ( AUASB ).

2 The text, graphic and layout of this Guidance Statement are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007.

3 Otherwise, no part of the Guidance Statement may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law. ISSN 1833-7600 GS 003 - 2 - GUIDANCE STATEMENT Guidance Statement GS 003 Audit and Review Requirements for Australian Financial Services Licensees under the Corporations Act 2001 CONTENTS AUTHORITY STATEMENT Paragraphs 1 Issuance Date.

4 2 3-6 Legislative Background .. 7-8 Regulatory Requirements for AFS Licensees Corporations Act 9-12 Financial Requirements for APRA Regulated Entities, Market and Clearing 13-15 Financial Requirements for all Other AFS 16-19 FS 71 Auditor Reporting Requirements .. 20-23 Exemptions from Lodging Form FS 24-27 Considerations for the Auditor Those Who May Audit the AFS 28 Agreeing on the Terms of the Engagement .. 29-31 32-35 Materiality.

5 36-39 Quality Control .. 40 Reporting Entity 41-42 Natural Persons .. 43-44 Reporting Requirements Limited Assurance on Certain Statements Made in FS 70 relating to Dealing with Clients Money and Dealing with Other Property of 45 Statement on Section 990K(2) Matters .. 46-50 Limited Assurance on Risk Management 51-52 Reasonable Assurance on Certain Provisions in Part of the Corporations 53-64 GS 003 - 3 - GUIDANCE STATEMENT Guidance Statement GS 003 Audit and Review Requirements for Australian Financial Services Licensees under the Corporations Act 2001 Financial Requirements.

6 64-65 Cash Needs Requirement .. 66-75 Inherent 76-77 The FS 71 Audit 78-80 Conformity with International Pronouncements .. 81 Appendix 1: Example FS 71 Paragraph 3 Insertions: Example 1: Paragraph 3 for a licensee regulated by APRA Example 2: Paragraph 3 for a Market or Clearing Participant Example 3: Paragraph 3 relying on Option 1 or Option 2 Example 4: Paragraph 3 relying on licence condition 13(c)(iii) (Option 3) Example 5: Paragraph 3 relying on licence condition 13(c)(iv) (Option 4) Example 6: Paragraph 3 relying on licence condition 13(c)(v) (Option 5) Appendix 2: Example Engagement Letter Appendix 3.

7 Example Management Representation Letter Appendix 4: Extract from ASIC Pro forma 209 GS 003 - 4 - GUIDANCE STATEMENT Guidance Statement GS 003 Audit and Review Requirements for Australian Financial Services Licensees under the Corporations Act 2001 AUTHORITY STATEMENT The Auditing and Assurance Standards Board ( AUASB ) formulates Guidance Statement GS 003 Audit and Review Requirements for Australian Financial Services Licensees under the Corporations Act 2001 as set out in paragraphs 1 to 81 and Appendices 1 to 4, pursuant to section 227B of the Australian Securities and Investments Commission Act 2001, for the purposes of providing guidance on procedural auditing and assurance matters.

8 This Guidance Statement provides guidance to assist the auditor to fulfil the objectives of the audit or assurance engagement. It includes explanatory details and suggested procedures on specific matters for the purposes of understanding and complying with AUASB Standards. The auditor exercises professional judgement when using this Guidance Statement. This Guidance Statement does not prescribe or create mandatory requirements. Dated 31 October 2007 M H Kelsall Chairman - AUASB GS 003.

9 5 - GUIDANCE STATEMENT GUIDANCE STATEMENT GS 003 Audit and Review Requirements for Australian Financial Services Licensees under the Corporations Act 2001 Application 1 This Guidance Statement has been formulated by the Auditing and Assurance Standards Board ( AUASB ) to provide guidance to the auditor of an Australian financial services (AFS) licensee reporting in accordance with the requirements of the Corporations Act 2001 (the Corporations Act).

10 Issuance Date 2 This Guidance Statement is issued on 31 October 2007 by the AUASB and replaces AGS 1068 Audit Requirements for Australian Financial Services Licensees under the Corporations Act 2001(issued in October 2004). Introduction 3 The audit of AFS licensees may give rise to a number of special audit considerations. Accordingly, this Guidance Statement has been developed to identify the auditor s responsibilities on such engagements, and to provide guidance to the auditor on additional factors which the auditor may consider when planning, conducting and reporting on the audit of an AFS licensee.