What is an auditor’s consent letter?
An auditor’s consent letter is one of many documents which may be provided by an auditor to a client at different stages of the audit process. It is not a document required for every audit engagement but may be required for things such as ASIC filings for new financial licensee’s needing to appoint an auditor, prospectuses or information memorandums for companies looking to raise funds or for other government authorities such as during grant applications
As a rule, when clients ask us “What is an auditor’s consent letter?”, they are usually seeking to understand why someone has asked them for the letter and what it commits both us and them too. It is important to note it is not a full engagement letter defining scope or cost, but rather a brief one pager which nevertheless can serve an important function for the client.
Why Is an Auditor’s Consent Letter Required?
There are a myriad of reasons why a government authority or other stakeholder may ask for such a letter but the key purpose behind it is to independently confirm that:
- The auditor has consented in writing to be named in an official document such as an ASIC application or Information Memorandum
- To confirm that the auditor has agreed to the appointment and has capacity to complete the proposed work
- That the independent stakeholder or regulatory body can be comforted that the use of the auditor’s firm is authorised and genuine.
This document has increased in importance over the years as a number of scams have gone around whether audit firms have had their letterheads inappropriately affixed to documents on behalf of clients who have not engaged with them. This has been done surreptitiously with the excuse that the client ‘planned’ to engage with the auditor at a later date while misleading either the government or investors that the auditor had consented to such an arrangement.
Common Situations Where an Auditor’s Consent Letter Is Required
Although not an exhaustive list these are some common circumstances whereby a client may request us to prepare an auditor’s consent letter:
- AFSL applications and other financial licensee disclosures to ASIC
- Prospectuses and other capital raisings
- Government grant applications
- Managed Investment Schemes
- SMSF Audits where the auditor must be appointed within 45 days of the fund’s annual tax return due date
- Legal disputes whereby a party proposes appointing an auditor to provide either a financial or forensic audit of the entity’s books
What Does an Auditor’s Consent Letter Confirm?
There is no fixed wording in most circumstances so each firm will use a slightly different template but the items that will be confirmed include:
- The audit firm confirmed that they have consented to being named in a particular application
- The specific document and date that they are consenting too (it is generally not an open consent forever and for every conceivable document)
It is important to remember that this is not an engagement letter or scope proposal and does not replace those important documents. There is no audit report and no level of assurance provided within the consent letter and thus no extension of audit responsibility given by the auditor to the client.
Auditor’s Consent Letter vs Audit Report
These are totally different documents although occasionally we do see naïve stakeholders or unsophisticated investors confused as to the differences. A consent letter is purely that, a consent to act for a particular client on a particular matter. At this stage the auditor has not generally reviewed the entities books in detail and would have no evidence on which to form an opinion as to their veracity. An audit report on the other hand is the end of the audit process whereby an auditor has reached a conclusion on the audit evidence gathered. This audit report will then express the auditors opinion on the books which can be an unqualified (clean) audit, an audit qualified to certain areas or an adverse opinion where fraud or material misstatement has been detected.
Who Can Issue an Auditor’s Consent Letter?
The auditor’s consent letter should be issued by a registered audit company, that is a company has an ASIC registration as an RCA. This can and should be independently verified on the ASIC website via their Professional Registers Search function. It is important to note that an accountant and an auditor are not interchangeable terms and many accounting firms do not have RCA status and instead partner with niche audit providers to assist their clients independently.
Need an Auditor’s Consent Letter?
If you need an Auditor’s Consent Letter, feel free to reach out to one of our friendly team for a confidential discussion. Auditors Australia regularly provides auditor’s consent letters in connection with company changes, regulatory filings, and disclosure documents.