Note 3: Audit fee revenue

Accounting policy

The specific accounting policies for audit fee revenue are explained below:

Fee revenue generated by the Office for audits and other assurance work

Fee revenue is recognised when earned, by reference to the stage of completion of audit and other assurance work, if the outcome can be estimated reliably. Revenue accrues as the audit activity progresses by reference to the value of work performed, and as direct expenses that can be recovered are incurred. If the outcome of an audit cannot be estimated reliably, revenue is recognised only to the extent of the direct costs incurred in respect of the work performed. If there are significant uncertainties regarding recovery, or if recovery is contingent on events outside our control, no revenue is recognised.

Fee revenue generated by contracted audit service providers for audits

Fee revenue generated by contracted audit service providers (other than Audit New Zealand) for audits of public entities is also recognised as the work progresses, based on advice from the contracted audit service providers. Contracted audit service providers invoice and collect audit fees directly from public entities.

Critical accounting estimates and assumptions

Assessing the value of audit fee revenue and associated work in progress or income in advance for engagements open at balance date is the most significant area where such judgements, estimations, and assumptions are made. This involves estimating the stage of completion of each engagement based on the value of work completed at balance date and the expected work to complete the engagement. A different assessment of the outcome on an engagement may result in a different value being determined for revenue and also a different carrying value for income in advance or work in progress.

Breakdown of fee revenue

Actual
2015/16
$000
Actual
2014/15
$000
Main Estimates
2015/16
$000*
Main Estimates
2016/17
$000*
Fee revenue generated by the Office for audit and assurance services 43,593 44,774 43,031 42,471
Fee revenue generated by other contracted audit service providers for audits of public entities** 34,705 33,363 32,191 32,824
Total audit fee revenue 78,298 78,137 75,222 75,295

*All Estimates information is unaudited.
** Revenue generated by contracted audit service providers (other than Audit New Zealand) does not involve any cash transactions with the Office.