Reserve Bank of Australia Annual Report – 1997 Financial Statements Independent Audit Report
INDEPENDENT AUDIT REPORT
To the Treasurer
Scope
I have audited the financial statements of the Reserve Bank of Australia (the Bank) for the year ended 30 June 1997. The statements comprise:
- balance sheet,
- profit and loss appropriation statement, and
- notes to and forming part of the financial statements.
The Bank's Board is responsible for the preparation and presentation of the financial statements and the information they contain. I have conducted an independent audit of the financial statements in order to express an opinion on them to the Treasurer.
The audit has been conducted in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards, to provide reasonable assurance as to whether the financial statements are free of material misstatement. Audit procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial statements are presented fairly in accordance with applicable Accounting Standards, other mandatory professional reporting requirements and statutory requirements so as to present a view which is consistent with my understanding of the Bank's financial position, the results of its operations and its cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Qualification
Note 1 to the financial statements indicates that income measurement for the period, for gold stocks and for both domestic and foreign investments, is based on realised gains/losses passing through the profit and loss account. Consistent with longstanding policy, unrealised gains/losses are passed to/from revaluation reserves provided market price is greater than cost. Under the Reserve Bank Act 1959, net profits are to be paid as dividend to the Government.
I agree that the policies adopted by the Reserve Bank, which reflect the prudent view that a central bank should make available for distribution to a central government all realised gains but not unrealised gains, are suitable to the operations of a central bank under the existing legislation.
These policies are, however, in breach of Australian Accounting Standard AAS 10 ‘Accounting for the Revaluation of Non-Current Assets’ because of the transfer from revaluation reserves to Net Profit of realised gains relating to gold stocks and to investments in Australian government securities, and in breach of AAS 20 ‘Foreign Currency Translation’ because of the use of a revaluation reserve to hold unrealised gains on investments in foreign government securities. For AAS 10 the amount transferred in 1996-97 was $1,811.8 million, and for AAS 20 the balance of the reserve at 30 June 1997 was $451.0 million. A detailed analysis of these transfers and reserves is at Note 3 to the accounts. If these Standards had been followed, the Bank's Net Operating Earnings, as shown in Note 2, would have been $2,343.9 million and the “Net Profits in Terms of the Reserve Bank Act” would have been $1,976.6 million.
This necessitates separate audit opinions on the fairness of the presentation of the financial statements in accordance with statutory requirements and on the fairness of the presentation in accordance with applicable Accounting Standards.
Audit Opinion
In accordance with subsection 81(2) of the Reserve Bank Act, I now report that the financial statements are in agreement with the accounts and records of the Bank and in my opinion:
(i) the financial statements are based on proper accounts and records; and
(ii) the financial statements show fairly in accordance with statutory requirements the financial operations and cash flows for the year ended 30 June 1997 and the state of the affairs of the Bank at that date.
Qualified Audit Opinion
In my opinion, except for the effects on the financial statements of the matter referred to in the Qualification section, the financial statements present fairly, in accordance with applicable Accounting Standards and other mandatory professional reporting requirements, the financial transactions and results, and cash flows, for the year ended 30 June 1997 and the state of affairs of the Bank as at that date.
P.J.Barrett
Auditor-General
Sydney
7 August 1997
