Jan 18, 2016
From the Financial Reporting View
On January 12, the Center for Audit Quality (CAQ) issued Audit Quality Indicators: The Journey and Path Ahead, to provide insights gathered from a series of global public roundtables with audit committee members and other stakeholders about a potential set of audit quality indicators (AQIs).
This outreach effort, together with the results from the pilot testing of the CAQ's Approach to Audit Quality Indicators, suggests a way to direct efforts to assess audit quality.
Key findings from the roundtables include:
- Stakeholders are seeking information that can assist audit committees in assessing the qualitative aspects of the audit, e.g., does the engagement team exhibit professional skepticism and auditor judgment;
- Audit committee members recognized that AQIs can help them oversee the quality of their external audit, while also recognizing that the external audit is just one aspect of quality financial reporting;
- Most stakeholders endorsed a flexible approach that would allow an audit committee, working with the external auditor, to customize a portfolio of AQIs that best suits its specific information needs;
- Some stakeholders indicated that they already have the tools necessary to gauge the quality of their audit;
- Audit committee members stated that AQIs alone, without context, cannot adequately communicate factors relevant to a particular audit engagement or audit firm;
- Stakeholders stated that the process of identifying and evaluating AQIs needs to be audit committee-driven and iterative, and will require continuous assessment and refinement to meet the changing information needs of audit committees; and
- Audit committee members expressed strong concerns that public disclosure of engagement-level AQIs could lead to unintended consequences. The consensus was that disclosing engagement-level AQI information should be voluntary.