January 29, 2016

CAQ Snapshot: January 2016

New Report Highlights Efforts on Audit Quality Indicators

The Center for Audit Quality (CAQ) in January released a new report, Audit Quality Indicators: The Journey and Path Ahead. Capturing fresh insights from a global series of roundtables with audit committee members and other stakeholders, the report surveys the CAQ's work to date on audit quality indicators (AQIs) and suggests a path forward. 

Key findings from the roundtables—held in New York, Chicago, London, and Singapore during the summer of 2015—include the following:

  • Roundtable participants expressed a desire for information that can assist audit committees in their assessment of the more qualitative aspects of the audit, such as the engagement team having the right mindset to bring forth professional skepticism and auditor judgment. 
  • Audit committee members recognized that AQIs can help them oversee the quality of their external audit, even if external audit is just one aspect of quality financial reporting. 
  • Most participants endorsed a flexible approach that allows an audit committee, working with the external auditor, to tailor or customize the selection and portfolio of AQIs that best suit its specific information needs. 

“Further dialogue and continued collaboration among all stakeholders is needed as we develop AQIs and best practices for their use,” said Michele J. Hooper, President and CEO of The Directors’ Council and CAQ Governing Board lead on the AQI Initiative, in a statement accompanying the report's release. “We have learned a great deal on this journey, but much more remains to be done to strengthen our ability to determine and assess audit quality,” added Stephen Chipman, CEO (retired) of Grant Thornton LLP and former AQI Initiative co-lead on the CAQ Governing Board. “The CAQ looks forward to continuing its work towards this vital goal.”

Year in Review Celebrates Profession's Future Focus

The CAQ has published the latest edition of its annual Year in Review. The publication, this year titled “Future Focused,” documents key efforts and accomplishments of the CAQ and the public company auditing profession during calendar 2015.

"As a profession, public company auditors do not rest on their laurels," says the Year in Review foreword. "They push to improve continually."

Year in Review 2015Among other topics, the Year in Review covers the CAQ’s proactive work to enhance audit quality, its ongoing support for independent research, its partnership with important stakeholders, and its new initiatives to bolster the profession's role and relevance. It also reviews the CAQ's constructive engagement with policymakers at home and abroad on many key issues, including AQIs, effective disclosure, and auditing accounting estimates and fair value measurements.

To request a hard copy of the Year in Review, please contact Andrew Gillies, CAQ Director of Communications, at agillies@thecaq.org

CAQ Letter Applauds Principles-Based Approach in ICGN Stewardship Code 

In a January comment letter, the CAQ offered broad support for the approach taken by the Global Stewardship Code of the International Corporate Governance Network (ICGN). The Global Stewardship Code, which ICGN released in November 2015 for comment, sets forth a range of principles informed by ICGN's policy work regarding the responsibilities of institutional investors.

"The principles-based framework of the Code promotes global consistency in investor stewardship while allowing for jurisdictional differences in approaches needed due to differences in legal environments and cultural norms," said the CAQ's letter.

Among other topics, the CAQ's letter highlighted encouraging recent developments in the area of audit committee reporting in the United States. "We believe that increased transparency can facilitate open dialogue between investors, corporate boards, and management," the letter noted, "and, in turn, reinforce accountability and good governance practices."

"Profession in Focus" Features AICPA's Melancon, PCAOB's Hanson

The CAQ added to its "Profession in Focus" video series with two January episodes. In the first, Barry Melancon, President and CEO of American Institute of CPAs and member of the CAQ's Governing Board, discussed the issue of cybersecurity at length, as well as the state of audit quality broadly. On audit quality, he observed that "people have to be very, very committed to doing the right thing and doing it even better tomorrow. And I think that’s really where the profession is today."

Profession in FocusIn the following episode, Jay D. Hanson, Board Member at the Public Company Accounting Oversight Board (PCAOB), also addressed the overall state of audit quality, as well as the PCAOB's 2016 priorities and the issue of internal control over financial reporting (ICFR). Regarding the latter, Hanson urged continued dialogue, stressing that ICFR is "something that needs a lot of good communication between all the parties."

CAQ Honors Life and Work of Michael G. Oxley 

Expressing sadness at the passing of former U.S. Representative Mike Oxley in early January, the CAQ's Fornelli remembered and praised "a leader whose work shaped the Nation significantly for the better."

"His ability to work with others was just one of many qualities that helped him to compile an amazing list of accomplishments both in the public service and in the private sector," said Fornelli, citing in particular the landmark Sarbanes-Oxley Act of 2002. That law's legacy, she added, "is evident in the robust levels of confidence that investors, from Wall Street to Main Street, show in U.S. capital markets."