Volume 3, Issue 7

July 2009

I. CAQ Announces Funding of Audit Research

The Center for Audit Quality (CAQ) announced the selection of auditing-related research projects by the CAQ’s Research Advisory Board (RAB) in response to a request for proposals (RFP) released in March. Academics from around the world submitted nearly 50 proposals that addressed one of four topics: audit quality, professional judgment, professional skepticism, and the value of the audit

The RAB, which includes four members from the academic world and four representatives from the auditing profession, selected five projects for funding:

• “The Collaboration Between Financial Statement Auditors and Fraud Experts in Fraud Risk Assessment,” by Stephen Asare, University of Florida; and Arnold Wright, Northeastern University
• “A Review and Model of Auditor Judgments in Fraud-Related Planning Tasks”, by Jacqueline Hammersley, University of Georgia
• “Does Context Influence Auditors’ Fair Value Judgments?” by Vicky Hoffman, University of Pittsburgh; Christine Earley, Providence College; and Jennifer Joe, Georgia State University
• “Training Auditors in Professional Skepticism,” by David Plumlee and Brett Rixom, University of Utah; and Andrew Rosman, University of Connecticut
• “Enhancing Professional Skepticism,” by Ken Trotman, University of New South Wales, Australia

“The funding of these research projects is part of the CAQ’s ongoing efforts to provide opportunities for active engagement between the academic community and the profession, in support of our mission to advance audit quality,” according to the CAQ’s Executive Director Cindy Fornelli. The CAQ’s goal is to make the request for research on issues important to the profession an annual initiative.

II. CAQ Webcast Series on AS 5 Continues with “Part II: Testing Controls”

Cindy Fornelli listens as Jennifer Burns of Deloitte discusses Testing Controls

More than 900 people registered for the webcast, which included the following panelists: William Powers, National Associate Director, Information Systems Audit Inspections, PCAOB; Jennifer M. Burns, Partner, Deloitte LLP; and Michael G. Gaynor, Partner, KPMG LLP. The panel was moderated by Cindy Fornelli.

The webcast on testing controls, which followed a discussion on the fundamentals to AS 5 in Part I of the webcast series, encouraged auditors of non-accelerated filers to be strategic when planning and performing the audit, to focus on risk assessment and risk re-assessment throughout the audit process, to use the resource tools available from the PCAOB, the SEC, COSO and the CAQ’s web resource on AS 5, and discussed the unique challenges in the internal control environments of smaller public companies.

Parts I & II of the webcast series are available online in the CAQ’s Webcast Archive.

III. Cindy Fornelli Discusses Risk Management at NYSE Event

Cindy Fornelli recently participated in a panel discussion during the New York Stock Exchange’s conference on “Challenges and Solutions of Managing Risk.” Fornelli’s panel discussion focused on “Building Enterprise Risk Management (ERM) into Strategy, Planning and Culture.” Fornelli provided practical tips for management and boards to consider as companies implement or review their ERM systems.

Fornelli said that companies must take a comprehensive, thoughtful approach when identifying and prioritizing risks. Implementing risk management systems must be “enterprise wide,” Fornelli told the audience. “You cannot do this in stovepipes.” Something for companies to consider, according to Fornelli, is whether there should be a “risk enterprise officer” or a point person whose sole responsibility is to “think about risk management and how to address it.”

Once a company has developed a framework for ERM, scenario planning and self-assessment allow management and the Board of Directors to examine the performance of the company’s risk management system. Implementing these fundamentals, said Fornelli, adds value to a corporation and echoes the conference’s theme of a “return to enhancing shareholder value.”