CAQ Announces Request for Academic Research Proposals on Key Auditing Policy Issues
Monday, December 1, 2014
Washington, DC – The Center for Audit Quality (CAQ) today issued a request for proposals (RFP) to fund independent academic research on auditing-related topics. The RFP focuses on a number of critical policy issues that are priorities for the CAQ and the public company auditing profession, including audits of Internal Control Over Financial Reporting (ICFR), audit quality indicators, audit committee effectiveness, communication and information technology, financial reporting fraud, professional skepticism, and value of the audit.
The CAQ and the public company auditing profession are committed to supporting valuable academic research that can have significant real world impact on the future of auditing and audit quality. This marks the seventh year that the CAQ will award grants for independent, scholarly academic research on topics of interest to the profession.
In 2008, the CAQ established a Research Advisory Board (RAB), comprised of representatives from academia and the profession. In the past six years, the RAB has awarded 25 grants for independent academic research projects on several topics of interest to the profession.
“These projects are very important to the CAQ and to the public company auditing profession because they have the potential to advance the field of public company auditing and to provide useful information that could enhance audit quality,” said CAQ Executive Director Cindy Fornelli.
The CAQ also has produced a brief video that offers expert guidance and advice on how to develop a successful research proposal, which might be of benefit to applicants. The video examines how to identify a good research question, where to find a good research question, and the tools for executing a successful proposal.
Areas of Interest
For 2015, the CAQ is especially interested in proposals that address one of the topics listed below. These topics are illustrative of those that the CAQ believes to have the greatest potential to inform practice.
Many public companies are required to assess the effectiveness of internal control over financial reporting as of their fiscal year end and then report the results in the Form 10-K. In addition, certain public companies are required to have their external auditor, audit and issue an opinion as to whether the public company maintained, in all material respects, effective internal control over financial reporting. In the inspections of the audits of ICFR the PCAOB has identified deficiencies. At the 2014 CAQ Symposium, practitioners provided insights into the audit planning, testing, and evaluation of ICFR. There was also a discussion about the lack of research on the relationship between reported ICFR deficiencies and financial statement restatements.
Audit Quality Indicators (AQI)
The CAQ has endeavored to develop and communicate a point of view on audit quality, including the key elements of audit quality and potential indicators. In 2014, the CAQ published the CAQ Approach to Audit Quality Indicators. The PCAOB plans to release an exposure draft seeking input from stakeholders on an audit quality framework for AQI metrics, and potential uses of those metrics. The CAQ is interested in research that addresses issues with respect to AQIs and the needs and perspectives of key stakeholders, such as investors, audit committee members, and other financial statement users.
Audit Committee Effectiveness
Audit committees play a critical role in the financial reporting process. The CAQ is interested in research that will add to the current understanding of the responsibilities, best practices, characteristics, policies, and structure of effective audit committees. In addition, the CAQ is interested in research that informs future research by adding to the current understanding of the impact of audit committees on the financial reporting process and the audits.
Communication and Information Technology
The CAQ is interested in the impact of communication and information technologies on the audit (e.g., determinations of the sufficiency of evidence; the confirmation process, including areas of use, reliability of information, response rates, form of confirmation requests, impact of third party service providers and challenges associated with an electronic form of confirmation; communications between audit staff and company personnel.)
Fraudulent Financial Reporting
Fraudulent financial reporting continues to be an area of key importance to the CAQ, and the focus of its collaborative partnership with the Financial Executives International, The Institute of Internal Auditors, and the National Association of Corporate Directors. In November, 2014, the Anti-Fraud Collaboration released a new report, The Fraud-Resistant Organization. Broad areas of interest for academic research include understanding the conditions that contribute to financial reporting fraud and assessing related risks; lessons and insights from past frauds that could prove useful in deterrence and detection; mitigating the risks associated with a focus on short-term results on financial reporting; the role of information technology in facilitating the deterrence and detection of fraudulent financial reporting; and the effectiveness of whistleblower programs.
Professional skepticism is a fundamental element underlying the effectiveness of an external audit. Audit firms continue to seek ways to foster the proper application of professional skepticism in practice and the CAQ is interested in research on the antecedents to and fostering of the proper application of professional skepticism.
Value of the Audit
Another area of on-going CAQ interest is the value ascribed to the audit (e.g., debt and equity market effects; the value proposition of audited financial information; the view of stakeholders).
To be considered, proposals should be received by Friday, March 20, 2015. Proposals will be reviewed by the CAQ’s Research Advisory Board. Grants will be announced on or about May 15, 2015.
About the CAQ
The Center for Audit Quality (CAQ) is an autonomous, nonpartisan public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high quality performance by public company auditors, convenes and collaborates with other stakeholders to advance the discussion of critical issues requiring action and intervention, and advocates policies and standards that promote public company auditors’ objectivity, effectiveness and responsiveness to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit www.thecaq.org.