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New CAQ Alert Highlights Key Risks for 2013 Audit Cycle

Tuesday, December 17, 2013

Washington, D.C. – To help public company auditing firms address risks in a proactive and accelerated manner, the Center for Audit Quality (CAQ) has published a member alert, “Select Auditing Considerations for the 2013 Audit Cycle.” The alert, which will be updated at least annually, and more frequently as needed, identifies and addresses some of the more judgmental or complex auditing areas, including those that are the focus of regulators. 

“This new alert is another example of how the public company auditing profession is proactively identifying emerging trends and responding to specific regulator concerns,” said CAQ Executive Director Cindy Fornelli. “By summarizing potential areas of risk, we believe this resource will be a valuable tool for CAQ member firms as they head into the 2013 audit cycle.”

The 2013 alert covers the following auditing considerations:

  • Internal Control Over Financial Reporting (ICFR)
  • Professional Skepticism
  • Engagement Quality Review
  • Accounting Estimates, Including Fair Value Measurements
  • Substantive Analytical Procedures
  • Inaccurate or Omitted Disclosures 

On ICFR, for example, the alert provides a summary of a recent PCAOB practice alert discussing observations on ICFR from inspection reports. Among the topics covered are risk assessment, selecting controls to test, information technology considerations, and evaluating identified control deficiencies. 

Additionally, the PCAOB issued a report on December 6, 2013 on registered audit firms’ implementation and compliance with Auditing Standard No. 7 (AS 7), Engagement Quality Review. The PCAOB found that, while firms’ methodologies generally were consistent with the requirements of AS 7, they did not always result in an appropriately executed engagement quality review. The report notes that in a number of engagements in which the PCAOB inspections staff identified audit deficiencies, the audit deficiency should have been identified by the engagement quality reviewer. 

“Audit firms take the inspections process very seriously and devote significant resources to understanding and remediating any deficiencies identified by the PCAOB,” added Fornelli. “Our new alert is a step forward in these efforts.”

The new alert is publicly available at the CAQ’s website.

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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, D.C., the CAQ is affiliated with the American Institute of Certified Public Accountants.

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