Resource Outlines Six Possible Elements of Audit Quality Reporting
Washington, D.C. – The Center for Audit Quality (CAQ) today released a Resource on Audit Quality Reporting to highlight some important elements of audit quality that U.S. audit firms could consider in refining or developing their own reporting regarding their public company audit practice.
“The CAQ and its members believe that audit quality reporting can foster greater confidence in the public company audit process by assisting financial statement users, audit committee members, and other stakeholders in understanding how an audit firm’s management and operations support the performance of high quality audits,” said CAQ Executive Director Cindy Fornelli.
“As regulators and standard-setters explore ways to increase auditor transparency and update the reporting model, this is an example of the profession’s efforts to improve communication with key stakeholders regarding firm activities aimed at enhancing audit quality,” Fornelli added.
The resource is not intended to include all possible audit quality reporting topics, nor is it suggesting that all such topics be reported. However, it is intended to assist the profession in its efforts to communicate information that describes how its system of quality control supports the performance of high quality audits and any recent enhancements or other firm initiatives intended to enhance audit quality.
Some audit firms currently report this type of information through various mechanisms, aimed at different audiences, including the audit committees of the companies they audit and their own personnel.1 In addition, several U.S. audit firms currently publicly issue audit quality reports.
The CAQ Resource on Audit Quality Reporting outlines the following six possible elements of audit quality reporting:
I. Firm Leadership and Audit Firm Tone at the Top
II. Independence, Objectivity and Skepticism
III. Audit Process, Methodology and Performance
IV. Professional Development and Competency
VI. Firm Organization and Structure
The CAQ encourages individual audit firms to tailor this type of reporting to best describe the specifics of its public company/issuer practice and to periodically update such reporting to highlight any significant changes in audit firm policies and practices or recent investments in audit quality.
The CAQ is committed to updating this resource in the future to reflect changes in the regulatory and standard-setting environment.
About the CAQ:
The Center for Audit Quality (CAQ) is an autonomous 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.
Some audit firms must produce reports to audit committees in response to securities exchange listing requirements. In addition, some firms must produce public reports to comply with disclosure requirements mandated by other jurisdictions (e.g., the European Union’s 8th Company Law Directive 2006/43/EC, Article 40 Transparency report). These reports may contain some of the elements of audit quality reporting discussed in this practice aid.