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Making a Bold Move to Improve Audit Quality

Like many of you, my background is in auditing. We launched our careers playing a vital role on an audit team. From those early days, with every engagement, we gained increased confidence in this complex discipline. We developed the understanding that our exemplary abilities to perform the audit are fundamental to the public’s trust in our profession.

In recent years, audit quality and audit relevance have become focal points for both public and private companies. It’s more important than ever for the profession to remain vigilant and uphold excellence. That’s why I’m proud that the AICPA has developed another plan, a bigger and bolder one than ever before to make this happen.

About a year ago the AICPA announced its Enhancing Audit Quality (EAQ) initiative, publishing a discussion paper, Enhancing Audit Quality: Plans and Perspectives for the U.S. CPA Profession, for member and stakeholder feedback. The paper, released last summer, spelled out our strategic thinking on how to improve audit quality. We received more than 860 comments from various constituents, and with that feedback we developed our 6-Point Plan to Improve Audits. I summarize the highlights of the plan in this short video.

Addressing Quality throughout the Audit Process

A CPA’s quest for quality starts before his or her career begins, so the plan integrates quality enhancements throughout an auditor’s journey -- from before an individual is licensed as a CPA, to when he or she builds professional competencies and engages practice monitoring and undergoes peer review. It places the necessary emphasis on areas that will drive higher audit performance, recognizing that focus on these areas is important both before the audit engagement is performed and after. The plan’s six areas are:

  1. 6 pt planPre-licensure – A next version of the CPA exam designed to increase assessment of higher-order skills, such as critical thinking and professional skepticism; high school AP accounting course; changes to college-level accounting education; additional doctoral-level audit professors with practical experience. 
  1. Standards and Ethics – Quality control standards implementation support; auditor’s report revisions; evaluation of clarified standards implementation; ethics code codification.
  1. CPA Learning and Support – Competency models for audit engagements, including employee benefit plan and governmental audits; competency assessment tools; targeted resources to develop competencies; certificate programs to demonstrate competence.
  1. Peer Review – Increased focus on greater risk industries and areas; more significant remediation; root cause analysis; termination from the peer review program after repeat quality issues.
  1. Practice Monitoring of the Future – Long-term initiative for near real-time, ongoing monitoring of firm quality checks using robust technological platform.
  1. Ethics Enforcement and NASBA Collaboration – More aggressive pursuit of reported deficiencies and stronger ties with the National Association of State Boards of Accountancy and state boards of accountancy.

Direction Guided by Stakeholder Feedback

As you can imagine, with close to 900 responses from a wide range of stakeholders, the feedback to the EAQ discussion paper was varied. Most striking was how many common themes emerged, one of which was that the single biggest obstacle to exercising due care in the audit process is firms taking on audits in areas where they need more developed competencies. Many readers noted the increasing specialization and complexity of many businesses.

It’s essential that practitioners expand their services to meet clients’ needs, but we must make sure to comply with the Code of Professional Conduct and be competent for those engagements. CPA firms need to honestly and accurately understand and assess their own expertise. We believe that the competency models, assessment tools and certificate programs described in the 6-Point Plan will help firms do just that.

Respondents from all areas of the profession also supported a number of specific measures to help improve the audit, including more frequent use of engagement quality control reviews by experts; holding practitioners accountable when non-conforming engagements are detected through peer review and ethics enforcement; and making sure only the most qualified practitioners are evaluating the work of firms during the peer review process. Actions on these issues are also reflected in the 6-Point Plan.

With the 6-Point Plan in place, wherever an auditor is in his or her career -- whether a member of the engagement team, or signing off as audit partner -- he or she can continue to uphold the public’s trust in our profession.

Each of us contributes to the profession’s reputation, and to the value and relevance of our services in the financial marketplace. Together, we can hold ourselves accountable and continue on our journey of audit excellence. I urge you to read the 6-Point Plan to understand our profession’s next steps.

Susan S. Coffey, CPA, CGMA, Senior Vice President – Public Practice and Global Alliances, American Institute of CPAs.

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