The Center for Audit Quality has written to the Public Company Accounting Oversight Board to offer its perspectives on audit quality indicators in preparation for a meeting later this week of the PCAOB’s Standing Advisory Group.
The CAQ's letter outlines its perspectives on the components of an audit quality definition, the beneficiaries of an audit, the role others have in affecting an audit, and how the most relevant audit quality indicators may be identified.
“The CAQ believes audit quality indicators could be used to better inform audit committees and other stakeholders about audit quality, and how it evolves over time,” said CAQ executive director Cindy Fornelli. “We feel it is appropriate to share our perspectives in advance of the SAG meeting in an effort to further the dialogue on this important topic.”
In its letter to the PCAOB, the CAQ described the components of an audit quality definition, the beneficiaries of an audit, stakeholders contributing to audit quality and financial reporting, and selection criteria for audit quality indicators.
She said the selection process of audit quality indicators should be supported by a careful analysis of pros and cons of each proposed indicator. “We believe that such analysis should include robust validation, including field testing, to provide evidence that the indicators are accomplishing the objectives set forth in the criteria noted above,” Fornelli wrote. “In some cases, academic research may also provide an important source to inform the analysis.”
As the PCAOB seeks additional feedback on its initiative, Fornelli indicated that the CAQ hopes to continue to contribute to the dialogue associated with providing a broader understanding of audit quality, its underlying elements and potential indicators.
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