CAQ offers audit quality disclosure framework
The Center for Audit Quality has issued a new framework to help auditing firms make disclosures about how they promote and monitor the quality of the audits they perform.
The CAQ’s Audit Quality Disclosure Framework aims to help more firms develop these types of disclosures, which many accounting firms now offer through annual transparency or audit quality reports.
The disclosure framework can assist firms in their efforts to determine, assess and communicate information that could be useful to stakeholders in understanding how audit quality is supported and monitored at the firm level. The disclosures can be about how a firm monitors audit quality, including related metrics, along with the investment the firm makes in its people and other resources, processes, policies and technology. This framework can also be used to help stakeholders better understand how a firm is trying to manage various risks to audit quality.
"Public company accounting firms make significant investments in their people, processes, policies and technology related to audit quality," said CAQ Executive Director Cindy Fornelli in a statement. "Our framework can facilitate consistency and comparability over time as firms foster transparency and trust by informing the public about their work to maintain and enhance audit quality."
The CAQ developed the framework in consultation with some of its member firms. The framework is built around three main principles:
- It’s voluntary and illustrative, instead of being prescriptive or all-inclusive.
- The framework is meant to be flexible, giving firms the ability to tailor the information that’s most relevant and meaningful to audit quality.
- The framework relates to disclosure of a system of quality control at a firm level, instead of the engagement level.
The framework also includes several "Points of Focus" for six elements of audit quality, along with examples of firm-level audit quality indicators:
- Leadership, Culture and Firm Governance
- Ethics and Independence
- Acceptance and Continuance of Clients and Engagements
- Engagement Team Management
- Audit Engagement Performance
The framework builds on some previous efforts of the CAQ, its member firms and other organizations such as the Public Company Accounting Oversight Board to develop audit quality indicators and perspectives. For more information on the CAQ's efforts, visit its dedicated AQIs resource page.