The Center for Audit Quality released a document Tuesday highlighting some important elements of audit quality that audit firms should consider in refining or developing their own reporting regarding their public company audit practice.
The CAQ cautioned that the document, “Resource on Audit Quality Reporting,” is not supposed to include all possible audit quality reporting topics, nor is the CAQ suggesting that all such topics be reported. However, the document is intended to assist the profession in communicating 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.
“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 in a statement. “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.”
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. 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 is encouraging individual audit firms to tailor this type of reporting to describe the specifics of their public company and issuer practice and to periodically update the reporting to highlight any significant changes in audit firm policies and practices or recent investments in audit quality.
The CAQ plans to update the resource document in the future to reflect changes in the regulatory and standard-setting environment.
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