AICPA Unveils 6-Point Plan to Improve Audit Qualityby
A six-point plan released by the American Institute of CPAs (AICPA) on May 14 details how audit quality in the United States can be enhanced, based on input from the accounting community.
The plan focuses on financial statement audits for private companies, employee benefit plans, and US governmental entities.
Last August, the AICPA released a discussion paper seeking input from CPAs, regulators, financial statement users, and others in the profession on how better audit performance of private entities can be achieved.
The discussion paper summarized a multifaceted effort, Enhancing Audit Quality, that the AICPA launched in May 2014. AICPA officials said the goal of the initiative is to align the objectives of all audit-related AICPA efforts and collectively improve the quality of audit services delivered by the profession.
The AICPA received more than 860 comments from practitioners and other stakeholders on ways to improve audit quality. The six-point plan represents the collective feedback of respondents and profession leaders, according to the AICPA.
“Audit quality has always been a CPA profession imperative. And as the issue has risen in importance worldwide, we recognized that a bigger, bolder step was needed to address challenges related to financial statement audit performance,” AICPA President and CEO Barry Melancon, CPA, CGMA, said in a written statement. “This concerted effort is at the core of the profession’s quality-driven mission to meet the needs and challenges of a rapidly changing financial marketplace.”
The action plan outlines six areas in which audit quality can be improved:
1. Pre-CPA 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 Advanced Placement accounting course; changes to college-level accounting education; additional doctoral-level audit professors with practical experience.
2. Standards and ethics. Quality-control standards implementation support; auditor’s report revisions; evaluation of clarified standards implementation; ethics code codification.
3. CPA learning and support. Competency models for audit engagements, including employee benefit plans and governmental audits; competency assessment tools; targeted resources to develop competencies; certificate programs to demonstrate competence.
4. 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.
5. Practice monitoring of the future. Long-term initiative for near real-time, ongoing monitoring of firm quality checks using robust technological platform.
6. Ethics enforcement and NASBA collaboration. More aggressive pursuit of reported deficiencies and stronger ties with the National Association of State Boards of Accountancy (NASBA) and state boards of accountancy.
“The entire profession must be committed to enhancing audit quality, just as the AICPA is committed to supporting our members with the necessary tools, training, and resources,” said Susan Coffey, CPA, CGMA, AICPA senior vice president of public practice and global alliances. “This six-point plan will promote the pursuit of quality throughout a CPA’s journey – from before an individual is licensed to when he or she builds professional competency and engages in peer review and practice monitoring. It places the necessary emphasis on areas that we believe will help our members stay focused on achieving the highest level of performance for financial statement audits.”