A recently released audit quality report by the American Institute of CPAs (AICPA) focused on five key accomplishments in the past year: peer review, audit documentation, single audits, employee benefit plan audits and quality control.
The 2017 Enhancing Audit Quality (EAQ) report is the most recent report card on audit quality since the AICPA first began tracking in 2014. It’s worth noting that a disclaimer at the beginning of the report notes that the contents do not necessarily reflect the AICPA’s position or opinion.
“Through this initiative, the AICPA uses a data-driven approach to identify trends in audit quality and address those trends through targeted action,” said Susan Coffey, AICPA executive vice president for public practice, in a prepared statement.
AICPA said that financial statement audits and assurance services play a broader role in society than most people realize and, as business and regulatory issues grow more complicated, the commitment of accountants to quality audits is even more important. In turn, that would be a boon to small business owners, investors and the public.
In its conclusion, AICPA said that with the EAQ, it remains committed in its long-term initiative to promote quality services. AICPA wrote that looking to the future, EAQ will continue to: implement reforms to make the Peer Review Program more effective; promote the value of audit and assurance in the marketplace; and conduct research to uncover more meaningful information about audit quality trends.
Here are what the report states:
Peer Review. Various changes in 2016 and 2017 now require reviewers to meet more qualifications. The changes also hasten remediation and aid in removing reviewers and firms who are unwilling or unable to perform.
Audit Documentation. Inadequate or the lack of audit documentation has proved to be a key problem. The AICPA developed an awareness campaign that includes a documentation toolkit. The toolkit, in fact, has received more than 10,000 page views and more than 4,500 downloads of the documentation resources in its first six months.
Single Audits. In a random sample of single audits, three factors are strongly linked to quality: the number of single audits a firm performed annually, qualifications of a firm’s engagement partner, and membership in the Governmental Audit Quality Center.
Employee Benefit Plan Audits. The Financial Accounting Standards Board’s has been informed of the need for simplified employee benefit plan reporting. Thus, the board released a new accounting standard to simplify benefit plan reporting.
Quality Control. The AICPA is working with the International Auditing and Assurance Standards Board on quality control. That may result in revised quality control standards.
A new credential and updated CPA exam also were produced.
The exam, released April 1, targets a candidate’s “higher-order” skills, such as applying professional skepticism and judgment.
The AICPA also launched the new Certified in Entity and Intangible Valuations credential and Mandatory Performance Framework to help increase competence and improve transparency and consistency in fair value measurements.
Credential holders will follow the performance framework, which describes the work required to provide auditable fair value measurements.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.