Audit quality is on everyone’s radar screens these days as regulators and stakeholders heed increasingly complex business environments. So, it’s no surprise that the American Institute of CPAs (AICPA) continues to weigh in on how to improve this segment of the accounting profession.
The report acknowledges the long-term effort required by thousands of firms and auditors, regulators, and standard-setters at state and federal levels to improve audit quality.
“There is still much more to do,” Susan Coffey, CPA, CGMA, executive vice president for public practice at the AICPA, said in a prepared statement. “Ultimately, audit quality results from a profession-wide dedication to continuous improvement and evolution. The profession has taken significant steps to keep pace with the expectations and demands to protect the public.”
Here are the highlights of the progress report.
Prelicensure. Evolution of the CPA exam is in the works. The next version is expected to launch in April with more emphasis on critical and analytical thinking, as well as solving problems. The Audit and Attestation section will test analysis and evaluation, and use simulations to test competence in recognizing issues, identifying errors, challenging assumptions, and applying professional judgment and skepticism.
Standards and ethics. The AICPA Auditing Standards Board is working to improve the relevance of an auditor’s report through proposed changes to Generally Accepted Auditing Standards.
CPA learning and support. Auditors can test their know-how and competency in various subject matters on the AICPA/CIMA Competency and Learning Website. Subjects include employee benefit plan (EBP) audits, government audits, IT, nonprofits, and financial accounting and reporting.
EBP and single-audit engagements have specific learning programs that can lead to a certificate.
Peer review. Root-cause analysis was added to peer reviews after engagements subject to enhanced oversight doubled this year.
Reviewers are studying certain industries and high-risk areas, including EBP audits and single audits. Also, poor-performing firms that fail to remediate can be more quickly booted out of the Peer Review Program.
A new data-matching program this year increases the ability to identify firms that should be enrolled in peer review actually are enrolled, and that engagements that should be reviewed actually are.
The Office of Management and Budget (OMB) Uniform Guidance for Federal Awards requires a quality study every six years covering single audits submitted by the Federal Audit Clearinghouse. The first study on single audits sent to the clearinghouse no earlier than 2018 is scheduled for 2019 or 2020, to be determined by the OMB. Needless to say, AICPA outreach is helping firms prepare for the reviews.
Practice monitoring. Changing peer review into an almost real-time monitoring experience is in the works, along with the pilot of a self-monitoring tool that firms can use internally.
Enforcement. The AICPA Professional Ethics Division is working with the National Association of State Boards of Accountancy and the US Department of Labor (DOL) on an initiative that would allow the division and DOL to share investigative files with state boards of accountancy. The division also is searching public databases to identify possible issues for outreach efforts.
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