Using audit quality indicators: What audit committees need to know
This publication provides step-by-step guidance to using audit quality indicators.
Many audit committees have been hearing about audit quality indicators (AQIs) – quantitative measures of particular aspects of an audit – and how they might spark a discussion both internally and with the external auditor to improve audit quality. But they may not know how to go about the process due to a lack of information available. This joint publication from CPA Canada, the Canadian Public Accountability Board (CPAB), and the Institute of Corporate Directors, Audit Committee Guide to Audit Quality Indicators, was developed to provide much-needed direction in this matter.
The great thing about this guide, in my view, is that it leverages the experience from a project run by CPAB with the input of key stakeholders to set out a practical approach. For example, the guide highlights that management plays an important role in audit quality so there are even AQIs enhancing this broader perspective. AQIs can therefore be a useful tool an audit committee uses to meet its responsibilities for oversight of the external audit process.
The five-step process outlined in the guide is flexible enough that it can be scaled to meet the specific needs of most audit committees. It is not a "one-size fits all" approach. For example, the guide does not specify which AQIs must be identified, but provides specific examples of measures that may be relevant to meeting the audit committee's objectives and to assist in evaluating audit quality – a somewhat nebulous concept.
Even if an audit committee is not familiar with what AQIs are or how you use them, the guide provides links to resources to move the committee up the learning curve, including the benefits and challenges of AQIs.
But one thing to remember – AQIs are not the only thing an audit committee needs in order to manage or evaluate audit quality– and their usefulness may take time to evolve. The key is using them to facilitate a more informed and meaningful conversation about audit quality among the audit committee, management, and the audit firm over time.
Keep the conversation going
As Canada becomes more familiar with the use of AQIs in practice, I think this guide is a measured approach that will encourage more audit committees to take the plunge. What do you think? Are you ready to dive in?
Post a comment below or email me directly.
Conversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.
Disclaimer
The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.
