Based on observations from its inspections, as well as an analysis of the results of firm audit quality action plans, the Canadian Public Accountability Board (CPAB) issued a publication in June identifying four key areas where it believes audit firms need to focus to improve audit quality in a sustainable manner.\nThe following highlight the four the key areas of focus CPAB identifies along with its recommendations:\nBuild the right teams:\n\n Ensure audit teams have the technical competence and industry experience to match the complexity and business of reporting issuers (which may include concentrating the audit of reporting issuers in a smaller number of offices)\n\nProvide the right support:\n\n Make consultation resources available locally (which may require a permanent increase in technical and specialist support)\n Perform pre-issuance technical reviews of financial statements (which should be mandatory for clients above a certain risk threshold, or where issues have been noted in the past)\n\nConduct in-process reviews:\n\n Conduct in-process reviews (reviews of audit files by technically strong assurance staff or partners in real time, throughout the audit)\n\nAssign accountability for audit quality:\n\n Accountabilities for audit quality should be specifically assigned to individuals and included within their job descriptions\n Include audit quality in performance evaluations\n Develop and utilize audit quality metrics for assessing and monitoring audit quality\n\nCPAB believes each of the focus areas is important to building sustainable audit quality and recognizes that it may not be possible to fully implement each initiative immediately.\nThe publication provides a useful overview of actions some firms may have taken to build sustainable audit quality into their organizations, and recommends that other firms adopt them. CPAB states firms should review the recommendations, prioritize them and develop a plan to implement relevant recommendations over a period of time.\nThere is the possibility that firms may make different assumptions about the authority and prescription of this publication. Some may presume it is designed to provide helpful advice and that firms can use their judgment in deciding whether and how to implement CPAB’s recommendations. Others may presume that because the publication is issued by CPAB firms are expected to adopt all of the recommendations and failure to do so be viewed as a deficiency. For example, CPAB recommends firms make consultation resources available locally and conduct in-process reviews. There may be cheaper, more effective, ways of supporting engagement teams and identifying audit quality problems on a timely basis. However, firms may be reluctant to implement them if they do not fully comply with CPAB’s recommendations.\nBuilding sustainable audit quality is a laudable objective. CPAB has identified that firms in Canada are taking up the challenge. Providing examples of good practices helps firms as they consider their next steps towards sustainable audit quality. However, in my view, one size does not fit all. Firms need to have the flexibility to design sustainable practices within a principles-based framework that allows for innovation nuanced for a firm’s individual circumstances. Hopefully CPAB’s publication can be used for this purpose.\nKeep the conversation going…. consider how your firm has developed sustainable audit quality practices and share them with me.\nPost a comment below; or email me directly.\nEric\nConversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.