PCAOB issues concept release on audit quality indicators

In its effort to drive audit quality, should Canada proactively identify its key audit quality indicators (AQI) or draw learnings from the U.S. project that’s currently underway?

Because audit quality is so difficult to assess, the U.S. Public Company Accounting Oversight Board (PCAOB) seeks to identify key AQI that can be used to inform discussions about the quality of the audit among users. In this respect, the PCAOB took a broad approach to developing a portfolio of AQI that considers different perspectives on audit quality, whether they are audit committees, audit firms, investors or audit inspectors. The PCAOB issued a concept release on its AQI in July 2015, the summation of two years’ work to provide new insights about how to evaluate the quality of audits.

The concept release recognizes the work that the U.S. Center for Audit Quality (CAQ) has already done in this space, as discussed in an earlier blog. The CAQ approach has a lot of merit because it begins by focusing on communications with the audit committee about engagement-specific AQI, a much narrower focus to the issue. The CAQ has been pilot-testing its approach over the last year or so. Hopefully, the learnings from the CAQ project will help guide the PCAOB as it moves forward.

So, does Canada need to begin its own AQI project? On the one hand, if Canada starts its own project it can go at its own pace, control its own agenda, and develop AQI that best fits the Canadian environment.

On the other hand, the topic is complex; requiring significant resources and Canada may not ultimately arrive at a significantly different solution than the U.S. So perhaps, a better approach might for be for Canada to wait and leverage learnings from the PCAOB project.

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CPA Canada’s Audit Quality Blog is designed to create an exchange of ideas on developments and issues in global audit quality, as well as their impact in Canada.

About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada

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