Auditor role in supporting audit committees with KPIs

Auditors can assist audit committees as they struggle to address their responsibilities relating to KPIs.

When I talk to audit committee members across the country about how to enhance the relevance and value of the audit, the discussion often turns to key performance indicators (KPIs) in Management’s Discussion and Analysis (MD&A).

KPIs are measures of an entity’s performance that many investors rely on. Because audit committees are responsible for the financial reporting process, including the MD&A, they ultimately have responsibility for KPIs. However, they are often not clear on how to best meet their responsibilities, for example in assessing whether the KPIs are appropriate for the entity and whether they have been reliably calculated. So, a key challenge facing audit committees is how to address these responsibilities in a robust manner.

Resources such as the one discussed below, issued by the Institute of Chartered Accountants of Scotland (ICAS), can be useful for audit committees in developing a robust approach and providing a clearer perspective on what the auditor’s involvement should be with KPIs.


Issues by ICAS, Towards Transparency: Assurance on KPIs – A practical guide for audit committees and boards provides a tool Canadian audit committees can use in assessing the assurance and transparency of KPI reporting.

The guide includes two key sections:

  • the KPI selection process
  • determining the source of assurance

The KPI selection process section suggests five characteristics the audit committee might apply to each KPI used by management in the MD&A:

  • strategic
  • linkage
  • reliability
  • consistency
  • completeness

As well, there is a series of questions audit committees can ask in deciding whether or not the KPIs are the appropriate ones.

The section on determining the source of assurance presents an assurance matrix that has been created to help audit committees determine the source of assurance obtained over each KPI and where each of the KPIs should be positioned in this matrix. Although it provides five illustrative sources of assurance that might be obtained over each KPI, I expect that each audit committee would tailor the sources to its own circumstances, probably based on discussion with management and the auditor. The audit committee can use the matrix to identify the auditor’s involvement, if any, with each KPI and the level of assurance the auditor is providing. The guide sets out a two-step process the audit committee might follow to complete the matrix, and includes possible questions that audit committees might ask at each step.


Auditors are responsible for reading the MD&A as part of their audit of the financial statements and these responsibilities may soon be expanded under proposed new auditing standards. However, there seems to be scope for auditors to provide additional support to audit committees to assist them meet their responsibilities in areas beyond the financial statements. KPIs seem to be one area where this can take place. I think the ICAS resource could help start a conversation between the audit committee and the auditor along these lines.


Post a comment below; or email me directly. Do you agree that auditors should provide more assurance over KPI? Why do you think this is not already happening? Will the ICAS tool help?

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