Young business woman and man going over business reports

Audit committees and management have more frequently been turning to audit quality indicators (AQIs) as a quantitative way to measure various aspects of the external audit. (Photo by Indypendenz/Shutterstock)

Accounting | Audit | Ethics

New audit quality indicator guide helps companies easily define priorities for a successful audit

Identifying the right indicators is an integral part of the step-by-step process 

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Measuring the success of an audit can be difficult. With so many variables to consider, it can be a challenge to assess if targets were truly met and if the audit was executed to the highest level of quality possible. To help with this, audit committees and management have more frequently been turning to audit quality indicators (AQIs) as a quantitative way to measure various aspects of the external audit.

For more than two years, the Canadian Public Accountability Board (CPAB) surveyed stakeholders via a pilot project to help determine what AQIs are most heavily used by audit committees, management and external auditors. 

“It’s an area that audit committees have been asking for more information about,” says Jeremy Justin, chief risk officer and VP, strategy at CPAB. 

The responses received during the pilot revealed there is a lot of data that can be gained from an audit besides the usual basic reporting. 

“What we’ve heard is the iceberg analogy, that the only thing you see is the part above the water, but there’s so much more underneath,” he adds. 

In response, CPA Canada, CPAB, the Institute of Corporate Directors and a specially formed advisory committee developed the non-authoritative Audit Committee Guide to Audit Quality Indicators to help companies better navigate the AQI process.   

“There is no one-size fits all approach [to AQIs],” says Stefan Mihailovich, GPLLM, CPA, CA, principal, corporate oversight and governance at CPA Canada. “This is a step-by-step guide that helps audit committees, as well as management, identify and track AQIs that matter to the particular organization.”

Mihailovich sees the benefit of not having more than five to 10 AQIs, as it allows all parties involved to focus on core measures that can lead to a higher quality audit. 

“The point of the indicator is to have a trackable metric that then sparks a discussion,” he says. “So it’s really important that the auditor and management know what’s being measured so they can perform towards that.” He also notes that a variance doesn’t automatically suggest the audit was poor, but it does flag the need to understand the discrepancy and why the target wasn’t met. 

Both Mihailovich, and CPAB’s Justin stress that discussion between the audit committee, management and external auditor is a key step in the AQI process which can ultimately lead to a higher-quality audit. To learn more about properly selecting and implementing AQIs join CPA Canada for the webinar, Audit Quality Indicators: Strengthening the audit process, on October 24, 2018.

For more

Get a deeper understanding of what external auditors do with CPA Canada’s three-part video series: A primer for audit committee members; The audit process; and, The audit process continued.