Profession Takes Bold Steps toward Audit Quality
By: Susan S. Coffey, CPA, CGMA
Senior Vice President - Public Practice and Global Alliances
American Institute of Certified Public Accountants (AICPA)
The CPA profession has worked hard to earn its reputation for trust. The quality of services we provide, plus our commitment to stakeholders in the financial marketplace, set the foundation that enables the public to rely on us. Our CPA brand research shows that the key words the public associates with CPAs include integrity, objectivity, competence and excellence.
Auditing is at the core of the many CPA services that protect the public. However, in recent years audit quality and audit relevance have become focal points for both public and private companies. We operate in a complex, challenging and fast-paced business environment, and auditors must remain vigilant, maintain excellence and continue to meet the expectations of those we serve.
The profession recently took a bold step in reaffirming our ongoing commitment to high-quality audit performance. We released a 6-Point Plan to Improve Audits.
The plan is a roadmap for the profession to achieve the goals outlined in the Enhancing Audit Quality (EAQ)
initiative, launched in May 2014 to support excellence at every touch point along the financial statement audit process. The comprehensive EAQ initiative includes a focus on specialized audits, such as those of governmental entities and employee benefit plans.
Stakeholder Input Shapes the Direction of the Quality Journey
To obtain member and stakeholder insights on the AICPA’s strategic thinking on improving audits, the Institute last summer published a discussion paper called Enhancing Audit Quality: Plans and Perspectives for the U.S. CPA Profession.
The Institute received more than 860 comments, and heard additional views from individuals and groups at conferences, meetings and other forums. We also heard from several state societies and state boards of accountancy. Many of the recommendations were brought to the appropriate AICPA board, committee or task force for consideration and, if appropriate, approval.
Action Speaks Louder than Words
The 6-Point Plan puts the input we received into action. We’ve designed a roadmap that integrates quality enhancements throughout an auditor’s journey. It starts before an individual is licensed as a CPA. Then, the journey continues as the CPA builds professional competencies, engages in practice monitoring and plays a role in peer review—either as a reviewer or as a practitioner under review. The plan places the necessary emphasis on areas that will drive higher audit performance, recognizing that focus on these areas is important both before the audit engagement is performed and after. The plan’s six areas are:
- Pre-licensure – A next version of the CPA exam designed to increase assessment of higher-order skills, such as critical thinking and professional skepticism; high school advanced placement accounting course; changes to college-level accounting education; additional doctoral-level audit professors with practical experience.
- Standards and Ethics – Quality control standards implementation support; auditor’s report revisions; evaluation of clarified standards implementation; ethics code codification.
- CPA Learning and Support – Competency models for audit engagements, including employee benefit plan and governmental audits; competency assessment tools; targeted resources to develop competencies; certificate programs to demonstrate competence.
- Peer Review – Increased focus on greater risk industries and areas; more significant remediation; root cause analysis; termination from the peer review program after repeat quality issues.
- Practice Monitoring of the Future – Long-term initiative for near real-time, ongoing monitoring of firm quality checks using robust technological platform.
- Ethics Enforcement and NASBA Collaboration – More aggressive pursuit of reported deficiencies and stronger ties with the National Association of State Boards of Accountancy and state boards of accountancy.
Take a Bold Step with Your Peers
Audit quality has always been an imperative for the CPA profession. As businesses have become more complex, so too have financial statement audits. A year ago we recognized that bigger, daring steps were needed to address challenges related to audit performance, and now we have a pathway forward for doing just that.
Every CPA plays a role in upholding the profession’s reputation and to strengthening the value and relevance of our services. Please join us in continuing the journey of audit excellence.