IFIAR publishes report of 2017 survey inspection findings

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09 Mar, 2018

The International Forum of Independent Audit Regulators (IFIAR) has published ‘International Forum of Independent Audit Regulators – 2017 Survey of Inspection Findings’ (“the report”). IFIAR highlights that “although the frequency of findings from inspections of individual audit engagements has reduced on an overall basis compared to the last survey, progress is not experienced in all jurisdictions or at the same rate”. It further comments that “these results affirm IFIAR’s views that the global networks must continue in their efforts to strengthen their systems of quality control and drive consistent execution of high quality audits throughout the world”.

IFIAR comprises 52 independent audit regulators from jurisdictions in Africa, the Americas, Asia, Europe, the Middle East and Oceania. IFIAR provides a forum for regulators to share knowledge of the audit market and share the practical experience gained from their independent audit regulatory activity.   The Financial Reporting Council (FRC) is a member.

The report summarises the key inspection findings from the audits of listed public interest entities (including systematically important financial institutions) and firm systems of quality control submitted by 42 of IFIAR’s members. Findings were submitted from the most recent audit inspection reports of members during the twelve months ended 30 June 2017. IFIAR collected information about two categories of activities; inspections performed on firm-wide systems of quality control and inspections of individual audit engagements.

IFIAR has challenged the global audit networks to reduce the percentage of listed PIE audits that have inspection findings by at least 25 per-cent (to 29 per-cent or less) over a four year period using the 2015 survey results as a baseline. This report reflects the networks’ progress at the measurement period’s mid-point and indicates that there is a 30 per-cent rate of findings.

The report identifies that in the area of firm-wide systems of quality control “for all but one quality control inspection theme, the rate of firms inspected with at least one finding reported in the 2017 increased compared to the 2016 survey results”. The quality control elements with the highest rates of inspection findings include engagement performance, independence and ethical requirements, human resources and monitoring.

With regards to inspections of individual audit engagements, “forty percent of the audits inspected had at least one finding”. The two areas with the highest rate and greatest number of findings in the 2017 survey were accounting estimates and internal control testing. The report highlighted that “revenue Recognition findings levels were comparatively lower” in the 2017 survey.

In June 2017 the Financial Reporting Council (FRC) published its own report of audit quality inspection work carried out by its Audit Quality Review (AQR) team.

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