New framework on audit quality

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19 Feb 2014

The International Auditing and Assurance Standards Board (IAASB) has published a framework on audit quality, which aims to raise awareness of the key elements of audit quality, encourage key stakeholders to do more to increase audit quality, and facilitate greater dialogue between key stakeholders on the topic.

The publication, A Framework for Audit Quality: Key Elements that Create an Environment for Audit Quality, notes that there is no definition of "audit quality" that has been universally recognised.  Reasons for this posited in the paper include the judgemental nature of aspects of underlying financial statements, together with other factors such financial statements only providing partial insight into audit quality, the varying nature of audits, differences in perspectives among stakeholders, and limited transparency about audit work and audit findings.

The framework does not include a definition of 'audit quality', but instead notes that the term "encompasses the key elements that create an environment which maximizes the likelihood that quality audits are performed on a consistent basis". Accordingly, in establishing the audit quality framework, the publication seeks to describe the inputs, processes and outputs factors that contribute to audit quality across a broad spectrum: at the engagement level, the audit firm, and national levels.  However, the framework does not seek to provide guidance on the measurement of audit quality.

The 'Feedback Statement' accompanying the Framework provides more background to this approach:

The IAASB concluded that describing audit quality in a holistic way, including qualitative factors with respect to inputs, processes and outputs, as well as interactions and contextual factors, is in and of itself an important contribution to the debate on audit quality. Such an approach reflects that, while the primary responsibility for performing quality audits rests with auditors, audit quality is best achieved in an environment where there is support from other participants in the financial reporting supply chain. However, the holistic approach lends itself less to direct measurement.

The IAASB believes the publication of the framework is in the public interest for many reasons, including assisting in the setting of auditing standards. The IAASB itself intends to use the framework in future revisions to International Standard on Quality Control ISQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and the International Standards on Auditing (ISAs).

Click for IAASB press release (link to IFAC website).

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