PCAOB seeks comments on audit quality indicators
FINANCIAL REPORTING INSIGHTS |
The Public Company Accounting Oversight Board (PCAOB) recently issued a Concept Release on Audit Quality Indicators seeking comment on the content and possible uses of a potential portfolio of quantitative measures that it thinks may provide new insights about how to evaluate the quality of audits and how high quality audits are achieved. The PCAOB believes that, taken together with qualitative context, the audit quality indicators (AQIs) may inform discussions among those concerned with the financial reporting process, such as audit committees, audit firms, investors and regulators.
The concept release seeks comment on 28 potential AQIs, covering three broad categories:
- Audit professionals — measures dealing with the availability, competence and focus of those performing the audit
- Audit process — measures concerning an audit firm's (a) tone at the top and leadership, (b) incentives, (c) independence, (d) investment in infrastructure needed to support quality auditing and (e) monitoring and remediation activities
- Audit results — measures relating to financial statements, internal control over financial reporting, going concern reporting, communications between auditors and audit committees, and enforcement and litigation
In addition to seeking comments on the content of AQIs, the PCAOB is asking for views on how AQIs may best be used to promote audit quality. The concept release considers how AQI data might be obtained and distributed, whether use of AQIs should be voluntary or mandatory, the scope of audits and audit firms that may be subject to AQI reporting, and the possibility of phasing-in steps toward AQI reporting and use.
The concept release is available for comment until September 28, 2015.