The Public Company Accounting
Oversight Board (PCAOB) is a nonprofit corporation in USA established by
Congress to oversee the audits of public companies in order to protect
investors and the public interest by promoting informative, accurate, and
independent audit reports. The Sarbanes-Oxley Act of 2002, which created the
PCAOB, required that auditors of U.S. public companies be subject to external
and independent oversight.
The PCAOB
has recently issued a concept release on Audit Quality Indicators
(AQI). It has sought the public comment on the content and possible uses of
a group of potential "audit quality indicators." The indicators are a
potential portfolio of quantitative measures that may provide new insights
about how to evaluate the quality of audits and how high quality audits are
achieved.
The 28 potential Audit Quality Indicators are:
AUDIT PROFESSIONALS
Availability
|
Competence
|
Focus
|
1. Staffing
Leverage 2.Partner Workload 3.Manager and Staff Workload 4.Technical
Accounting and Auditing Resources 5.Persons with Specialized Skill and
Knowledge
|
6.Experience of
Audit Personnel 7.Industry Expertise of Audit Personnel 8.Turnoverof Audit
Personnel 9.Amount of Audit Work Centralized at Service Centers10.Training
Hours per Audit Professional
|
11.Audit Hours
and Risk Areas
12.Allocation
of Audit Hours to Phases of the Audit
|
AUDIT PROCESS
Tone at the Top and Leadership
|
Incentives
|
Independence
|
Infrastructure
|
Monitoring and Remediation
|
13.Results of
Independent Survey of Firm Personnel
|
14.Quality
Ratings and Compensation
15.Audit Fees,
Effort, and Client Risk
|
16.Compliance
with Independence Requirement
|
17.Investment
in Infrastructure Supporting Quality Auditing
|
18.Audit Firms'
Internal Quality Review Results
19.PCAOB
Inspection Results 20.Technical Competency Testing
|
AUDIT RESULTS
Financial Statements
|
Internal Control
|
Going Concern
|
Communication between Auditors and Audit
Committee
|
Enforcement and Litigation
|
21. Frequency
and Impact of Financial Statement Restatements for Errors 22.Fraud and other
Financial Reporting Misconduct 23.Inferring Audit Quality from Measures of
Financial Reporting Quality
|
24.Timely
Reporting of Internal Control Weaknesses
|
25.Timely
Reporting
of Going
Concern Issues
|
26.Results of
Independent Surveys of Audit Committee Members
|
27. Trends in
PCAOB and SEC Enforcement Proceedings
28.Trends in
Private Litigation
|
Additional Thoughts
Quality
control for audit is very important as only with an effective Quality control
mechanism, the public interest can be served through independence, integrity,
ethics, objectivity and quality performance. The aforementioned quality indicators
can prove to be a useful benchmark for auditors to gauge their performance.
