Academic journal article Journal of Accountancy

A Plan to Enhance Private-Entity Audit Quality: The AICPA Is Seeking Feedback on an Initiative That Is Designed to Integrate Audit-Related Resources

Academic journal article Journal of Accountancy

A Plan to Enhance Private-Entity Audit Quality: The AICPA Is Seeking Feedback on an Initiative That Is Designed to Integrate Audit-Related Resources

Article excerpt

Enhancing Audit Quality Plans and Perspectives for the U.S. CPA Profession

A discussion paper seeking input from all stakeholders in the audit process of private entities.

Executive Summary

CPAs take pride in their long-standing commitment to excellence. That commitment includes continued vigilance in delivering accounting and auditing services and protecting the public interest.

In the current business environment, the rapid pace of change is driving complexity and that trend is not likely to abate. Increased complexity presents challenges to practitioners in public accounting as they strive to continually perform high-quality financial statement audits of private entities. (1) To preserve their prominent and respected role in the business community, CPAs must, and will, meet and overcome these challenges.

With that in mind, in May 2014 the AICPA launched its Enhancing Audit Quality initiative. EAQ is a holistic effort to consider auditing of private entities through multiple touch points, especially where quality issues have emerged. The goal is to align the objectives of all audit-related AICPA efforts to improve audit performance.

EAQ is based on a two-phased approach. Phase 1 involves planned and proposed efforts that will begin to improve quality in the near term. Some of these efforts have already been approved by appropriate AICPA boards or committees and are under way, while others are ideas for exploration and comment. Phase 2 centers around the transformation of the current peer review program into a practice monitoring process that marries technology with human oversight.

This paper outlines the near- and longer-term plans and proposals to address quality issues related to financial statement audits of private entities. The more significant changes and efforts include:

Competence and Due Care

* Continue serving the public interest by aligning the CPA Exam with real-world practice for newly licensed CPAs. Determine marketplace needs through periodic comprehensive research efforts to maintain the exam's relevance and adequately assess competence of CPA candidates.

* Ensure that all CPAs who perform financial statement audits adhere to the requirements in the AICPA Code of Professional Conduct, including but not limited to competence and due care.

Auditing and Quality Control Standards

* Monitor the use of the Auditing Standards Board's new clarified auditing standards to ensure they are being consistently understood and implemented to achieve high-quality audits. Revise standards, issue supplemental guidance or provide additional education and tools as necessary.

* Identify and better understand where and how audit deficiencies occur and their root causes so revisions can be made to the appropriate standards and/or guidance.

* Consider whether more specificity is needed in the quality control standards to drive quality performance.

Guidance, Tools, Learning and Resources

* Enhance curricula, content and methods of instruction to support the major topical areas the profession serves, including but not limited to challenging areas such as employee benefit plan audits, governmental audits and financial reporting.

* Release a rigorous, profession-wide competency framework that has been validated by experts and regulators from around the globe.

* Develop additional individual and suites of resources or educational courses based upon areas of concern uncovered in peer reviews.

Practice Monitoring (Peer Review)

* Perform more extensive peer review procedures on high-risk and complex areas and engagements.

* Address the risks posed by low-volume auditors of high-risk and complex engagements by requiring the firm, in all cases where material non-conformity with applicable professional standards is noted, to engage a third party to perform pre- or post-issuance reviews of those engagements in the future with periodic reporting to a peer review Report Acceptance Body (RAB). …

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