In a six-point plan released May 14, the AICPA describes extensive ongoing and new efforts to improve audit quality.
Continued improvement in the quality of audits has long been a core focus of the AICPA. In May 2014, the Institute launched its Enhancing Audit Quality (EAQ) initiative, which focuses on addressing quality issues on a holistic, ongoing basis. The initiative focuses on audits of private companies, employee benefit plans (EBPs), and governmental entities in the United States.
"Audit quality has always been a CPA profession imperative," AICPA President and CEO Barry Melancon, CPA, CGMA, said in a news release. "And as the issue has risen in importance worldwide, we recognized that a bigger, bolder step was needed to address challenges related to financial statement audit performance. This concerted effort is at the core of the profession's quality-driven mission to meet stakeholders' needs and maintain excellence in a rapidly changing financial marketplace."
The AICPA's six-point plan outlines the road map to enhanced audit quality. It covers several stages in the process of becoming or being an auditor:
Prelicensure. Steps for improving skills before individuals become CPAs include updating the CPA exam to increase assessment of higher-order skills, such as professional skepticism and critical thinking; working with the College Board to establish an advanced placement high school course in accounting; implementing the recommendations of the Pathways Commission on Accounting Higher Education; and funding doctoral students with real-world experience who concentrate in audit and will accept college and university faculty positions around the nation.
Standards and ethics. The AICPA continues developing new resources around the Statements on Quality Control Standards, and the AICPA Auditing Standards Board is working to make the auditor's report more communicative and relevant. In 2014, the AICPA completed a reorganization of its Code of Professional Conduct, which includes mandates to act with integrity and objectivity, maintain independence, and exercise due professional care and competence when performing audit and attest services for clients.
CPA learning and support. The AICPA Employee Benefit Plan Audit Quality Center (EBPAQC) has undertaken numerous new initiatives designed to improve audit quality. The recently launched AICPA | CIMA Competency and Learning site (competency.aicpa.org) now offers practitioners a way to assess and build their employee benefit plan-related competencies. A U.S. Department of Labor (DOL) report released May 28 showed a need for improvement in audits of employee benefit plan financial statements. The report, based on a study that examined audits of Form 5500 filings from 2011, found that 61% of audits fully complied with auditing standards or had minor deficiencies. One or more major deficiencies were found in 39% of the 400 audits examined in the study. Firms that are members of the EBPAQC performed higher-quality work than nonmember firms, the DOL report states. In the DOL study, deficiencies were more likely among firms that performed smaller numbers of EBP audits.
The AICPA this summer will launch a similar competency framework and assessment tools for single audit, another area identified by peer review for additional focus. Under the AICPA's Future of Learning initiative, the Institute and the National Association of State Boards of Accountancy (NASBA) issued recommendations on ways to modernize how CPAs learn and grow their competencies. Separately, the Center for Plain English Accounting assists regional and local firms with understanding complex and challenging accounting and auditing issues.
Peer review. The AICPA is increasing qualifications required for reviewers to perform a review, enhancing oversight of reviewers and firms, and expediting removal of poor reviewers. An enhanced approach will include deep-dive reviews of specialized areas such as EBP audits. The AICPA also is working on measures to ensure that firms thoroughly comply with peer-review requirements.
Practice monitoring of the future. An initiative designed to promote discussion about how practice monitoring might evolve into a technology-based system that will allow firms to identify and correct potential problems in near real time.
Ethics enforcement and NASBA collaboration. AICPA members found to be in violation of the Code of Professional Conduct are subject to remediation and discipline, up to and including expulsion from AICPA membership. The AICPA is also collaborating with NASBA on initiatives to jointly support the work of state boards of accountancy.
"This six-point plan will promote the pursuit of quality throughout a CPA's journey—from before an individual is licensed to when he or she builds professional competency and engages in peer review and practice monitoring," Sue Coffey, CPA, CGMA, AICPA senior vice president—Public Practice & Global Alliances, said in a news release. "It places the necessary emphasis on areas that we believe will help our members stay focused on achieving the highest level of performance for financial statement audits."
More information is available at aicpa.org/auditquality.
Ken Tysiac is a JofA editorial director. To comment on this article or to suggest an idea for another article, contact him at email@example.com or 919-402-2112.