Audit regulators across the globe reported improving audit quality in their latest annual survey, and a new effort by the International Forum of Independent Audit Regulators (IFIAR) aims to drive further gains.
Forty-three percent of inspected audits of public interest entities that were included in the survey had at least one inspection finding during the period, according to IFIAR. Inspection findings indicate that firms did not obtain sufficient appropriate evidence to support their opinions, but they do not necessarily imply that the financial statements are materially misstated.
The newest figure for inspection findings represented a drop of 4 percentage points from the previous year's survey. The survey represented findings from inspections of the six largest global network audit firms (BDO, Deloitte, EY, Grant Thornton, KPMG, and PwC). The survey incorporated findings from 33 IFIAR members' reporting periods ending in June 2015.
Hoping to continue the positive trend, those six largest firms have agreed to work collaboratively with IFIAR on a new initiative to improve audit quality globally and reduce the number of deficient audits reported by IFIAR members.
The initiative aims over the next four years to reduce by at least 25% the number of audits with at least one finding. IFIAR will encourage root-cause analysis, intensive quality monitoring, and increased dialogue with the networks' international leadership.
The survey found audit deficiencies most often in the following areas:
- Internal control testing.
- Fair value measurement.
- Risk assessment.
- Revenue recognition.