CAQ releases practice aid on audit communication

BY NEIL AMATO
October 11, 2012

How should audit firms and audit committees be talking to each other?

The Center for Audit Quality (CAQ) examines the question in a brief guide released Wednesday on ways to enhance the flow of information on audit inspections and quality-control matters.

The CAQ practice aid says that “transparent, candid communication … supports the audit committee’s role in overseeing the external auditor.” The practice aid says the CAQ supports interaction that is consistent with the objectives of the PCAOB’s August 2012 Release No. 2012-003, Information for Audit Committees About the PCAOB Inspection Process.

“Proactive engagement by auditors with audit committees regarding inspections and firm quality-control improvement initiatives should provide audit committees valuable insights into the firm’s quality-control program,” Cindy Fornelli, the CAQ’s executive director, said in a news release.

According to the practice aid, a firm should consider the following elements in developing a communications plan:

  • Whether the issuer’s audit was selected for inspection by the PCAOB and, if so, the status of the progress of that inspection;
  • Information about the firm’s responses to the PCAOB findings with respect to the issuer’s audit;
  • Whether any items described in the public part of a PCAOB inspection report on the company, including matters not involving the issuer’s audit, involve issues and audit approaches similar to those from the audit of the issuer’s financial statements;
  • Steps the firm is taking to address issues identified with respect to its system of quality control; and
  • Whether issues described by the PCAOB in general reports summarizing inspection results across groups of firms (also known as “4010 Reports”) relate to the audit of the issuer’s financial statements and internal controls over financial reporting, and how the firm is addressing those issues.


The PCAOB’s August release describes how its inspections of audit firms work and how to gather information from audit firms about those inspections.

The CAQ, which is affiliated with the AICPA, will host a webcast, “Communications With Audit Committees: Requirements and Leading Practices,” from 2:30 to 4 p.m. Oct. 24 to discuss the practice aid and share best practices. Fornelli will serve as the moderator, and one of the scheduled panelists is Jay Hanson of the PCAOB.

Neil Amato ( namato@aicpa.org ) is a JofA senior editor.

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