In a six-point plan released Thursday, 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 entities, employee benefit plans, and governmental agencies 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 the needs and challenges of a rapidly changing financial marketplace.”
The AICPA’s six-point plan outlines the road map to enhanced audit quality. The plan covers several stages in the process of becoming or being an auditor:
- Pre-licensure. 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 course in accounting; implementing the recommendations of the Pathways Commission on 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 is developing new resources around the Statements on Quality Control Standards, and the 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 has undertaken numerous new initiatives designed to improve audit quality. The AICPA | CIMA Competency and Learning site now offers practitioners a way to assess and build their employee benefit plan-related competencies. The U.S. Department of Labor is preparing to release a study of employee benefit plan (EBP) audits that is expected to show a need for improvement. The AICPA also is developing similar competency assessment tools for single audit, another area identified by peer review for additional focus. Under its Future of Learning initiative, the AICPA 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 employee benefit plan 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 as to how practice monitoring might evolve into a technology-based system that will allow firms to identify and correct potential problems in near real time. Feedback on an AICPA concept paper on this topic can be submitted by June 15.
- 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 also is collaborating with the National Association of State Boards of Accountancy on an initiative that would allow the AICPA Ethics team to share its investigative files with state boards.
“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.”
—Ken Tysiac (email@example.com) is a JofA editorial director.