Audit committees prefer customized, tailored audit quality indicators

By Ken Tysiac

Audit committee members would prefer the ability to tailor and customize audit quality indicators to suit their specific information needs, a new Center for Audit Quality (CAQ) report shows.

The development of objective measures of audit quality has been a focus of the profession for years. The PCAOB issued a concept paper in July seeking comment on a potential portfolio of qualitative measures that could provide new insights about how to evaluate the quality of audits.

In 2014, the CAQ, which is affiliated with the AICPA, proposed a set of audit quality indicators for engagement teams that could be used to better inform audit committees about key matters that may contribute to the quality of an audit.

A CAQ report issued Tuesday summarized feedback from audit committee members who participated in pilot testing of the proposed audit quality indicators. After the pilot testing, most of the participating audit committees and engagement teams generally expressed support for a discussion of audit quality indicators between audit committees and engagement teams, though feedback on individual indicators varied.

Key findings from the round-table discussions included:

  • Endorsement of a flexible approach that would allow an audit committee to work with the external auditor and customize the portfolio of audit quality indicators that best suit the specific audit committee’s needs.
  • Desire for information that can assist audit committees in their assessment of the more qualitative aspects of the audit, which cannot be adequately captured in a quantitative audit quality indicator and is best achieved through dialogue.
  • Agreement that, without context, audit quality indicators alone can’t adequately communicate factors relevant to any particular audit engagement or audit firm.
  • Agreement that the process of identifying audit quality indicators needs to be driven by the audit committee and iterative, with continuing assessment and refinement to meet the changing information needs of audit committees.
  • Belief that mandated public disclosure of engagement-level audit quality indicators could lead to unintended consequences and that any disclosures of information on engagement-level audit quality indicators should be voluntary.

“Pilot testing and round-table discussions have provided enormously helpful inputs to the profession’s work in this area, and we are grateful to all of the participants,” CAQ Executive Director Cindy Fornelli said in a news release. “While validating many aspects of our approach, these efforts also have shown us where more work needs to be done.”

Ken Tysiac ( is a JofA editorial director.


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