Audit regulators across the globe saw some improvement in audit quality in their latest annual survey, but they say the pace of improvement needs to be faster.
Forty-three per cent of inspected audits of public interest entities that were included in the survey had at least one inspection finding during the period, the International Forum of Independent Audit Regulators (IFIAR) said in a news release.
This 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). Findings submitted by 33 IFIAR members in jurisdictions around the world were included in the survey.
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.
Those six firms have agreed to work collaboratively with IFIAR on a new initiative that is designed to improve audit quality globally and reduce the number of deficient audits reported by IFIAR members. The initiative will include a measurable target of a reduction of at least 25% in audits with at least one finding in the next four years.
To accomplish this objective, IFIAR will encourage root-cause analysis, intensive quality monitoring, and increased dialogue with the networks’ international leadership.
The areas in the survey with the most audit deficiencies were:
- Internal control testing.
- Fair value measurement.
- Risk assessment.
- Revenue recognition.
The survey results are compiled from inspection reports issued during IFIAR members’ most recent reporting periods, ending in June 2015.
—Ken Tysiac (firstname.lastname@example.org) is a CGMA Magazine editorial director.