Microsoft Word Audit Quality-Framework Final vs 20140214
Interactions between Auditors and Financial Statement Users
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| Interactions between Auditors and Financial Statement Users 57. In some countries, the regulatory framework provides users with an opportunity to interact, to some degree, with the auditors. For example, in a number of jurisdictions, proposals for the appointment, re-appointment or replacement of an entity’s auditor are required to be approved by the entity’s shareholders in the general meeting. Shareholders may also have the right to question the auditor on any significant matters pertaining to the audit in the general meeting. These interactions can provide an added motivation for auditors to perform quality audits. 58. Users may also wish to probe the rationale for a change in auditor. This will be facilitated when information related to the reasons for the changes are made publicly available on a timely basis. 59. Public sector auditors often have direct contact with primary users of the financial statements. It is not unusual for auditors to make presentations about their findings to the legislature or ministries (concerning government agencies of government-owned companies), as well as providing them with: Unbiased and politically neutral insights into the operations and financial reporting practices of the entity; and Constructive and timely recommendations in areas of performance (including value for money) and compliance with relevant mandates. 22 Such presentations may enhance the auditors’ knowledge of expectations of primary users of financial statements and provide the primary users with an opportunity to evaluate audit quality. 60. The auditing profession, in particular professional accountancy organizations, might at times organize forums, conferences, and other high level meetings and discussions, where auditors can engage with groups of financial statement users to discuss matters of relevance to audit quality. 4.4 Interactions between Auditors and Regulators 61. There are a number of different types of regulators that impact the audit: regulators of the financial markets, of financial market participants, and of financial reporting (“financial regulators”); regulators of certain types of entities such as banks and insurance companies (“prudential regulators”); and regulators with direct oversight over some audit firms (“audit regulators”). In some countries, there are a number of financial and prudential regulators and it is beneficial for them to coordinate their activities related to audit quality. 4.4.1 Financial and Prudential Regulators 62. In many respects, financial and prudential regulators and auditors have complementary concerns, although the focus of their concerns may be different. Appropriate sharing of information between these parties can therefore both enhance the regulatory process and contribute to audit quality. 63. An audit is important to financial and prudential regulators. These regulators usually require the financial statements of relevant entities to be audited, and sometimes extend the scope of the audit to include matters such as the effectiveness of the company’s system of internal financial control. In addition, these regulators sometimes request auditors to obtain assurance on specific matters. 64. In addition to formal reporting responsibilities, financial and prudential regulators may wish to be informed about matters that come to the auditor’s attention during the course of undertaking the audit. In the case of banking regulators, this may involve matters such as: Information that indicates a failure to fulfill one of the requirements of a banking license. Information that may indicate a material breach of laws and regulations. Material adverse changes in the risks of the banks’ business and going concern issues. 65. Financial and prudential regulators sometimes have information that, if known by the auditor, would impact the scope of the audit and potentially the auditor’s conclusions and audit opinion. 4.4.2 Audit Regulators 12 66. The formation of independent audit regulators in many countries tasked with the inspection of audit firms and individual audits provides an opportunity both for increasing audit quality and for making audit quality more transparent to users. 12 In the public sector, public sector audit bodies are usually not subordinated to external regulatory oversight. They answer to parliament, legislatures, or the equivalent, who from time to time may question the quality of audit activities. 23 67. Open communication between audit firms and the audit regulators will assist regulators to undertake their activities effectively. Furthermore, clear communication of the findings of audit inspections will enable audit firms to better understand the root causes of deficiencies identified and respond to them in a positive manner. 68. Dialogue between audit regulators in different countries, with the aim of promoting consistency of inspection approaches, will potentially strengthen global audit quality. 13 4.5 Download 1.81 Mb. Share with your friends:
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