Microsoft Word Audit Quality-Framework Final vs 20140214
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| Appendix 1 38 and the value that is placed on an audit varies among different stakeholders. 14. Stakeholders in listed entities do not have access to audit communications except for those available to the public. In contrast, stakeholders in other entities may often have direct access to auditors and receive both formal and informal communications, which directly influence their perspectives of audit quality. 15. Some users of the financial statements may see audit quality as maximizing the amount of audit evidence obtained and the challenge provided to management. Considering audit quality solely from this perspective would suggest that the quality of an audit would be higher, the more resources (both in quantitative and qualitative terms) that are allocated to an audit. 16. Management may have an interest in ensuring that the cost of the audit is constrained, the audit is completed as quickly as possible and that the disruption to the entity’s ongoing operations is minimized. By considering audit quality from this perspective, management may suggest that the resources allocated to an audit should be minimized. 17. Balancing these different views suggests that a quality audit involves an effective audit being performed efficiently, on a timely basis and for a reasonable fee. There is, however, subjectivity around the words “effective,” “efficiently,” “timely,” and “reasonable.” Those charged with governance, including audit committees, are often well placed to consider these matters. For this reason, in many countries audit committees have responsibilities for considering audit quality and approving, or recommending for approval, the auditor appointment, and audit fees. There Is Limited Transparency About Audit Work Performed and Audit Findings 18. Many services are relatively transparent to those for whom they are performed and users can evaluate the quality of them directly. However, many stakeholders, including the shareholders of listed companies, or finance providers for any business, do not usually have detailed insights into the work performed in the audit and the issues that were identified and addressed. Therefore, users of financial reports, who are external to the entity being audited, often cannot directly evaluate audit quality. 19. Information about the auditor’s work and findings could be provided in the auditor’s report. However, many auditors’ reports are standardized, and other than in the relatively unusual circumstances when the auditor’s opinion is modified, information is not usually provided about the auditor’s work and findings. 20. Users have challenged IAASB about whether more information should be provided in auditor’s reports and the IAASB has responded by proposing changes to the structure, wording and content of the auditor's report including, for the audits of listed companies, the inclusion of Key Audit Matters. The IAASB hopes that changes to the auditor's report, and in particular the inclusion of Key Audit Matters, will provide useful information to users of the financial statements to enhance their understanding of those matters that, in the auditor's professional judgment, were of most significance in the audit. 21. The IAASB hopes that its auditor reporting initiative will provide users with some insight into the quality of the audit especially if there is an opportunity for there to be further discussion about it with audit committees or the auditor. However, the IAASB recognizes that such additional information will inevitably be only a relatively small portion of the total information known by the auditor and that may be relevant to a better appreciation of audit quality. |