Audit quality is a hot topic for regulators, management, audit committees and auditors alike. The focus on audit reports following financial scandals and increased tendering means there is a greater need for differentiation between audit firms.
Ideas around the definition and measurement of audit quality are evolving at a faster pace than ever. The various stakeholders in the audit process have different perspectives on what comprises a quality audit. An auditor is expected to demonstrate much more than the basic level of competence and statutory compliance. Auditing standards have not changed materially in the last five years and so do not necessarily reflect this evolving, wider perception of what a quality audit entails. How can we measure audit quality, and how can we improve it?
Perception of quality is as important as any measure. Sometimes the most valuable audit might not look like the cleanest or ‘best’ quality. Auditors need to be transparent about the processes they undertake to increase confidence in the process and their work.
Audit firms need to demonstrate the value they bring to the audit process, driving quality not only internally but also from other stakeholders.
Airlines report their near misses in a no-blame culture to seek out the root causes of failure and raise standards. Can audit firms get better at learning from mistakes?
Different stakeholders have differing needs and expectations from the audit. Good measures of audit quality should focus on innovation and experimentation, rather than standardisation.