4 Major Elements to Audit Quality, Advocate Says

Catherine Nance, senior director of professional practice at the Center for Audit Quality, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Founded in 2007, the Center for Audit Quality is an autonomous non-partisan, non-profit, public policy advocacy organization with more than 500 public company auditing firm members, Nance explained. The organization’s mission is to enhance investor confidence and trust in the capital markets by fostering high-quality performance of public company auditors. The organization also advocates for rules and standards that enhance auditor objectivity and effectiveness.

Earlier this year, the Center for Audit Quality issued a report that provides insights from a global series of roundtable discussions with audit committee members and other stakeholders on a potential set of audit quality indicators.

Nance said that the Center for Audit Quality has identified four major elements to audit quality:

  • Firm leadership and tone at the top;
  • Engagement team knowledge, experience and workload,
  • Monitoring; and
  • Auditor reporting.

 

Nance also noted that when an audit deficiency is identified, it doesn’t necessarily mean that the company’s financial statements are incorrect.

“It could be a deficiency in how the auditors documented the support that they reviewed and the conclusion reached,” she said.

Nance stressed that the Public Company Accounting Oversight Board (PCAOB) does not use a statistical sampling approach when it selects engagements for review. Rather, it has a risk-based, targeted approach, she said. Nance added that the audit profession is committed to continuous improvement and that the inspection process provides invaluable input.