Report: Worldwide audit quality improving

Audit quality seems to be improving somewhat around the world, although there’s still a lack of consistency, according to the annual Survey of Inspection Findings from the International Forum of Independent Audit Regulators (IFIAR).

The survey shows the percentage of audit engagement inspection findings declining last year to just over one-third (37%) of public company audit engagements inspected had at least one finding in 2018, compared to 40% in the 2017 survey and to 47% in 2014, the first year a survey captured this percentage.

The most frequent findings involved:

• Accounting estimates (including fair value estimates)
• Internal control testing
• Adequacy of financial statement presentation and disclosure
• Revenue recognition
• Audit sampling

IFIAR said that while the downward trend is encouraging, the recurrence and level of findings reflected in the survey indicate a lack of consistency in the execution of high-quality audits and the need for a sustained focus on continuing improvement. The group acknowledged that the survey results don’t precisely measure auditing firms’ progress in improving audit quality and aren’t the sole factor when considering developments in audit quality. Its members’ inspection processes generally rely on a risk-based methodology and aren’t necessarily intended to select a representative sample of all firms, their quality control elements or all the assurance work they do throughout the year.

IFIAR is encouraging audit firms to work toward ongoing and continuous improvement. Along with the inspection findings, the latest report includes information about IFIAR members’ practices when it comes to reporting the results of inspections to the firms themselves, audit committees, those charged with governance and the public. The report also includes data about certain initiatives, beyond inspections, pursued by IFIAR members individually aimed at improving audit quality.