This article was first published in the July/August International edition of Accounting and Business magazine.
Audit and auditors have been under the microscope in recent months, with many, particularly those commentators who make the most of 20/20 hindsight, questioning the role of both in a number of financial failures.
While auditors clearly have a crucial role in ensuring that audit reports are accurate and reliable, it is important to remember that audit quality is not the exclusive responsibility of the auditor. ACCA made the point in its recent response to a consultation by the International Auditing and Assurance Standards Board (IAASB) on a proposed international framework for audit quality.
In setting down what is important to audit quality, the framework has also made it crystal-clear that it’s not all down to the auditor. While auditors have to comply with stringent quality control standards, it is vital that all the stakeholders in the corporate reporting supply chain pull together to maximise audit quality and do not abdicate responsibility by pointing to those with the word ‘audit’ in their job titles and saying it’s solely down to them.
Audit increases user confidence in the credibility of corporate reporting in all sectors and facilitates the efficient allocation and use of capital, particularly in rapidly emerging economies. Audit must therefore be of a consistently high quality, which is why ACCA is committed to doing all it can to embed audit quality in our education, qualification, support and regulation of audit professionals and firms.
The most important stakeholder in all this is the person who relies on the audit report, so it is critical that the proposed framework adopts the shareholder perspective in judging the importance of factors relevant to audit quality and identifies the complex interactions between those factors. The framework should also inform debate about key issues, such as mandatory rotation of auditors, so stakeholders can make informed choices.
It will also be important that the final framework not only recognises the importance of innovation and ensures that audit quality is judged in the dimensions of modern business activities, but that it also sees the threats to audit quality and enables all stakeholders to address them.
Professor Barry J Cooper is head of the School of Accounting, Economics and Finance at Deakin University, Australia