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MORE VIEWPOINTS FROM ERROL OH

The IAASB’s consultation on its proposed Framework for Audit Quality should provide valuable insight, demonstrating that discussion with stakeholders ultimately yields the best results, says Errol Oh

This article was first published in the July/August Malaysia edition of Accounting and Business magazine.

What is the weight of a framework – specifically, the Framework for Audit Quality developed by the International Auditing and Assurance Standards Board (IAASB)? This is a key question to address because it may well determine the effectiveness of the framework.

In January, the board issued a consultation paper on the proposed framework. The document made clear the objectives: to raise awareness of the key elements, to encourage stakeholders to explore ways to improve audit quality and to facilitate greater dialogue. It also issued the caveat that the framework is not a substitute for ‘relevant auditing standards and standards of quality control within audit firms, as well as ethics and other regulatory requirements’.

The board received 67 letters, mostly from accountancy and audit bodies and professional services firms. These responses cover many aspects but it appears that one fundamental concern is the extent of reliance on the framework.

Grant Thornton International, for example, points out that the framework may be viewed by some as authoritative. Deloitte Touche Tohmatsu also calls for more clarity on its purpose and anticipated use, to alleviate the risk of each individual factor and interaction being used (instead of auditing and quality control standards) to directly benchmark or ‘scorecard’ whether quality was achieved on an engagement.

CPA Australia makes a similar point: ‘Along with a wider purpose in facilitating understanding and dialogue on audit quality, we recommend that the core principles within the framework, particularly in respect of input factors, be eventually incorporated into other IAASB pronouncements that are concerned with audit quality.’

Referring to the caveat, the Canadian Securities Administrators says: ‘This statement explains how the framework does not relate to International Standards on Auditing (ISAs), but fails to clearly explain how the framework does relate to ISAs.’

One of the questions that the IAASB posed was: ‘How do you intend to use the framework? Are there changes that need to be made...to maximise its value to you?’ By inviting responses to this question, the board stands to gain valuable insight into how others regard the framework and its purpose, as illustrated by ACCA’s response:

‘The framework gives preparers, auditors, shareholders, regulators and others a shared understanding of audit quality. As a public document with global relevance, we will use it to facilitate communication with those with whom we engage.

‘The framework will also inform the development of our professional standards, and our inspection and monitoring of auditors. In line with the framework’s aim of raising awareness of the key elements of audit quality, we certainly envisage including it in our qualification.’

Given the diversity of responses, the IAASB will probably need time to tweak the framework. While there is no way the board can accommodate every recommendation the final outcome will, hopefully, demonstrate that the consultation process yields the best results for all.

Errol Oh is executive editor of The Star

 

Last updated: 18 Jun 2013