Improving audit quality: 5 risks to consider
Improving audit quality is a constant endeavor for professional standard-setting and regulatory oversight bodies like the PCAOB and AICPA. We’ve identified the top areas this year that are likely to garner the greatest level of interest in quality management processes and reviews. The only goal shouldn’t be to detect audit deficiencies that have occurred, but to also prevent them from occurring in the first place. You can use this list to improve your auditing process – and identify issues before they even arise.
Top 5 audit quality risks in 2023
1. Exercising professional skepticism
Maintaining an attitude of a questioning mind is critical for ensuring sufficient and appropriate audit evidence to support audit conclusions. Evaluating the reasonableness of management’s representations, estimates, forecasts, and other areas of uncertainty is always critical when placing proper emphasis on audit quality.
2. Identifying and responding to fraud risk
An unstable economic and operating environment tends to create greater risk of fraudulent financial reporting and misappropriation of assets. Risk assessment is a continuous process, where initial thinking must be updated as new factors and circumstances evolve.
3. Ensuring timely and appropriate supervision and review
When less-experienced staff are remote working, it is particularly important to dedicate specific efforts to quality control and professional development of staff. In addition, lack of “in-person” access to people, availability of information only in digital form, and other challenges can make the quality control review process even more difficult. It is fundamental for firms to strive to create an environment where audit quality is never compromised, despite unique challenges.
4. Getting more persuasive audit evidence in areas of complexity
For example, special-purpose acquisition companies (SPACs), continued supply chain disruption, increased financial market volatility, cryptocurrency, and more.
5. Ensuring the reasonableness of new significant accounting policies and their implementation
Many reporting entities attempt to minimize the impact of required accounting rule changes by attempting to inappropriately justify desired departures as not being “material”.
Learn more about audit guidance and quality management standards in 2023 with the Becker CPE 2023 Audit Update.