The critical importance of credible high-quality audit

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The events of the global financial crisis have highlighted the critical importance of credible high-quality audit. They have also demonstrated the importance of considering the role of audit quality in the broader context of financial reporting quality. Achieving quality of financial information depends on the integrity of each link in the supply chain of financial information. As one of those links, external audit plays an important role in supporting the quality of financial reporting worldwide, whether in the context of capital markets, public or private or public. Is an important part of the regulation and supervision of infrastructure, and therefore a significant activity in the public interest. audit quality is therefore a matter of great importance to the IAASB. The IAASB is more directly involved in supporting audit quality through its International Standards on Auditing (ISA) and International Standard on Quality Control (NICC). These standards provide a support base audit quality. However, it is important that standards be recognized and understood, as only one of several components that affect audit quality. Other influences, including user perceptions, skills and competencies of auditors, the actions of others in the supply chain of financial information, and legal and business regulatory environment also play an important role in the debate on quality audit. Because the context in which it conducts an audit is constantly evolving to keep pace with changes in the business environment, financial reporting standards, regulation and technology, inherently an audit is an activity that evolves with time. The pursuit of audit quality, therefore, is not a program with a definitive result. Rather, it is a process that ensures, through continuous improvements in its elements, audit quality is developed with the environment in which audits are carried out. This means that any element of improving audit quality should not preclude efforts for further improvement in other elements. Different stakeholders may have different views about what is quality of the audit and how we can improve. The IAASB believes that it is important to try to reach a common view on this by stakeholders, including preparers, investors, regulators, auditors, and managers of government and other standards bodies, to share point's particular view, and understanding and comments on the perspectives of others. This publication presents a specific initiative of the IAASB to contribute to the debate on audit quality. It highlights several important insights about the quality audit as a means to stimulate thought and discussion among stakeholders in the financial reporting process. It also provides an indication of the IAASB plans to consider pursuing a future project on audit quality.

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Perceptions of Audit Quality

There are number of attempts to define "audit Quality" in the past. However, none has resulted in a definition that has achieved universal recognition and acceptance. Audit quality is, in essence, a complex and

multi-faceted concept. Audit quality is subject to many direct and indirect

influences. While some may place more emphasis on the direct influences of audit quality, this perspective alone is not sufficient to address the question of whether audit quality has been achieved in the broader context. Perceptions of audit quality vary amongst stakeholders depending on their level of direct involvement in audits and on the lens through which they assess audit quality. Variations in stakeholder perspectives of audit quality

suggest that no single element should be assumed as having the dominant influence on audit quality. This implies that a broader and deeper understanding of the complexities and nuances of the topic needs to be developed through studying audit quality more holistically. It also implies that individual stakeholders should consider more carefully whether actions they endorse might have detrimental effects on others' perspectives of audit quality. Therefore, understanding each other's views and how one's actions may impact on others' perceptions of audit quality is critical to efforts to

enhance audit quality.

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Inputs

Context

Factors

Outputs

Conceptually, you can see the quality of audit in terms of three aspects: input, output, and context factors. There are many entrances to the quality audit, other audit standards. An important contribution is the auditor of personal attributes such as skill and experience as an auditor, ethical values and way of thinking. Another important element is the audit process. The audit process covers issues such as the strength of the audit methodology, the effectiveness of the audit tools used and the availability of adequate technical support, all aimed at supporting the implementation of a quality audit. The audit findings also important influences on audit quality because often the results are considered by stakeholders in their assessment of audit quality. For example, the auditor's report is likely to be seen as positively influence audit quality is clearly conveyed if the result of the audit. Similarly, communications managers of the government auditor (TCWG) on issues such qualitative aspects of the entity's financial reporting practices and internal control deficiencies can positively influence audit quality. More generally, there are contextual factors also influence audit quality. For example, a corporate governance provides the quality of the audit, especially if it creates a climate of transparency and ethical behavior within the organization. Act and Rule also can positively influence audit quality if, among other things, creates a framework in which the audit can be performed effectively, such as regulatory oversight, setting an effective system for quality control auditors' work and is not an effective dialogue between the auditors and regulators. Also, the quality of financial reporting requirements framework can influence audit quality. For example, the use of a financial reporting framework does not promote sound and transparent disclosure may negatively affect quality audit and related to external perceptions. Conceptually, you can see the quality of audit in terms of three aspects: input, output, and context factors. There are many entrances to the quality audit, other audit standards. An important contribution is the auditor of personal attributes such as skill and experience as an auditor, ethical values and way of thinking. Another important element is the audit process. The audit process covers issues such as the strength of the audit methodology, the effectiveness of the audit tools used and the availability of adequate technical support, all aimed at supporting the implementation of a quality audit. The audit findings also important influences on audit quality because often the results are considered by stakeholders in their assessment of audit quality. For example, the auditor's report is likely to be seen as positively influence audit quality is clearly conveyed if the result of the audit. Similarly, communications managers of the government auditor (TCWG) on issues such qualitative aspects of the entity's financial reporting practices and internal control deficiencies can positively influence audit quality. More generally, there are contextual factors also influence audit quality. For example, a corporate governance provides the quality of the audit, especially if it creates a climate of transparency and ethical behavior within the organization. Act and Rule also can positively influence audit quality if, among other things, creates a framework in which the audit can be performed effectively, such as regulatory oversight, setting an effective system for quality control auditors' work and is not an effective dialogue between the auditors and regulators. Also, the quality of financial reporting requirements framework can influence audit quality. For example, the use of a financial reporting framework does not promote sound and transparent disclosure may negatively affect quality audit and related to external perceptions.Conceptually, you can see the quality of audit in terms of three aspects: input, output, and context factors. There are many entrances to the quality audit, other audit standards. An important contribution is the auditor of personal attributes such as skill and experience as an auditor, ethical values and way of thinking. Another important element is the audit process. The audit process covers issues such as the strength of the audit methodology, the effectiveness of the audit tools used and the availability of adequate technical support, all aimed at supporting the implementation of a quality audit. The audit findings also important influences on audit quality because often the results are considered by stakeholders in their assessment of audit quality. For example, the auditor's report is likely to be seen as positively influence audit quality is clearly conveyed if the result of the audit. Similarly, communications managers of the government auditor (TCWG) on issues such qualitative aspects of the entity's financial reporting practices and internal control deficiencies can positively influence audit quality. More generally, there are contextual factors also influence audit quality. For example, a corporate governance provides the quality of the audit, especially if it creates a climate of transparency and ethical behavior within the organization. Act and Rule also can positively influence audit quality if, among other things, creates a framework in which the audit can be performed effectively, such as regulatory oversight, setting an effective system for quality control auditors' work and is not an effective dialogue between the auditors and regulators. Also, the quality of financial reporting requirements framework can influence audit quality. For example, the use of a financial reporting framework does not promote sound and transparent disclosure may negatively affect quality audit and related to external perceptions. Conceptually, you can see the quality of audit in terms of three aspects: input, output, and context factors. There are many entrances to the quality audit, other audit standards. An important contribution is the auditor of personal attributes such as skill and experience as an auditor, ethical values and way of thinking. Another important element is the audit process. The audit process covers issues such as the strength of the audit methodology, the effectiveness of the audit tools used and the availability of adequate technical support, all aimed at supporting the implementation of a quality audit. The audit findings also important influences on audit quality because often the results are considered by stakeholders in their assessment of audit quality. For example, the auditor's report is likely to be seen as positively influence audit quality is clearly conveyed if the result of the audit. Similarly, communications managers of the government auditor (TCWG) on issues such qualitative aspects of the entity's financial reporting practices and internal control deficiencies can positively influence audit quality. More generally, there are contextual factors also influence audit quality. For example, a corporate governance provides the quality of the audit, especially if it creates a climate of transparency and ethical behavior within the organization. Act and Rule also can positively influence audit quality if, among other things, creates a framework in which the audit can be performed effectively, such as regulatory oversight, setting an effective system for quality control auditors' work and is not an effective dialogue between the auditors and regulators. Also, the quality of financial reporting requirements framework can influence audit quality. For example, the use of a financial reporting framework does not promote sound and transparent disclosure may negatively affect quality audit and related to external perceptions.

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These are not one-way influences. For example, the auditor communicates TCWG that can influence the actions and perspectives of issues related to the audit TCWG. In turn, TCWG can influence the nature and scope of the auditor's actions may be taken during the audit. Also, the regulators may have a direct influence on the process of setting auditing standards, in turn, the quality of auditing standards can affect the nature and extent of regulation and supervision. Clearly, these influences are related, directly or indirectly affect the extent that each has on the quality of the audit. In addition, TCWG attitudes and the importance placed on constructive and transparent dialogue with the auditors can help improve audit quality, as well as the attitudes of institutional actors such as regulators and standards bodies in understanding and responding to changes in the environment.

Important Influences on Audit Quality

(E.g., Governance;

Law and Regulation)

(E.g., Auditor's Report;

Auditor Communications)

(E.g., Auditing Standards;

Auditor Attributes)

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J The overall audit approach, instilling a focus on objectives, to promote an audit of thinking, and emphasize the importance of professional skepticism. J Aspects of financial statements in general are at increased risk of material misstatement, for example, estimates and fair values and related party transactions. J The quality of audit evidence, particularly in terms of external confirmations and written communication. J With the work of others, especially in the context of group audits, to ensure that auditors are satisfied that there is an adequate basis on which to use the work of others, and use others only when it is convenient to do so. J Auditor communications and reporting, to emphasize the importance of open and constructive dialogue between the auditors and TCWG and management, and to help ensure that

important issues are brought to attention of users in a clear and meaningful.

Contribution of IAASB Standards to Audit Quality

The NIA play a key role in contributing to audit quality by providing everyone recognizes and accepts the benchmarks for the conduct of audits. Develop on the basis of a robust and transparent due process, at its core, the input characteristics of the stakeholders and consultation. 1 This, together with independent oversight of the IAASB standard-setting process by the Supervisory Board of the Public Interest (PIOB) ensures that standards are of high quality. In March 2009, the IAASB Clarity Project completed. This project involved a comprehensive review and redrafting of all ISAs and NICC 36 12 to improve clarity and understanding and thereby to facilitate their consistent implementation. 3 In addition to improving the clarity of the ISA, the IAASB substantially revised about half of the rules. Overall, these efforts led to the improvement of NIA in the following areas:

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In a broader context, ISA 2205 and an NICC establish a framework for quality control in two specific dimensions - at the level of audit work and the level of firms, respectively. Together, these two criteria relate to a variety of areas in which auditors and their companies can take specific actions to promote and safeguard the quality of the audit. These areas include in particular: The compliance with ISA in the context of quality control systems at the enterprise level is an important element of audit quality. However, the full realization of the objectives of the NIA relies on an important determinant - the people who carried out the audit. It is their knowledge and experience and customer understanding that can make a real difference in the quality of the audit. Importantly, actually runs on many of the requirements of ISA is based on a personal code of competition - the professional opinion. Achieving the goal of a high quality audit is highly dependent on the exercise of appropriate professional auditors and correct approach throughout the engagement. This requires that the right people involved about the commitment that not only properly trained, but also continue to enhance its competency through ongoing professional development. It may be helpful for interested parties to further explore these people considerations in the debate on how to improve audit quality. J leadership responsibilities for quality in the company. J Compliance with ethical requirements. J The acceptance and retention of client relationships and specific engagements. J Human Resources. J Participation performance. J. MonitoringIn a broader context, ISA 2205 and an NICC establish a framework for quality control in two specific dimensions - at the level of audit work and the level of firms, respectively. Together, these two criteria relate to a variety of areas in which auditors and their companies can take specific actions to promote and safeguard the quality of the audit. These areas include in particular: The compliance with ISA in the context of quality control systems at the enterprise level is an important element of audit quality. However, the full realization of the objectives of the NIA relies on an important determinant - the people who carried out the audit. It is their knowledge and experience and customer understanding that can make a real difference in the quality of the audit. Importantly, actually runs on many of the requirements of ISA is based on a personal code of competition - the professional opinion. Achieving the goal of a high quality audit is highly dependent on the exercise of appropriate professional auditors and correct approach throughout the engagement. This requires that the right people involved about the commitment that not only properly trained, but also continue to enhance its competency through ongoing professional development. It may be helpful for interested parties to further explore these people considerations in the debate on how to improve audit quality. J leadership responsibilities for quality in the company. J Compliance with ethical requirements. J The acceptance and retention of client relationships and specific engagements. J Human Resources. J Participation performance. J. Monitoring

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The IAASB believes that the completion of the project clearly has made a useful contribution to the quality audit. However, this does not mean the end of the IAASB's efforts to further improve the quality of the audit. Maintaining the quality and robustness of the ISAs is and will remain, a key objective of the IAASB. With the launch of the clarified ISAs, the IAASB has embarked on a project to gather information to help you evaluate the effective and consistent implementation of the clarified ISAs worldwide. While it is important to maintain a stable platform during this period of implementation, the IAASB has also begun to explore other areas within the ISA that are or may be, in need of improvement. In particular, the IAASB has launched projects to review the NIA is concerned with using the work of internal auditors and the auditor's responsibilities in relation to other information in documents containing audited financial statements. In addition, the IAASB recently initiated the study of issues related to the work of the auditor on the financial statement disclosures, and auditor communications embodied in the auditor's report.undefinedundefinedundefinedundefinedundefined In particular, the IAASB has launched projects to review the NIA is concerned with using the work of internal auditors and the auditor's responsibilities in relation to other information in documents containing audited financial statements.undefinedundefinedundefinedundefinedundefinedundefinedundefined In addition, the IAASB recently initiated the study of issues related to the work of the auditor on the financial statement disclosures, and auditor communications embodied in the auditor's report.

Continuous improvement of audit quality depends not only on the IAASB's efforts, but also the active participation of all stakeholders in the debate. This highlights in particular the importance of commitment among auditors, regulators and standards bodies TCWG on practical issues such as the collection and share views on audit quality and to explore how the interactions between they can provide. It also highlights the need for institutional and political actors such as standards bodies and regulators seek more commitment to end users and investors. The IAASB believes that more can be done to further contribute to the debate on audit quality. The IAASB therefore consider in 2011 how to take forward a more specific project on audit quality - which necessarily must be on a partnership basis, recognizing the importance of international consensus. In this sense, the IAASB will discuss an initiative in 2011 to launch a public consultation on the development of a framework for international quality audit. Such a framework could not only help the IAASB to continually assess whether their standards are appropriate, but prompt other participants in the financial reporting process for further action to improve audit quality. The IAASB will use this publication present in various outreach activities to generate debate on the issue of audit quality in the context of the current consultation on its proposed strategy for 2012-2014. 6 Perspectives on audit quality and views on major issues of audit quality are received by the

Key Contacts

The IAASB develop auditing standards and safety guidance for use by all professional accountants under a shared responsibility involving legislative process PIOB, which oversees the activities of the IAASB and the IAASB Consultative Advisory Group, which provides information of interest public in the development of standards and guidance. The structures and processes that support the operations of the IAASB is facilitated by the IFAC.