19 May 2016

ACCA, FEE respond to IAASB’s proposal on enhancing audit quality

ACCA and FEE have responded to IAASB’s Invitation to Comment 'Enhancing Audit Quality in the Public Interest: A Focus on Professional Skepticism, Quality Control and Group Audits'.

ACCA

ACCA believes that the Invitation to Comment (ITC) brings together a number of important auditing issues and presents a full and thorough analysis to improve auditing standards. The response reflects the views from the ACCA Global Forum for Audit and Assurance, and has considered the views that arose at the ACCA roundtable on audit quality, hosted in Kuala Lumpur, Malaysia in April 2016.

In many of the areas identified, clarified ISA set out clear expectations of auditors. Where auditors are seen as needing further guidance, they could be supported through application material or other forms of communication, such as thematic blogs or speeches. Such informal communication methods can help shed more light on the IAASB’s intentions.

The IAASB has been led by feedback from regulators and audit oversight bodies in drawing up the list of issues to enhance audit quality. Whilst this ensures that the IAASB’s proposals are responsive to the concerns of regulators, it means the proposals within the ITC might be seen as being wholly regulatory-led. This reinforces a regulatory view of audit quality, where audit quality is eroded by a failure to follow ISAs to the satisfaction of audit oversight bodies, but there is limited recognition of innovations which boost audit quality.

Andrew Gambier, Head of Audit and Assurance at ACCA, said, “ACCA supports and encourages the IAASB in developing a wider concept of audit quality. A symptom of the regulatory approach to audit quality is that many of the proposed actions relate to ‘strengthening documentation requirements’ in order that audit work undertaken, particularly as it relates to group audit situations, can be reviewed by regulators.

 “ACCA will continue to work with the IAASB in helping translate the findings they get from the ITC into proposals for revised standards. This is a very significant consultation, and we commend the IAASB staff and board for conducting this process in such a transparent and open way.”

Full press release

FEE

The FEE notes that a number of important issues have been identified in the ITC and supports most of the actions aimed at enhancing audit quality.

The FEE expresses concern that a large number of the issues are predominantly regulatory-driven and thus are likely to have been developed from observations regarding large and complex audits. Also, the spirit of the clarity project is gradually getting lost; the IAASB should be careful not to end up at a point where standards will become overly complex. In addition, the IAASB should be careful to maintain a workable list of standards of usable length, especially when some are only relevant to large complex audits. The standards should be kept flexible enough for small- and medium-sized practitioners (SMPs) and have sufficient room so as not to inhibit innovations that will happen in the near future.

The ITC addresses the most relevant public interest issues. The fundamental public interest angle is public confidence in high quality financial reporting, and therefore audit quality. The FEE notes that the standards need to continue emphasising the need for professional scepticism and professional judgement to be applied, especially in the context of accounting estimates.

Full comment letter

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Invitation to comment 

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