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Increased collaboration between those who set auditing
standards and those tasked with monitoring the practical
application of those standards is vital in strengthening the
competency of the auditing profession. As such, efforts to
create a meaningful dialogue between these two functions will
improve themeasurability of standards by inspectors.
Recent moves aimed at closing the perceived gap between
the two functions have resulted in inspectors calling for the
incorporation of more examples and meaningful application
material in standards. Having Standards and Inspections
departments operating from different perspectives – with
inspectors preferring measurable rules while standards focus
on principles – has widened this apparent gap over the years.
However, gradual moves to collaborate are helping with the
identification of areas that may require improvement or
clarification, especially when inspections are undertaken.
Also, this cooperation is steadily bridging the gap between
theory and existing challenges with the practical application
and monitoring of standards. In addition, it promotes a
common understanding of not only the interpretation of the
standards but also their intention ( spirit vs the letter”).
Ultimately, this should help with improving audit quality, which
the International Forum of Independent Audit Regulators
(IFIAR) recently classified as going “too slow”. This came out
as the IFIAR was releasing its annual inspections findings
survey at the beginning of March. “[The] IFIAR's 2015 survey
of findings from the inspections of the six largest global
network audit firms… indicates that 43%of inspected audits of
listed public interest entities (PIEs) had at least one inspection
finding during the survey period,” said IFIAR chairman Janine
van Diggelen in a press release.
“While this is a four percentage point drop in deficient audits
over last year, IFIAR is not yet satisfied that enough has been
done by the audit profession to understand and address
shortfalls in audit quality. The outcomes continue to show a
lack of consistency in the execution of high-quality audits and
highlight concerns over the robustness of the firms' internal
“
quality management systems.”
Interestingly, there are a number of similarities in terms of
inspections outcomes between what the IFIAR report reveals
and what has been observed in South Africa, with both
instances showing exactly the same failure rate of 43%, even
though the two do not cover the same period. Another slight
difference to bear in mind is that the IRBA also inspects small
andmediumpractices (SMPs).
As such, there is now a global focus on the measurable
improvement of audit quality and on developing and
implementing meaningful audit quality indicators (AQIs) that
can be used by other stakeholders, such as audit committees
and regulators, in assessing the competence, capacity and
experience of auditors. SouthAfrica should look at developing
relevant AQIs as soon as possible and start engaging various
stakeholders so they can meaningfully use these indicators
when assessing their auditors for appointment or
accreditation.
I NSPECT I ONS
Collaboration EffortsWill Produce Better Results
Imre Nagy
Director: Inspections
Telephone: (087) 940-8800
Fax:
(087) 940-8874
E-mail:
inspections @irba.co.za2 0
Issue 33 January - March 2016