IRBA NEWS LETTER

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Issue 35 | July-September 2016 19
The Journey and Path Ahead – stated that many stakeholders felt
it was important to add context to the quantitatively based AQIs.
The Federation of European Accountants (FEE), in its study titled
Overview of Audit Quality Indicators Initiatives, identified the
number of training hours per audit personnel to be the most
common AQI used among nine separate international bodies. One
would assume that the more hours spent by a firm on training would
result in a firm that is more committed to audit quality. However,
this may not always be the case. For example, a firm with skilled
partners and years of experience in a particular industry may not
invest as heavily in training when compared with a firm that has less
experienced partners in a particular industry.
Another common AQI example highlighted by the FEE was the
outcome of external inspections. While inspection results provide
a snapshot of audit quality at a particular point in time, they should
not be regarded as the only indicator of audit quality. Locally,
the IRBA cautions that inspections are based on a risk-based
approach, with a limited scope in many instances. This means
while inspections are performed with the objective to promote audit
quality, the results should not be taken out of context. For example,
an unsatisfactory result does not necessarily imply that the audit
report was inappropriate.
The International Auditing and Assurance Standards Board’s
(IAASB) A Framework for Audit Quality emphasises the importance
of the audit committees and their responsibility to oversee the audit
process. This is further described in the draft King IV Report, as
published by the Institute of Directors Southern Africa (IODSA), in
which audit quality oversight is specifically described as a function
for the audit committees. It is envisaged that AQIs could be used
as a valuable tool by audit committees in better discharging their
duties.
The IRBA believes that the method of implementation for AQIs
requires careful consideration in order to ensure that the desired
outcome of improved audit quality is achieved. As part of our
mandate in driving audit quality, we have begun an internal research
process. The conceptual avenues to be explored could include:
• Engaging with international and local professional bodies;
• Engaging with relevant local platforms and stakeholders;
• The consideration of minimum disclosures to the relevant
stakeholders, for example, regulators, audit committees or the
stock exchange;
• The consideration of which method of publication would best
achieve the overall objective, for example, mandatory minimum
disclosures versus tailored engagement specific disclosures,
when engaging with a particular client or potential client;
• The consideration of confidentiality threats versus the need for
audit transparency; and
• Incorporating AQIs into the inspections and remedial action
processes.
The statutory mandate of the IRBA – which is also a member of an
IFIAR Task Force that is developing a Thought Leadership Paper
on Audit Committees – is the regulation of auditors. However, it
recognises its broader responsibility to also strengthen other
structures, particularly those charged with governance, so that they
are in a position to contribute to overall audit quality.
So, it is through ensuring high audit quality that we can contribute to
the credibility of financial statements and our financial markets, and
better protect the investing public.
Imre Nagy
Director Inspections
Telephone: (087) 940-8800
Fax: (087) 940-8874
E-mail:
INSPECTIONS c o n t .