10 Strategies to Increase Audit Quality

by Salvatore A. Collemi, CPA, Collemi Consulting & Advisory Services, LLC | September 9, 2022

In today’s challenging economic environment, independent auditors — from sole practitioners to the largest international CPA firms — are under a microscope to ensure they are achieving high-quality auditing of financial reporting. CPA firms have recently been in the crossfire of negative results reported by standard-setters and regulatory agencies.

One way to steer your ship clear of these treacherous waters is to increase audit quality across your assurance practice. When independent auditors, regulators and investors refer to the term “audit quality,” most tend to focus on the credibility of the audited financial statements. In other words, did the auditor deliver an appropriate professional opinion that was supported by sufficient evidence and objective judgments? In order to answer that question, we must first identify the key ingredients that drive audit quality:

  • Leadership and culture of a firm
  • The skills and personal traits of audit partners and professional staff
  • The effectiveness of a firm’s audit process, methodologies, policies and tools
  • The reliability and usefulness of audit reporting
  • The business and regulatory environment in which the CPA firm and their clients operate
  • Compliance with applicable independence and ethics requirements from the American Institute of CPAs (AICPA), regulators, standard-setters and state boards of accountancy
  • Market placement and specialization
  • Engagement performance, professional skepticism and judgement
  • Quality control and consultation
  • The delivery of consistent results

So how can you ensure your assurance practice does not get sued by an audit client, fail an AICPA peer review or face a regulatory enforcement action? Follow these 10 recommendations for boosting the quality of your audit practice:

  1. Strengthen the “tone at the top.” Firm leadership should:
    • Ensure that all staff have sufficient time and resources to solve engagement issues.
    • Demonstrate a track record of consistency on standards-based decisions.
    • Establish and regularly communicate a formal code of conduct.
    • Challenge unethical behavior and address instances of non-compliance with the firm’s code of conduct through swift disciplinary actions.
    • Provide a copy of the firm’s quality control document to all professionals.
    • Hire, compensate, promote and reward professionals who possess and exhibit high levels of integrity and demonstrate a commitment to quality.
  2. Enhance your client acceptance and continuance process. Perform sufficient client background checks. It’s important to only associate with highly ethical clients.
  3. Hire or align with experts, specialists and consultants. Have sufficient technical personnel on hand at your firm or have access to external experts, specialists and consultants who can provide you with the appropriate advice when facing challenging issues.
  4. Offer high-quality continuing professional education and training. Offer a blended training package to increase competency from a technical and soft skills standpoint. Focus on topics such as:
    • Independence and ethics
    • Applying professional judgment, skepticism and objectivity
    • Firm policies and procedures
  5. Establish or outsource a quality control department. If possible, consider investing in or outsourcing a quality control department that will:
    • Develop accounting and auditing guidance as well as industry-specific guidance.
    • Perform engagement quality control reviews of high-risk engagements.
    • Monitor and evaluate the firm’s quality control policies and procedures.
    • Provide technical consultation to personnel.
    • Monitor the firm’s accounting and auditing training programs.
    • Develop assurance policies and procedures.
    • Participate in a dialogue with regulators and standards-setters when new accounting and auditing standards are being developed.
  6. Streamline your audit process. Ensure all engagement teams consistently apply and streamline your audit approach so they can focus on areas of high risk and audit execution.
  7. Increase specialization. Consider specializing in a specific industry or niche so that you can focus your attention and build efficiencies to increase engagement realization.
  8. Rotate key professionals on engagements. Consider rotating partners, managers and engagement quality control reviewers on a periodic basis to add fresh and new perspectives to your high-risk attest engagements.
  9. Join an accounting network or alliance. Consider joining a reputable accounting network or alliance program to collaborate and share with other CPA firms.
  10. Incorporate data analytics. With many attest clients processing their transactions electronically, CPAs are getting more involved in data analytics — the art and science of processing “Big Data” to discover and analyze patterns, identify anomalies and extract other important information embedded in data through analysis, modelling and visualization relative to human behavior and interactions. Data analytics can be utilized to enhance audit and review engagements, forensic investigations and consulting engagements, and to assist clients in business decisions. For CPA firms, data analytics is a powerful tool because it can help auditors and accountants achieve 100-percent coverage in substantive testing, which decreases engagement risk while increasing efficiency and realization.

Salvatore A. Collemi

Salvatore A. Collemi

Salvatore A. Collemi, CPA, is the managing member and founder of Collemi Consulting & Advisory Services, LLC. He is a member of the NJCPA Content Advisory Board.

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