Understanding key risks that could have an effect on financial statements of a company and effectively translating that knowledge into a well-defined audit plan to address the risks identified are the main elements in a quality audit. In addition, a quality audit results from the performance of the audit team in planning and executing the audit plan within the system of quality control established by the audit firm.
Audit quality is made up of many different factors and the relative importance of these factors is dependent upon the users of financial information and their specific needs.
Boards of Directors and Management are in the best position to assess the auditor’s performance as part of their fiscal and fiduciary responsibility to the company in overseeing the financial reporting process. These individuals know what data is meaningful to them based on their understanding of the company.
While there is no single definition of audit quality some factors of a quality audit include:
- Compliance with the accounting and auditing standards set by the profession.
- Applying a deep and broad understanding of the client’s business and the environments in which they operate.
- Using the auditor’s expertise to raise and resolve issues early during the audit process.
- Exercising professional skepticism in all aspects of the audit.
Certain elements of audit quality such as skepticism and prudence on the part of the auditor can not be quantified. Other elements, such as data points and contextual information will provide knowledge of an audit firm’s investment in and commitment to quality. All of these factors will be helpful to those in governance in assessing the quality of their auditors and in evaluating the Company’s investment in the audit process and relationship.
TJS Deemer Dana LLP’s team is experienced with audit and assurance services. Feel free to reach out to us with any questions at www.tjsdd.com.
Written by: Matt Stringfellow