Audit Quality: More Than Just a Concern for Auditors

Gary Pflugrath | June 2, 2014 | 2

The recent speech by James Doty, Chairman, US Public Company Accounting Oversight Board (PCOAB), discussing the link between audit fees and audit quality is quite encouraging for a very important reason—it appears to show that regulators like the PCAOB are recognizing that enhancing audit quality goes far beyond the role of the auditor; and what is solely within an auditor’s influence and ability to control.

While no one would argue that the auditor has the primary responsibility for the conduct of a quality audit for a particular audit engagement, the concept of audit quality within a jurisdiction is a much broader issue.

As the International Auditing and Assurance Standards Board (IAASB) recently described in its Framework for Audit Quality, there are many factors that create an environment for enhancing audit quality within a jurisdiction. It notes that while the role of the auditor is paramount, there are many other factors and interactions that impact audit quality.

These include, but are not limited to, the corporate governance arrangements within companies being audited, the commercial and business laws and regulations with the jurisdiction, and the robustness of the financial reporting framework. Additionally, the roles and responsibilities of regulators, boards, audit committees, and users—and their interactions and relationships with auditors and audit firms—can have an impact on, and should be considered when assessing, audit quality.

So what do you think? Can auditors alone be held responsible for audit quality within a jurisdiction?

 

Gary Pflugrath

Gary Pflugrath

Senior Director, Public Policy and Governance

Dr. Gary Pflugrath joined IFAC in 2011 and commenced his current role as Senior Director, Public Policy and Governance, in March 2018. In this role, Dr. Pflugrath has responsibility for the public policy and regulation function of IFAC, which, as the global organization representing the accountancy profession, researches and represents the views of the profession and its stakeholders. IFAC takes a leadership position on public interest issues where the accountancy profession’s expertise is most relevant. Since 2015 Dr. Pflugrath has been responsible for overseeing IFAC’s performance reporting and risk management activities and managing its Planning and Finance Committee as well as participating in IFAC leadership’s work with respect to international standard-setting boards’ governance arrangements. He also has responsibility for the organizational governance activities of IFAC, including overseeing IFAC Board and IFAC Council arrangements, meetings, and agendas. Dr. Pflugrath’s positions prior to joining IFAC include nearly 20 years at the Reserve Bank of Australia, where in 2002 he was the senior manager responsible for the Bank’s accounting policy and reporting. He then moved to the University of New South Wales (UNSW), as a lecturer in accounting, to pursue his ambition to complete doctoral studies. Subsequently, he held the position of policy adviser (audit and assurance) at CPA Australia. Dr. Pflugrath holds a Bachelor of Business (Accounting) Degree, (Chisholm Institute of Technology, now Monash University), and a Master of Business Administration Degree (University of Melbourne). He received his Doctorate of Philosophy (PhD) from UNSW in 2008. He has published referred articles in several academic journals, including Auditing: A Journal of Practice and Theory, the Journal of Business Ethics, and the International Journal of Auditing. Dr. Pflugrath has been a CPA in Australia for more than twenty years.

 

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Abdelhamid Mohamed Abdelhamid August 27, 2014

I think the audit fees consider a very big guaranty for the auditors' independence so with giving the auditor the fees he deserve the auditor will be survive to continue specially in the SMP sector I hope the regulators in IFAC taking care about discussing the "floor fees" concept with the governments to ensure that the auditors will follow the quality control concept

Ralph Nach June 13, 2014

Thank you for acknowledging the role that the accounting framework plays. Financial statements need to be prepared using standards that render them auditable.

 

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