Ensuring a High Quality Audit: Who is Responsible? Five Ideas for Audit Committees to Maximize Value from the External Audit Process

Abstract

External audits are expensive, especially when you factor in a company’s time in responding to audit requests. While some companies may treat the audit opinion as a commodity, there are risks and opportunities within the audit process that should be considered. This article begins with some regulatory concerns and concludes with ideas in ensuring a healthy external audit process to maximize shareholder value. Specifically, five ideas are offered to audit committees and chief financial officers for extracting additional value from the external audit process. These ideas are grounded in practical applications to increase a company’s return on investment.

Notes

^1. The Securities and Exchange Commission, Speech, Directors Forum 2016 Keynote Address, Andrew Ceresney, Director of Division of Enforcement, San Diego, California, January 25, 2016, https://www.sec.gov/news/speech/directors-forum-keynote-ceresney.html

^2. International Forum of Independent Audit Regulators’ Report on 2015 Survey of Inspection Findings, March 3, 2016.

^3. International Forum for Independent Audit Regulators’ press release, International Audit Regulators Say Pace of Audit Quality Improvement Too Slow; Call for Measurable Improvement By 2019, Amsterdam, the Netherlands, March 3, 2016.

^4. Public Company Accounting Oversight Board’s Speeches & Statements, The State of Audit Quality, December 11, 2015, http://pcaobus.org/News/Speech/Pages/Munter-AICPA-2015-inspections-update.aspx

^5. The Center for Audit Quality’s CAQ Approach to Audit Quality Indicators, April, 2014.

Additional information

Notes on contributors

Ronald Kral

Ronald Kral, CPA, CMA, CGMA is the Managing Partner of Candela Solutions LLC, a public accounting firm with a national focus on governance, SEC compliance, and internal auditing. He is an educator, advisor, and internal auditor for boards and management teams. Ron is a member of 4 of the 5 COSO sponsoring organizations; the AICPA, FEI, IIA, and IMA. He can be reached at [email protected], or you can connect with him at www.linkedin.com/in/ronkral.