Audit Quality Indicators
Audit quality is challenging for audit committees to measure and evaluate. Audit Quality Indicators (AQIs) respond to this issue by providing quantitative measures of aspects of the external audit.
What are Audit Quality Indicators?
Audit Quality Indicators (AQIs) are quantitative measures about the external audit process. With proper context and discussion among all stakeholders, AQIs can provide insights and facilitate collaboration among auditors, management and the audit committee and provide more in-depth information to assist in evaluating and achieving sustained audit quality.
AQIs can be used for several purposes. Some common objectives include improving general oversight of the audit, increasing the transparency of the audit approach, and providing better information for the purposes of evaluating the external auditor. Common AQIs include:
- Timing of audit execution
- Use of specialists
- Partner/manager leverage
- Experience of engagement team
- Management deliverables
- Audit hours by areas of significant risk
For a list of other AQIs, please see the AQI Guide.
Who uses Audit Quality Indicators?
AQIs are used by Canadian audit committees. In 2016, CPAB launched an AQI Pilot with Canadian audit committees, their management and external auditors to get feedback about the usefulness of AQIs and to support broader national and international discussions. Based on the results of the Pilot and ongoing external outreach, CPAB believes that AQIs continue to have potential to positively impact audit quality.
Learn more about who participated and the results of the Pilot in our Final Report on CPAB’s AQI Pilot.
Why should I use Audit Quality Indicators?
CPAB worked with Canadian public company audit committees to test the use of AQIs. Their real-life experience identified the following benefits of using AQIs:
- A better understanding among management, the audit committee and the external auditor of their respective roles in the audit and responsibilities related to audit quality, and their expectations of others.
- More efficient and effective interactions between the audit committee and the auditor, as discussions are focused on the most important areas of the audit.
- Improved knowledge and engagement in the audit process and audit quality by all members of the audit committee due to increased information on the most important areas of the audit.
- Improved project management over the audit, including coordination and collaboration in audit execution.
- Better information for the purposes of auditor evaluation.
Learn more about the benefits and challenges of using AQIs in our Final Report on CPAB’s AQI Pilot.
How do I use Audit Quality Indicators?
To use AQIs, the audit committee, management and the audit firm need to collectively determine the AQIs they want to track and monitor those AQIs throughout each audit cycle.
Our AQI Guide, developed together with CPA Canada and the Institute of Corporate Directors (ICD), provides a step-by-step process to help audit committees and management identify relevant AQIs. The Guide also establishes a general understanding of how AQIs can be used to spark a discussion both internally and with the external auditor about improving audit quality.
Those interested in using AQIs to assist with auditor evaluation can use the Guide in conjunction with the following guidance and tools: