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. When assessed together with relevant qualitative information, they provide insights about factors that may influence audit quality. 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.

How do I use Audit Quality Indicators?

AQIs are a useful tool that, with proper context and discussion among all stakeholders, 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.

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.

Additional information about how to implement AQIs can be found in the AQI Guide.

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.

I would like to use Audit Quality Indicators. How do I get started?

AQI Guide

Together with CPA Canada and the Institute of Corporate Directors, we developed a short guide to assist audit committees in implementing AQIs for the first time. The Guide provides a step-by-step process to help audit committees and management identify relevant AQIs and establishes a general understanding of how they 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 updated Enhancing Audit Quality (EAQ) publications:

• Oversight of the External Auditor – Guidance for Audit Committees
• Annual Assessment of the External Auditor – Tool for Audit Committees
• Periodic Comprehensive Review of the External Auditor – Tool for Audit Committees

Who do I contact if I want to learn more about Audit Quality Indicators?

Please contact stakeholderengagement@cpab-ccrc.ca with your AQI-related comments or questions.

Resources

AQI Guide: Quick start guide to implementing AQIs

Click here to access the AQI Guide jointly developed by CPAB, CPA Canada and the Institute of Corporate Directors, which provides a step-by-step process to help audit committees and management implement AQIs for the first time.

Final Report on CPAB’s AQI Pilot

In 2018, CPAB concluded a two-year exploratory AQI Pilot with Canadian reporting issuers to get feedback about the usefulness of AQIs.

See what we learned here.