IFAC PAIB Committee Comment Letter for the IAASB Invitation to Comment on Audit Quality

The IFAC Professional Accountants in Business (PAIB) Committee recently submitted a comment letter to the International Audit and Assurance Standards Board (IAASB)’s Invitation to Comment, Enhancing Audit Quality in the Public Interest: A Focus on Professional Skepticism, Quality Control and Group Audits (ITC). The comments focus primarily on the preparer’s perspective on enhancing audit quality and reflect the opinions of the members of the PAIB Committee. Committee members recognize that, since the financial crisis, serious questions are being asked of the audit profession, which is to be expected given the public interest dimension of audit quality. However, in making improvements to audit and assurance related standards and regulations, the IAASB should recognize that many of the issues that drove organizational failure or wrongdoing were not necessarily due to poor audit quality. Instead, the failures and resulting impacts on financial statements were primarily the responsibility of those charged with governance, and executive management.

Committee members therefore recommend that further development of audit and assurance related regulations and standards prioritize driving the right behavior among auditors, in particular their relationship and engagement with the organizations they audit (referred to as the audit client in the ITC). The basis for changing standards should be the result of an empirical vetting of actual audit failures. Changes should not be made to the audit because of governance and management failures. Doing so is, at best, simply an effort to appear to take action on a particular matter. At worst, it is a misdirected effort to influence governance and management practices indirectly through audit standards rather than directly through other means.