Early warning systems needed

Tools for flagging signs of poor-quality audits need to be used more effectively, so corrective action can be taken, according to a major new review of their use by the Financial Reporting Council.

The problem is, however, that most monitoring of audit quality indicators (AQIs) in large audit firms, at least, only takes place after audits are completed!

The watchdog said that consistent public reporting of AQIs can help audit committees and investors hold audit firms accountable for achieving high quality audit. The worry is few audit committees and investors interviewed by FRC for the report were aware of published AQIs. That is because publicly-reported AQIs are not easily accessible or comparable across firms.

FRC’s David Rule said: “Public reporting of a consistent set of audit quality indicators is required to provide companies and investors another window on audit quality.”