Back in 1974, Robert M. Pirsig explored the meaning of ‘quality’ in his seminal book, Zen and the Art of Motorcycle Maintenance. At the time, the author admitted that the book included very little factual information about either Zen or motorcycles—but it did look deeply into the concept of quality. Now, 40 years later, CPAB and CPA Canada have raised the quality torch in an effort to help audit committees assess the performance of their external auditors. While they don’t refer to Zen or motorcycles at all, they have provided tools to improve audit committee oversight of the external auditor in the belief that this approach is the one most likely to enhance audit quality.
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Are audit committees changing their processes in response to the CPA Canada materials?
Do you expect audit committees to use the CPA Canada tools to conduct annual assessments and periodic comprehensive reviews of external auditors?
What is audit quality? What are the critical elements of the quality of service from the external auditor?
Who should coordinate the assessment processes? The audit committee? Management? A third party? The external auditor?
Are there best practices audit committees can use to assess their external auditors?
While the new guidance has not yet spurred the development of new trends or themes, in our experience, it’s most effective to:
- Reach agreement regarding the most important aspects of the service provided by the external auditor. This will vary from one organization to another.
- Get input from audit committee members, management and external auditors on each aspect of quality service. Consider giving each party the opportunity to comment on the initial information provided by the other parties. They may be able to share an interesting perspective on the observations of others.
- Set aside ample time for the audit committee to substantively discuss the accumulated information.
- Conduct an open and frank discussion of the results of the assessment with the external auditors.
While practices will evolve over the coming months and years, each organization should establish processes consistent with the spirit of CPA Canada materials. Although many organizations will develop tools and processes most effective to their circumstances, it may help to use CPA Canada’s materials and tools as a reference source.
There is little doubt that audit committees—and individuals—will continue to grapple with the concept of quality for years to come. That said, we will continue to work with CPAB and CPA Canada to help shape the future of audit quality in Canada.
- John Gordon, Canadian Managing Partner, Audit