Audit regulators globally say they’re seeing some incremental improvement in audit inspection results, but not yet enough.
In its latest annual assessment of global audit inspection results, the International Forum of Independent Audit Regulators says deficiencies are cited in a “high but decreasing percentage of audit engagements” in the 42 jurisdictions that participated in the survey. IFIAR challenged the global audit networks to reduce inspection findings by at least 25 percent over a four-year period, and they’re nearly but not quite there, the forum said.
At the half-way point of that four-year targeted improvement period, IFIAR’s 2017 survey data says 30 percent of publicly traded entities inspected and reporting into the survey had at least one audit deficiency finding. That brings the level of findings “very close to the 25-percent reduction target of 29 percent,” said IFIAR. While acknowledging the efforts of global network firms to bring deficiency findings down, IFIAR’s working group assessing the findings says: “the rate of findings remains too high.”
When examining audit findings for public interest entities and entities that are considered “systemically important financial institutions,” IFIAR said of the 918 audit inspected, 40 percent had at least one deficiency finding. While IFIAR considered that number high, it’s down from an even higher rate of 47 percent in 2014. “While the 2017 survey indicates a modest decrease in the rate of audits inspected with at least one finding on an overall basis, a closer analysis of the data highlights a troubling trend of inconsistent progress among IFIAR member jurisdictions,” IFIAR reported.
IFIAR says while it sees an overall downward trend in deficiency findings, the improvement is not even across jurisdictions. It also finds no definitive trends for findings arising from inspections of firm-wide systems of quality control. “These mixed results affirm IFIAR’s views that the global networks must continue in their efforts to strengthen their systems of quality control and drive consistent execution of high quality audits throughout the world,” IFIAR reported.
In the United States, the Public Company Accounting Oversight Board is also calling on the major audit networks for improvements. While the board's findings on audit deficiencies are made public via individual firm inspection results, concerns about quality control measures taken at the firms are not as clear because those results are kept private unless or until firms fail to remediate concerns to the PCAOB’s satisfaction.