Audit Quality and Reform
Audit quality encompasses the inputs, processes, and outputs of the audit process. A high-quality, independent audit provides a high degree of assurance to investors that audited financial statements and related disclosures are free of material misstatement from errors or fraud. CFA Institute has long advocated for investor interests in achieving high-quality, independent audits through:
Reforms that appropriately widen the scope of assurance to include audits of internal controls over financial reporting, similar to the Sarbanes Oxley Act in the United States, and other information and non-GAAP measures that are used by investors in their investment and voting decision-making.
Measurement and disclosure of audit quality indicators that provide investors and audit committees and with meaningful and useful information to judge the performance of audits and their outcomes. Until disclosures of these indicators are made, investors cannot judge the success of failure of audits.
Strengthening quality control standards that result in greater adherence to auditing standards.
Regulatory inspections of audit engagements and firms and transparency on the inspections process, such as material engagement deficiencies and communications with auditors and audit committees.