​Quality indicators

Evaluating the auditor's performance is a key responsibility of the audit committee. Several new initiatives are underway to provide audit committees with a more precise and disciplined auditor evaluation process.

For example, a questionnaire has been developed by CPAB and CPA Canada for evaluating the auditor's performance, which covers partners' competency, the firm's performance with regard to third-party inspection programs, relationships with management, communications with the board, fair fees, and more. The questionnaire, endorsed by the Enhancing Audit Quality initiative, formalizes the performance interviews and helps audit committees document their conclusions and support their decision to re-engage the auditor or not.

CPAB releases the following set of potential audit quality indicators (AQI):

Audit firm level AQIs ​Engagement level AQIs
  • ​Partner workload
  • Partner to staff leverage
  • Training hours per professional (average)
  • Technical resources per professional
  • ​Years of experience of partners and key audit team members
  • Years of industry experience of partners and staff
  • Specialist hours (e.g. IT, valuations, tax) on the engagement
  • Key engagement team workloads including hours of overtime during peak periods

In the U.S., the Public Company Accounting Oversight Board launched an initiative to define a quality audit. It looks at factors related to the audit strategy, including the audit team's expertise, industry knowledge and experience; the time partners and managers spend on the audit; the time spent identifying and addressing audit risks; consultations with others; outsourced work; firm policies; compensation policies; and so on.

Audit committees should consider integrating the principles and practices recommended by these initiatives in their auditor assessment process.

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