How audit committees can assess the quality and effectiveness of external audit

Following recent corporate failures and a decline in public trust, the scrutiny on audit quality has never been greater.

Assessing audit quality is a key task for audit committees. To help this, we have built a tool to help identify areas where improvement might be needed.

The tool consists of:

• An interactive questionnaire for audit committees
• An optional set of questions for management and the auditor

Our tool considers the increased emphasis by regulators and investors on audit quality. It also takes into account recent pronouncements such as the Financial Reporting Council’s Audit Quality: Practice Aid for Audit Committees and its Letter to audit firms on high quality audits, both issued in December 2019.

What are the key features of the audit committee tool?

• Simple questions, with the option to go into further detail for each, to address the key considerations relevant to audit quality structured along the key phases of the audit.
• Suggested sources of information and evidence to support audit committees’ assessment.
• The option to choose responses, strike out questions and add new ones, highlight text, write notes, and add comments. This allows you to customise the tool to reflect the particular circumstances of your company and its audit and annotate actions and/or report on progress. 

Download the tool for audit committees. 

Why ask management and the auditor for feedback?

While it is important that audit committees have an independent point of view on audit quality, they may consider it necessary for their assessment to be informed by input from executive management. Similarly, an audit is influenced by the quality and effectiveness of the reporting function, the reporting processes that management has put in place and the audit committee’s input and interventions. Hence the audit committee may also want to ask for the auditor’s views.

To aid the collation of this feedback, we have prepared two supplementary questionnaires that can be completed by management and the auditor should the audit committee wish to include their respective views as part of their overall assessment of audit quality. If used together with the main tool, audit committees will be able to conduct a holistic assessment of audit quality. 

Download the supplementary questionnaires for completion by management and the auditor.