Can Audit Quality Be Measured?
By Carol Paradine, CPA, CA
A
Meet CPAB’s New CEO
We’d like to introduce you to Carol Paradine, the newly appointed CEO of
the Canadian Public Accountability Board (CPAB), Canada’s public
company audit regulator. Carol takes over from Brian Hunt, FCPA, FCA,
who served as the organization’s CEO for nine years and continues in his
role as chair of the International Forum of Independent Audit Regulators
through April 2019.
Carol is a senior executive leader with 30 years of public accounting
experience. As a partner of a major international firm for 21 years, she
specialized in providing assurance and advisory services for public
companies and auditing complex accounting and financial transactions.
Carol also served on the firm’s board of directors and executive committee.
Her career is rounded out with industry experience as a senior financial
officer at a multinational, publicly traded technology company and roles on
numerous not-for-profit boards.
Prior to joining CPAB on March 1, 2018, Carol’s activities on behalf of the
accounting profession included serving on a task force for the Auditing and
Assurance Standards Board and as a member of the Professional Conduct
Committee for CPA Manitoba. She currently serves as a member of the
Auditing and Assurance Standards Oversight Council.
In this article, Carol shares the results of a pilot project conducted by
CPAB to determine the usefulness of audit quality indicators.
26 CPABC in Focus • July/August 2018
uditors and corporate directors
have historically faced a common
challenge: how to measure the
quality of the external audit. How do we
judge an auditor’s ability to find material
misstatements in the financial statements?
Fortunately, this is beginning to change. In-
ternationally, the audit community has been
discussing quantitative measures to assess
the audit process—measures that are becoming
commonly known as audit quality indicators
(AQIs).
In early 2018, CPAB wrapped up a two-year
exploratory pilot project with Canadian audit
committees, management, and external au-
ditors to get feedback about the usefulness
of AQIs. Approximately 20 large and small
organizations got involved, including western
Canadian companies like TELUS. (If you’d
like to learn more about the pilot project,
please visit cpab-ccrc.ca.)
So, what did the pilot project tell us? In a
nutshell, we concluded that AQIs have sig-
nificant potential to positively impact audit
quality.
How are AQIs used?
At their simplest, AQIs provide us with
quantitative information about an audit. Using
them begins with an open conversation among
management, the audit firm, and the audit
committee chair to: 1) determine the orga-
nization’s objectives in using AQIs, 2) select
key AQIs, and 3) agree on how to report and
evaluate them. These discussions are critical
as they enable a shared understanding of
how each party defines audit quality, what
their respective expectations are, and how to
manage the co-ordination needed to achieve
everyone’s goals.
Once the AQIs are selected and target values
are determined, the auditor typically prepares
interim and year-end reports for audit com-
mittee discussion.