In: Accounting
Auditing and Assurance
Distinguish between the terms ‘Audit Quality’ and “Quality Audit” from the perspectives of
Required:
With empirical evidence:
Please note the following:
1) Audit quality is the process through which quality of the audit can be improved by way of better performance of audit engagements. It is the like standards for application of quality standards during the audit. On the other hand, quality audit is the audit which is delivered to the client and thus helps the client in improving their business processes and financial reporting. It is more like a systematic process of examination of quality controls in the Organization.
2) These are the factors which drives the quality of audit in audit firms-:
a) Engagement partner should ensure the overall quality of audit. It is the primary responsibility of senior audit team members for adhering to quality standards.
b) Relevant ethical requirements such as independence, safeguarding threats etc during the engagement.
c) Client acceptance should be carefully done by the audit firms.
d) Engagement team members should have sufficient number of experience and expertise in the particular sector of client.
e) Continuous monitoring should be done by the senior audit team members. Documentation of audit procedures is the overall responsibility of the engagement team for maintaining quality in the audit.
3) Lets take the example of India where one of the big 4 was barred to audit the banking and NBFC sector. This was mainly done because regulator has seen some lapses during their review. In this case, auditor should have maintained the quality and raised red flags during the audit. After that incident, every audit firm is very careful to maintain the overall quality during the engagements.
4) Auditor's resources has a key impact on performance of audit procedures. With introduction of more technology, testing of automated controls requires expertise in information technology. Audit firms should have separate team who should assist the engagement team in performance of audit procedures through computer assisted audit techniques. In addition to that data analytics can now only done through use of IT systems. Thus if the audit firm does not have these resources then obviously the quality of the audit will be hampered.