On 3 March 2017, the International Forum of Independent Audit Regulators (IFIAR) published its Report on 2016 Survey of Inspection Findings (Annual Report), its fifth annual survey of IFIAR members’ findings from inspected audit reports, as well as the 2016 Annual Inspection Survey Stakeholder Announcement (Survey Announcement). The Annual Report concludes that overall, the 2016 Survey ‘shows a general decline in inspection finding rates; however, the high rates of findings continue to be of concern to IFIAR’.
Inspection themes of particular concern to IFIAR include high rates of findings in:
- Firm-wide quality control, including in engagement performance, independence and ethical requirements, human resources and monitoring
- Inspections of listed public interest entities, including in the area of accounting estimates, such as fair value measurement, internal control testing, revenue recognition and audit sampling
- Audits of systemically important financial institutions, particularly internal control sampling.
IFIAR is also concerned with what it notes as overall inconsistency in execution of high quality audits.
To achieve the goal of improving audit quality and decrease the incidence of audit findings, IFIAR calls on audit firms to:
- Address firm-wide systems of quality control, including in the area of auditor independence, to determine what further system changes will lead to more consistent audit execution
- Implement processes to enable thorough analysis of recurring root cause issues
- Establish processes of remedial actions.
The 2016 Annual Report is available on this link.
The Survey Announcement is available on this link.
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