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About the forum

The ICAEW Audit and Assurance Faculty convened the Audit Quality Forum in 2004. Its aim is to promote quality and confidence in corporate reporting.

Origins

The Audit and Assurance Faculty initiated its Audit Quality programme in 2002. The programme is about working in the public interest to promote quality and confidence in corporate reporting.

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The Audit Quality Forum was established in December 2004 at the request of the Secretary of State for Trade and Industry.

Purpose of the forum

The forum brings together representatives of auditors, investors, business and regulatory bodies.

Its purpose is to encourage stakeholders to work together by promoting open and constructive dialogue about transparency, accountability, reporting and confidence in the independent audit. This contributes to the work of government and regulators and generates practical ideas.

Two rules

  • There is no formal constitution for the forum
  • The forum is conducted on a similar basis to the Chatham House rules

Two principles

  • There should be a spirit of consensus within the forum which comprises of individuals drawn from key stakeholder groups working together for a common purpose
  • The forum should continue so long as participants believe that it can produce useful policy proposals

Shareholder involvement: the first AQF work programme

Shareholder involvement is the AQF's first series of published papers.

The forum identified five areas of initial interest. Four have resulted in policy proposals to support shareholder involvement and increase transparency in the audit process by:

  • Disclosing the contractual terms of audit engagements for quoted companies on their websites
  • Identifying the names of individual partners signing audit reports
  • Empowering shareholders to put questions to auditors of quoted companies in advance of the AGM
  • Communicating useful and timely information about the circumstances of auditor resignations

In March 2005 the papers advancing these proposals were submitted to the Department of Trade and Industry and the Financial Reporting Council for their consideration.

The fifth area, competition and choice in the audit market for large listed companies, is covered in an interim report (PDF 169KB/22 pages) published in July 2005.

This called for detailed independent research and highlighted the overriding need to ensure that audit quality is maintained and that potential, actual, or perceived barriers to choice are identified.

Fundamentals: broadening the agenda

In 2005 the forum agreed to move to explore a broader agenda. This was prompted by the need to examine the fundamentals of high-quality audit in the light of the UK’s implementation of International Standards on Auditing (ISAs).

The second work programme was entitled Fundamentals and examined the relationships between shareholders, boards, auditors, regulators and other stakeholders in the audit. 

This work included:

  • A project articulating the purpose of the audit under national law
  • Closely related projects on principles-based auditing standards, making global stanbdards local and auditor reporting
  • A study of the legal responsibilities of third parties in supporting high-quality auditing

Evolution: the next stage

The first two work programmes of the forum led naturally to the Evolution of the series.  This looked at how, internationally, audit might evolve because of changes in corporate governance, including the growing importance audit committees, changes in the expectations that various stakeholders have of audit, and changes in financial reporting practice.

Global challenges

The forum’s previous work programmes provide a platform for the current and future work of the forum on Global challenges in three areas: audit market needs; audit performance; and audited financial information.