Improving audit quality: our track record
ICAEW convened the first meeting of the AQF on 7 December 2004. This was at a time where there were real concerns about the value of audit. During this first phase of its work, the AQF initially set up working groups to consider different issues around how to improve audit quality. These developed into wide-ranging debates. For each stage, the AQF produced a series of key publications.
Shareholder involvement (2004-2005)
Launched in December 2004, the initial focus of the AQF was to improve audit transparency and support shareholder involvement in the audit process. Investors were concerned they were not receiving all the information they required from audits. The AQF identified matters that would improve audit transparency and bring real benefits to shareholders as well as the longer-term issue of competition and choice. These topics included disclosing engagement terms; identifying the audit partner; auditor involvement in AGMs; auditor resignation statements; and competition and choice.
Audit fundamentals (2005-2007)
The AQF then moved on to look at the fundamentals of high quality audit and whether, and how, international standards could help. It looked at: agency theory and the role of audit; the purpose of the statutory audit; the need for principles-based auditing standards; whether global auditing standards could be made local; and obtaining evidence from third parties.
It became clear with these first two programmes of work that it wasn’t possible to look at audit in isolation – there were wider factors, such as changes in corporate governance and stakeholders, which influenced how audit evolves. The evolution programme considered the impact of audit committees, stakeholder expectations and changes in financial reporting and audit practice.
Global challenges (2009-2011)
By now the AQF was an important international voice on audit issues so the AQF extended its agenda to look at global challenges around the role of audit in managing risk, the provision of non-audit services, promoting audit quality, audit communication and audit committees. This culminated in a landmark paper on how to achieve international consistency in audit quality.
The AQF began a series of wide-ranging debates which looked at The auditor’s potential role in managing systemic risk (2009); The provision of non-audit services by auditors (2009); and Promoting dialogue on audit quality (2011).
Reliability matters (2011-2014)
With the recognition that audit quality issues cannot be resolved without considering the reliability of financial information as a whole, the AQF then explored an agenda relating to the reliability of audited financial statements and how auditors can respond to society’s expectations for reliable information.
Key debates during this period included Spotlight on audit committees: a step change in transparency (2013), and Should auditors do more to enhance the reliability of financial statements? (2014).
After this, the AQF broaden the agenda further to look more broadly at confidence in business.