mhm messenger- six ways the aicpa plans to improve audit quality

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Page 1: MHM Messenger- Six Ways the AICPA Plans to Improve Audit Quality

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MAYER HOFFMAN MCCANN P.C. – AN INDEPENDENT CPA FIRM

A publication of the Professional Standards Group

MHMMessenger

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creation of high-quality auditors. The AICPA’s six-point plan begins with education. The organization is teaming up with the College Board, the nonprofit responsible for the SAT and Advanced Placement (AP) exams to create an AP Accounting course for high school students.

The American Accounting Association is working with the AICPA on the collegiate level to ensure students are being prepared for the current issues and developing challenges in the field. Among the changes being discussed for college-level accounting training is creating an easier way for practicing accountants to receive their doctoral degrees so that they can teach within the university system.

Certification of accountants is also being examined for ways to help with audit quality. The AICPA administers the Uniform CPA Examination, the test that certifies an accountant to become a CPA. It is preparing to release a new version of the CPA exam in 2017. Additional focus on testing critical thinking skills and professional skepticism are among the planned changes to the exam. Both are critical skills an auditor uses to perform a quality audit.

Standards and Ethics

The AICPA recently reworked its generally accepted auditing standards and quality control standards to make them more user-friendly. To further assist auditors in understanding their audit principles and

Much of the recent attention on audit quality falls on employee benefit plans, but to build and maintain the trust of the public all audits—be they for private companies, qualified plans or governmental entities—requires continual improvement to ensure the highest quality. The American Institute of CPAs (AICPA), which establishes auditing standards in the U.S. for non-listed entities, recently developed a roadmap designed to increase audit quality among professionals in the field. Coming from the AICPA’s Enhancing Audit Quality Initiative, the six-point plan reflects the comments and suggestions that came from the AICPA’s research and outreach into what could make audit and attest work better.

Changes the AICPA plans to make to its guidelines, guidance and initiatives fall into the following categories: pre-licensure, standards and ethics, CPA learning and support, peer review, practice monitoring of the future and enforcement. Reviewing the changes put forth by the plan, some of which are already in the works, provides insight into how the profession plans to improve audit quality.

Pre-licensure

To get higher quality audits, you need to ensure the

August 2015

Six Ways the AICPA Plans to Improve Audit Quality

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© 2 0 1 5 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 • www.mhmcpa.com • All rights reserved.

MHMMessenger

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ethical requirements, the AICPA created three new Statements on Quality Control Standards practice aids for firms of a variety of sizes. Task forces are also working on practice aids specifically tailored to single audit and employee benefit plan audit work. Specialty audit areas tend to produce high rates of noncompliant audits; the Department of Labor’s (DOL) recent audit quality study found that nearly 4 in 10 employee benefit plan audits contained major deficiencies.

Improving audit quality involves conversations about industry ethics as well. In early 2014, the AICPA retooled its Code of Professional Conduct (Code). The new ethics recommendations contain guidance accountants can use to guide their decision-making for a range of issues, including topics that are not explicitly addressed within the Code.

CPA Learning and Support

Ongoing education provides an essential support for CPAs in the field. The AICPA created a new website professionals can use to test their accounting competencies. Additionally, the AICPA plans to create certificate programs for employee benefit plan and single audits starting in 2016. These audit specialties tend to have higher rates of noncompliance because they require unique knowledge and skill sets.

Continuing professional education hours are also being reworked to ensure they provide the maximum utility to working CPAs. The AICPA and the National Association of State Boards of Accountancy plan to create a system that measures continuing education requirements not by hours spent (as in current practice) but by competencies mastered. They’re considering alternative ways to get continuing professional education credit that allows working professionals to receive credits in shorter time intervals.

Peer Review

The DOL’s 2014 report on employee benefit plan audit quality found no correlation between a CPA firm’s AICPA peer review and the quality of the audits it performed. To strengthen the peer review program, the AICPA plans to increase the qualifications required of a peer reviewer.

It plans to incorporate better monitoring of peer review completion and performance as well. Starting in fall 2015, the AICPA will track firms’ Employer Identification Numbers and compare them to other databases, such as the DOL’s EFAST2 database. Comparing data will verify that firms that should be receiving a peer review are enrolled in the AICPA’s peer review program.

Practice Monitoring of the Future

Self-monitoring plays a large role in the audit quality process. Though how the firm ensures it is meeting the applicable standards will depend on the firm, the AICPA is working on tools to help with the process. It plans to launch a quality-monitoring tool in the near future that helps firms keep track of their accounting, attest and auditing engagements. The technological tool being developed will reflect the feedback the AICPA has received about the usefulness of such a program, including how to incorporate technology, risk management and transparency elements into self-monitoring activities.

Enforcement

From the AICPA to the applicable state board of accountancy to the DOL, several parties can get involved when an auditor performs deficient work. Communication among the different agencies can be

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please contact your MHM auditor to further discuss the impact on your audit or audit report.

complex, which is why the AICPA plans to encourage information sharing among the different groups.

Currently, when an AICPA member violates an ethical provision, it may receive remediation or disciplinary actions from the AICPA. Notifications about violations are publicly published and also submitted to the state boards of accountancy.

The AICPA and the National Association of State Boards of Accountancy are working on a program that would allow the AICPA’s enforcement division and the DOL to share findings with the state boards of accountancy. Sharing information would help state boards of accountancy better investigate deficient work.

For More Information

If you have specific comments, questions or concerns about how the AICPA’s six-point plan could affect audit quality, please share them with Mark Winiarski of the MHM Professional Standards Group. Mark can be reached at [email protected] or 816.945.5614.