Introduction
Audit quality refers to a wide range of concepts of interrelated factors including; the ethical standards that apply to all the accounting bodies, legal framework related to audit regulation, the auditors’ independence, the auditing and accounting standards as well as ASIC’s role in the process of audit review. There are other factors related to individual firm’s processes affecting audit quality, including the culture of the audit firm as well as the firm’s quality in the audit process, such as technical expertise and experience of the audit team (Miettinen 2008).
Importance
Audit quality is quite important because it plays a number of significant roles. It helps in maintaining the efficiency of market environments. Quality audit underpins the integrity and credibility of financial reports necessary for markets to function well (Tritschler 2014). Audits performed in accordance with high quality auditing standards ensure that accounting standards are well implemented by the reporting entities, thereby ensuring the transparency, reliability and confidence of financial statements. Additionally, quality audits help Australian investors to become confident and well informed while making their investment decisions (ASIC: audit quality – the role of directors and audit committees 2015).
Impact of Committees
Audit committees and directors play an important impact on audit quality. They both perform important roles that promote the quality of audit undertaken by a firm. They ensure that auditors adhere to their audit responsibilities. They also focus on issues that may affect the integrity of a firm’s financial reporting (Tritschler 2014). The directors ensure that a firm has the necessary processes, controls and resources in order to achieve high quality reports. Audit committees also handle those concerns related to audit quality with the board of directors that are not properly resolved with the auditor. Additionally, they both seek advice where necessary by engaging ASIC for needed assistance (ASIC: audit quality – the role of directors and audit committees 2015).
Usefulness of Recommendations
The recommendations given by the report are useful in maintaining the continued quality of audit in firms. This is because the member’s auditor recommendation will determine the appointment of the right auditor in the firm. In addition, audit quality is very important. Hence, the continuous assessment of auditors will also determine whether they are performing in accordance to the required audit standards (Miettinen 2008). Again, it is useful to maintain the independence of auditors to ensure that the performance of their duties is not compromised by other individuals’ interests. It is also useful to facilitate the process of audit to ensure the sustainability of audit quality in the company. The assessment of the quality of conducting audit depicts whether the auditors have demonstrated commitment in audit quality as well as in applying high ethical standards (ASIC: information sheet 196, audit quality – the role of directors and audit committees 2014).
Requirement of Recommendations
It is appropriate to have the recommendations made mandatory as of July 2014. This is because they will help in ensuring that audit firms adhere to audit quality while performing their audit activities. In addition, every party to the audit will become responsive to the audit process, thereby ensuring that audit performance is in a manner that is satisfactory to all the relevant parties (Tritschler 2014).
Audit Profession
Audit quality is very essential in the auditing profession. It is through audit quality that the audit profession meets most of its goals of firms undertaking auditing in their businesses. It would therefore be appropriate for the auditing profession to be regulated in this manner in order to ensure that all companies perform audits under the same requirements (Miettinen 2008).
Conclusion
In summary, audit quality is essential in ensuring that firm’s obtain credibility and integrity in their financial statements. In addition, investors will be confident to make investments based on reports performed under high quality audit. The recommendations given by ASIC under INFO 196 are essential in ensuring the attainment of quality audit.
List of References
ASIC: information sheet 196, audit quality – the role of directors and audit committees 2014, Web.
ASIC: audit quality – the role of directors and audit committees 2015, Web.
Miettinen, J 2008, The effect of audit quality on the relationship between audit committee effectiveness and financial reporting quality. Vaasa, University of Vaasa.
Tritschler, J 2014, Audit Quality Association between published reporting errors and audit firm characteristics. Wiesbaden, Imprint: Springer Gabler.