What is the state of audit quality today? There are a number of different ways to interpret, as well as answer, that question. The variety of viewpoints presented in this issue grapple with the regulatory model within which audit work is performed, the historical context of current issues in the discipline, and the recent progress that has been in remediating deficiencies.
Audits have become so encumbered by regulatory requirements that their costs have risen out of line with their benefits, argue Arthur Radin and Miriam Katowitz. While many of the requirements may make sense in isolation, in the aggregate the result has been auditors preoccupied with completing checklists rather than focused on the basics—understanding the business under audit.
Has the profession made progress in solving fundamental problems in auditing over the past decades? Howard Levy looks back at some of the problems identified by leading commentators over 50 years and finds that, despite the efforts of regulators and standards setters, most of them have stubbornly persisted to today.
The PCAOB has seen the pursuit of audit quality as a key component of its mission, and, through its inspection process, it has tried to express its priorities to auditors of public companies. Authors Thomas G. Calderon, Hakjoon Song, and Li Wang look at selected audit deficiencies identified by the PCAOB and assess whether auditors are heeding the regulator’s advice in subsequent audits.
A pair of differing perspectives are highlighted in our News & Views section. Jim Peterson argues that the models auditors use to assess risk are fundamentally flawed, and a different approach is needed to find the more subtle indicators of serious potential audit breakdowns. Cindy Fornelli points to more positive signs that audit quality is improving, and she points to the more prominent role of audit committees, which are becoming central to the process of improving quality.