Recently the topic of audit quality, relevancy, and efficiency has become focal points for both the public and private business sectors. It has become essential, now more than ever, for the professional auditor to remain vigilant and uphold excellence with the recent scrutiny and proposed initiatives from both standard setters and regulatory authorities. Furthermore, as with any organization, auditing firms are constantly seeking ways in which they can perform jobs more efficiently and with minimum intrusion.

This article presents an overview of material presented in a webinar sponsored by Wolters Kluwer and hosted by Accounting Today, titled, “Ways to Improve Audit Quality.” This webinar was delivered on July 23, 2015, by Stephanie Lanke, CPA, Customer Experience Manager, Accounting and Audit Solutions at CCH, a Wolters Kluwer business; and Robert E. Cameron, CPA, Cameron, Smith & Company, P.C.

Both speakers provide valuable insight into the common factors that affect the quality of audits—more specifically, peer review deficiencies and recommendations on how efficiency may be improved.


Common Peer Review Deficiencies

Deficiencies in the peer review process is often cited as the leading contributor to poor audit quality. These are most commonly noted among risk assessments and internal controls, where the documentation requirements are stringent, yet involve professional judgement.

Documentation of planning and risk assessment: This includes, but is not limited to:

  • Insufficient documentation of risk assessments: It is important at the planning phase of an audit to identify and document all possible risks. Ultimately, documentation should enable a technically competent auditor, who has no previous connection with the audit, to understand the nature, timing, extent, and results of the procedures including significant findings or issues.
  • Failure to link procedure to risk: After risks have been identified, it is essential to develop audit procedures to minimize these risks. Additionally, these audit procedures should be documented and properly communicated so team members encountering these risks may be able to refer to the procedures and take appropriate action.
  • Failure to define procedures to address risk at the assertion level: It is also crucial to ensure that risks are assessed, and addressed at the assertion level where assertion level risks consist of inherent risk and control risk.

Evaluation and documentation of internal controls: Internal control systems comprise the control environment and control procedures of a company. It includes all the policies and procedures adopted by the organization to assist in achieving their strategic objectives.

As outlined in the webinar, improper documentation of internal control procedures has been cited as another contributing factor poor audit quality. Some examples of failures to evaluate and document internal controls include failure to perform procedures to determine implementation of controls, incomplete documentation of items observed, failure to document IT controls and impact, and not addressing or reporting findings.

To counteract these deficiencies, auditors should take the time to properly understand a company’s internal controls. The understanding of relevant aspects of the accounting and internal control systems enables auditors to:

  • Assess the adequacy of the accounting system
  • Identify the types of potential misstatements that could occur
  • Consider factors that could affect the risk of misstatements
  • Design appropriate audit procedures

Sampling: Sufficiency of audit evidence relates to the quality and quantity of audit evidence where an auditor uses sampling or other audit approaches that do not include testing of all transactions in an account balance or class.

Gone are the days when audit firms would judgmentally select a sample size. It is now mandated by the AICPA (American Institute of Certified Public Accountants) that appropriate standards be used for determining sample sizes. The AICPA themselves provide two approved methods of determining sample sizes (the statistical and non-statistical approach).

Incorrect sample sizes can lead to unrealistic assumptions of the population and can lead to incidents such as incorrect acceptance or incorrect rejection.


How Can eFileCabinet Improve Audit Quality?

Auditors and companies being audited will find that using eFileCabinet Document Management Software (DMS) tools and solutions can make the auditing process more efficient.

Firstly, eFileCabinet’s DMS environment was designed with the goal of providing quick and easy access to files and documents. The intuitive user interface provides a level of organization that external auditors can quickly navigate to retrieve necessary documents.

Also, eFileCabinet comes with built-in HIPAA and FINRA compliance. eFileCabinet’s specific inherent functions and features helps companies foster document management best practices, such as:

  • Being able to easily retrieve folders and documents on demand;
  • Robust security measures to ensure document privacy and confidentiality;
  • Having a system with controls to prevent and detect unauthorized creation of, additions to, alterations of, or deletion of records; and
  • Ability to maintain the integrity of documents and records in the event of unforeseen circumstances such as natural disasters, fire, theft, etc.

Auditors will also be pleased with eFileCabinet’s Enterprise Access tool. This powerful tool makes remote audits a reality by allowing auditors to access company files 24/7 from any location with an internet connection. Enterprise Access means that auditors can perform their duties without having to be physically on-site. This minimizes the cost, time, effort, and associated interruptions that can be a reality of the audit process.

To learn more about how you or your organization can improve the quality of audits fill out the contact form provided for a free 15-minute demo.