With continued economic turbulence and a hyper-complex operating environment, entities need audit and accounting firms more than ever to simplify the complexity. Using a data-driven approach, the AICPA’s Enhancing Audit Quality initiative identified risks and opportunities for audit and accounting firms in 2024 in three main areas: finding and retaining talent, risk assessment, and quality management.
Challenge 1 — Finding and retaining talent
Workforce challenges continue to be top of mind for firms. Although the accounting profession is not alone in facing this challenge, we have tools at our disposal to mitigate the risk. One important tool is technology. Firms need to start thinking of their technology strategy as a talent strategy. Technology-enabled auditing has provided powerful tools to assess risk and spot anomalies and fraud. These tools are not a replacement for professional judgment, but they allow job roles to broaden and expand. Technology can foster career development that aligns with your firm’s strategic growth objectives. Workforce trends indicate employees are looking for meaningful work experiences; when a firm leverages technology-enabled auditing procedures, this can allow time for deeper client engagement when investigating data outliers and free up employee time for opportunities beyond entry-level tasks, which may foster greater job satisfaction.
Resources for implementing technology
The AICPA has developed the Use of Technology in an Audit of Financial Statements practice aid (the technology practice aid) to help auditors focus on the use of technology in the audit of financial statements. Part 1 of the technology practice aid, “The use of automated tools and techniques in the auditor’s risk assessment,” has been developed to assist practitioners in considering the use of technology when applying Statement on Auditing Standards (SAS) No. 145, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.
The AICPA is committed to supporting our members by providing valuable resources that illustrate real-world examples of firms using technology to perform more efficient and effective audits. This hub provides you with access to the latest technology information, tools and resources to best serve your clients or support your organization.
Challenge 2 — Risk assessment
Audit risk assessment procedures are a common area of noncompliance observed through practice monitoring programs. The Auditing Standards Board recognizes that auditors have struggled with certain areas of risk assessment, including adapting risk assessment requirements to less-complex entities. SAS No. 145, which is effective for audits of financial statements for periods ending on or after December 15, 2023, incorporates scalability options and clarifies and enhances certain aspects of the identification and assessment of risks of material misstatement, without fundamentally changing key concepts.
Resources for risk assessment challenges
The AICPA’s Audit Quality team has created resources, including webcasts, so that you can learn from the most common audit quality issues:
Read the newly updated authoritative Audit Guide Risk Assessment in a Financial Statement Audit(updated for SAS No. 145), with real-world examples of applying audit risk assessment requirements to less-complex entities.
Download the “AICPA Audit Risk Assessment Resource” to help document identified risks, risk assessment procedures performed, and the planned responses to those risks.
Download the “Aid for identifying and testing controls at smaller entities,” which provides examples of controls that could be implemented.
Attend the “Risk Assessment Under SAS No. 145”webcast to learn about new and updated concepts for better risk assessments.
Watch the “Applying and Scaling Audit Risk Assessment Procedures Under SAS No. 145” self-study course, which will teach you the ins and outs of AU-C section 315.
Challenge 3 — Quality management
Quality is at the heart of the accounting profession because it creates the trust that our clients value and expect. The new quality management (QM) standards are designed to help firms improve the quality of their accounting and auditing engagements in a modern and scalable way. The new QM standards move firms from a policies-based approach to a risk-based approach. The risk assessment process is a new component firms will design and implement as part of their system of quality management. This process enables firms to tailor the system of quality management to respond to the nature and circumstances of the firm. Implementing a system of quality management will require a significant effort from firms, and the AICPA has developed resources to support you.
Resources to support QM implementation
Start your quality management system implementation journey to comply with the new QM standards using our comprehensive free tools for AICPA members:
Our downloadable interactive practice aid and accompanying risk-and-response library tool focus on Statement on Quality Management Standards (SQMS) No. 1, A Firm’s System of Quality Management, and provide practical examples that showcase effective quality management systems for your firm’s A&A practice.
This QM standards implementation checklist for firms provides tips and resources to help practitioners prepare for and implement a system of quality management.
Our crosswalk document provides a detailed summary of the changes between SQMS No. 1 and Statement on Quality Control Standards No. 8, as amended.
The webcast “New Quality Management Standards: A Practical Approach to Risk Assessment and Response” provides a deep dive into the new risk assessment process, which is a key component of a firm’s system of quality management.
Our self-study course “Understanding and Implementing the New Quality Management Standards” will help you understand the primary changes introduced by the QM standards.
Stay up-to-date with our valuable audit and assurance resources by regularly visiting aicpa-cima.com/eaq.