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US PCAOB to Push Forward with AQIs

US PCAOB to Push Forward with AQIs

by Starling Insights

Starling Insights Editorial Board

Apr 09, 2024


The US Public Company Accounting Oversight Board (PCAOB) has scheduled a meeting this week to consider issuing a proposal on audit quality indicators (AQIs).

The PCAOB's AQI project began nearly a decade ago but was shelved due to pushback from the audit industry. In late 2022, the project — now called "Firm and Engagement Performance Metrics" — was revived following a push from the PCAOB's Investor Advisory Group. The notice for the meeting said that the proposal would require "certain" firms to "publicly report specified metrics relating to some of their audit engagements and their audit practices."

It remains to be seen precisely what those metrics would entail. However, the PCAOB has been clear that it sees culture is a key driver of audit quality and professional conduct. In a fireside chat at the 18th Annual Baruch College Auditing Conference last November, PCAOB Board Member George Botic said, "[A]udit firms need a clear culture to derive the right behaviors, which in turn are necessary to ensure the consistent execution of high-quality audits." In addition, Botic argued that such a culture would help to prevent the other professional conduct issues with which many audit firms have struggled in recent years.

Given this focus, it seems likely that such AQIs would seek to assess these cultural drivers of audit quality. Last year, Starling published "Renal Failure: A Crisis in Audit Culture?," a Deeper Dive report into global concerns surrounding audit quality and professional conduct. Therein, we discuss the efforts of regulators, including the PCAOB, to reform audit quality and governance.

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