In a recent speech, George R. Botic, a Board Member at the US Public Company Accounting Oversight Board (PCAOB), emphasized the importance of audit quality and the need for a sense of collective responsibility among all stakeholders — including audit firms, audit committees, public companies, regulators, and academics — in maintaining it.
"I submit to you that each one of these candidates represents a unique link of the financial reporting chain and each has a duty to ensure the performance of high-quality auditing," Botic said. "A few have a more clear and direct responsibility for audit quality such as the auditing profession and audit committees while other links in the chain are more indirect. But make no mistake, each plays a part in ensuring the auditing profession's ability to execute high quality audits year after year."
Botic highlighted the role of audit firm culture in driving the employee behavior necessary to ensure consistent, high-quality effort. A sound culture would also help prevent other misconduct concerns plaguing audit firms globally, such as exam cheating, Botic asserted. "Without maintaining a keen unrelenting focus on the importance of audit quality, a firm's culture may not embody what the organization wants to project nor what investors expect," he said.
Botic pointed to employee behavior, management decisions, and formal systems as key aspects of the "written and unwritten" rules that make up culture. Firm leadership, he asserted, should periodically assess the state of their organization's culture to determine if it is supportive of high-quality audits and other desired outcomes. "Unfortunately, I suspect what many firms will likely find, particularly regarding the unwritten rules, is that audit quality is not front and center," Botic said. "Ideally, a firm's culture inspires every member of each audit engagement team to start their day with an objective that they will do one thing to improve the quality of the audit. Consider the power of that."
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