Assessing engagement quality is essential for maintaining audit integrity and reliability. Let’s delve into the significance of the Engagement Quality (EQ) metrics and how they impact audit quality and effectiveness.
Indicator: EQ Review Partner Hours (%) and EQ Review Team Hours (%) represent the hours charged to the audit client by the EQ review partner and team as a percentage of the total audit hours for completed engagements.
Purpose: These metrics quantify the extent of pre-issuance EQ reviews, providing insights into the thoroughness of audit file scrutiny.
How to Interpret the AQI:
Higher Percentages: Indicate greater involvement of the EQ review partner and team, potentially covering more areas of significant judgment in the audit file. However, excessively high percentages may signal overreliance on the EQ reviewer to resolve issues that should have been addressed by the engagement partner.
Lower Percentages: May suggest inadequate time spent by the EQ review partner or insufficient attention to critical judgment areas. It’s essential to ensure all significant judgment areas are adequately addressed, regardless of the percentage of EQ review hours.
Considerations:
Quality Over Quantity: The EQ metrics provide a gauge of review thoroughness but do not inherently signify the eligibility or objectivity of the EQ reviewer. Quality assurance should prioritise comprehensive review coverage rather than simply maximising review hours.
Continuous Improvement: Regular evaluation and refinement of EQ review processes are essential to optimise audit effectiveness and mitigate risks associated with under or over-reliance on EQ reviewers.
This AQI, presented as an average per firm, offers valuable insights into the rigor of EQ review processes and their impact on audit quality.
In AQI2, we explored Fee Recovery, remember to include appropriate budgeted hours for the EQ Partner and Team.
Let’s strive for a balanced approach to EQ review, ensuring thorough scrutiny of audit files while maintaining independence and objectivity.
Our Caseware SQM solution includes a library of Monitoring Activities and can help facilitate EQ Reviewers with tailor made work programs for engagement files and firm monitoring.
