It seems the Public Company Accounting Oversight Board is not the only audit regulator troubled by audit quality around internal controls over financial reporting and fair value. It's a big problem in other countries as well, according to a recent survey by the International Forum of Independent Audit Regulators.

IFIAR assembled the inspection findings of 30 member regulators through July 2013 and found internal control testing and auditing fair value measurements proved to the leading areas of deficiency in the audits inspected, consistent with themes emerging from the PCAOB the past few years. Also high on the list: procedures to assess the adequacy of financial statement presentations and disclosures. When aggregating the results, the leading area of audit deficiencies at major financial institutions revolved around allowance for loan losses and loan impairments, internal control testing, and the valuation of investments and securities, the IFIAR reported.

As for the audit firms quality control systems, the highest number of inspection findings focused on areas of engagement performance, human resources, and independence and ethics requirements -- also common themes in U.S. inspection findings. Lewis Ferguson, chairman of IFIAR and a member of the PCAOB, says more works needs to be done to improve the reliability of audit work performed globally. ““The high rate and severity of inspection deficiencies in critical aspects of the audit, and at some of the world's largest and systemically important financial institutions, is a wake-up call to firms and regulators alike,” he said during a media briefing.

The survey results are consistent with findings in 2012, although the nature of the survey does not lend itself to quantitative analysis on the quality of audit performance, Ferguson says. As such, IFIAR can't assert a definitive conclusion on whether audit quality has improved or deteriorated since the last survey, he said. Still, “the survey makes clear that these important inspection findings are prevalent across many nations and firms,” he said.

IFIAR sees a need for monitoring and promoting audit quality across borders and has a role to play in doing so, said Ferguson. “In monitoring the firms' progress in these areas, IFIAR hopes to gain insight into whether the firms are successful in addressing firm-wide issues and, accordingly, promoting consistency in the execution of their audits,” he said.

IFIAR says it has met with the global audit firm network leaders to discuss inspection results and actions the firms can take to show improvement. The association is looking for more root cause analysis around audit deficiencies or audit failures to determine how improvements can be made.

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