CAQ’s Auditor Assessment Tool: The 2025 Version

The Center for Audit Quality (CAQ) has released an updated version of its External Auditor Assessment Tool: A Tool for US Audit Committees. Audit committees are responsible for evaluating the external auditor, at least annually, and making a recommendation to the board on whether to retain the auditor. The assessment tool is designed to assist audit committees in performing this evaluation. The CAQ originally issued the U.S. assessment tool, along with a companion worldwide tool, in 2015. See The Audit Committee Collaboration Publishes External Auditor Assessment Tools, July 2015 Update. See also CAQ Updates its Auditor Assessment Tool, April 2017 Update.

The assessment tool is a questionnaire that the audit committee can use to guide its evaluation of the auditor.  It has four parts -- the qualifications and performance of the external auditor; the firm-level approach to promoting and monitoring audit quality; the quality and candor of the external auditor’s communications with the audit committee and the company; and the external auditor’s independence, objectivity, and professional skepticism. Each part consists of several topics and includes sample questions for that topic and space for the committee to record its observations. In total, there are 20 evaluation topics

The assessment tool also includes two appendices.  Appendix I contains relevant U.S. legal requirements and standards, including the statutory requirements relating to non-audit services, SEC and PCAOB rules on auditor/audit committee communications, and the New York Stock Exchange’s listing standard regarding audit committee charters.  Appendix II is a list of resources and suggested reading.  This list includes accounting firm publications on audit committee responsibilities and relevant CAQ publications. 

The Assessment Process

The assessment tool begins with an overview of the auditor assessment process. That process should draw on the audit committee’s experience with the auditor during the engagement, including presentations, reports, and dialogue during formal and informal meetings, and should be informed by prior evaluations. The committee should also consider the views of management and internal audit. The assessment tool includes a suggested survey form for obtaining observations about the auditor from others in the company.

Other sources of input into the audit committee’s assessment may include discussions with the auditor regarding its firm-level approach to promoting and monitoring audit quality and information published by the firm that addresses audit quality issues (such as firm transparency and audit quality reports, see Six Large Firms Describe Their Commitment to Audit Quality, January 2025 Update).  Audit committees may also want to review regulatory inspection reports or peer review findings.

The CAQ recommends that audit committees consider disclosing to shareholders that they perform an annual auditor evaluation and the process, scope, and factors considered in the evaluation.

Assessment Topics

As noted above, the assessment tool consists of a four-part framework with topics and sample discussion questions under each part. The four parts of the evaluation are listed below, along with the 20 evaluation topics.  An example of a discussion question for each topic is also included. 

Part 1: Quality of services and sufficiency of resources provided by the external auditor – the engagement team. 

The audit committee’s evaluation of the external auditor begins with consideration of the quality of the services provided by the engagement team during the audit and throughout the financial reporting year. This includes an assessment of the team’s competence, resources, and responsiveness. The team’s knowledge, skills, and experience, ability to address risks of material misstatement, access to specialized expertise, and use of technological resources are key factors. ​

1.     Engagement team competence, resources, and responsiveness.

Sample question: Did the lead audit engagement partner and engagement team demonstrate the necessary knowledge, skills, and experience (company-specific, industry, accounting, auditing, and reporting) to perform the audit of the company’s financial statements?

2.     Engagement team hours and workload.

Sample question: Did the lead audit engagement partner discuss key engagement team members’ workloads and workload information (compared to a standard workload by level as determined by the audit firm)?

3.     Audit plan and risks.

Sample question: Did the lead audit engagement partner discuss the audit plan, including the use of technology and how it addressed risks of material misstatement relevant to the company’s financial statements (including fraud risk and other significant risks) with the audit committee?

4.     ​​​​Audit participants.

Sample question: Did the lead audit engagement partner explain how he or she reviews and supervises those other auditors (such as component teams or audit teams in other locations), specialists, or personnel at shared service center(s), if applicable?

5.     Engagement team succession.

Sample question:  If applicable, has the audit firm sufficiently explained how the changes or rotations of lead audit engagement partner or senior engagement team personnel would be managed?

6.     ​​​​​Complex accounting and auditing matters, including consultations.

Sample question: Did the lead audit engagement partner bring the resources of his or her firm to the audit and advise the audit committee of the results of any consultations with the audit firm’s national professional practice office or other technical resources on accounting or auditing matters?

7.     Scope and cost considerations.

Sample question:  Were the scope, hours, and cost of the audit reasonable and sufficient for the size, complexity, and risks of the company?

Part 2:  Quality of services and sufficiency of resources provided by the external auditor – the audit firm.

This facet of the evaluation involves assessing the audit firm’s industry expertise, geographical reach, resources, and system of quality control. 

8.     Audit quality report.

Sample question: Does the firm’s audit quality report, if applicable, provide transparency into how the audit firm promotes and monitors audit quality and how trends and disclosures are calculated?

9.     Governance and leadership.

Sample question: Have there been any changes to the firm structure (including outside investment), and what is the impact of these changes?

10.  Resources.

Sample question: Does the audit firm have adequate financial strength and stability to appropriately execute its responsibilities and serve its client base?

11.  Engagement performance.

Sample question:  Do audit firm policies reinforce planning and performing the audit to avoid surprises, promote early detection of issues, and achieve the timely completion of the audit?

12.  Monitoring and remediation.

Sample question: If the audit was subject to inspection by the PCAOB or other regulators—or other internal quality review—did the external auditor advise the audit committee in a timely manner of the inspection, communicate any significant findings, and the impact, if any, on the audit results?

Part 3: Communication and interaction with the external auditor.

Frequent and open communication between the audit committee and the external auditor is important to effective oversight of the company’s financial reporting process. ​ The audit committee should evaluate the quality, openness, and frequency of these communications, including discussions on financial reporting quality, accounting estimates, industry trends, new standards, critical audit matters, and any concerns the auditor may have about management’s reporting processes, internal controls, and cooperation. ​

13.  Openness of communications.

Sample question:  Was the lead audit engagement partner able to explain accounting and auditing matters in an understandable manner?

14.  Nature of communications.

Sample question: Did the lead audit engagement partner discuss critical audit matters (CAMs) communicated in the auditor’s report and how CAMs were identified?

15.  Communication of concerns.

Sample question: Did the lead audit engagement partner promptly alert the audit committee if he or she did not receive sufficient cooperation from management, including management in other jurisdictions?

Part 4: Auditor independence, objectivity, and professional skepticism.

The audit committees should ensure the auditor complies with statutory and regulatory independence requirements, including those related to services or relationships that could impact independence.​ The auditor should also demonstrate objectivity and skepticism, particularly when assessing management’s estimates, assumptions, and accounting policies. ​

16.  Independence compliance.

Sample question: Did the external auditor discuss processes in place to monitor and remediate independence violations?

17.  Disagreements with management.

Sample question:  Were there any significant differences in views between management and the external auditor?

18.  Promotion of professional skepticism.

Sample question: Did the external auditor promote the application of professional judgment and exercise of professional skepticism in executing the audit?

19.  Internal audit reliance.

Sample question:  Were there any significant differences in views between the internal auditors and the external auditor?

20.  Non-audit services.

Sample question: In obtaining pre-approval from the audit committee for all non-audit services, did the lead audit engagement partner discuss safeguards in place to protect the independence, objectivity, and professional skepticism of the external auditor?

Audit Committee Takeaways

The CAQ’s assessment tool provides an organized way for an audit committee to evaluate the company’s auditor. The tool is a comprehensive framework for gauging the auditor’s performance, independence, and audit quality. Even if the committee chooses not to ask all sample questions, the tool is a useful framework for determining factors to consider and how to conduct an auditor evaluation.  ​ Audit committees can also use the assessment tool to foster dialogue with the auditor and as a predicate for disclosure to shareholders concerning the evaluation process.