Six Key Habits of Good Audit Firms
Executing a good audit is never easy as most auditors and their clients are under severe time and budgetary pressure. Covid has contributed to these pressures. If you would like to know how to do better and more efficient audits have a look at our summary of this recent report.
The UK Financial Reporting Council recently published a report called ‘What Makes a Good Audit?’ The report highlights the six key habits that progressive audit firms have developed to ensure that they carry out better-quality audits. These are:
- Assessing firm quality risks (careful risk assessment at the outset of the audit);
- Mindset, culture governance and leadership (avoid conflicts of interest or threats to independence);
- Performance monitoring and remediation (root cause analysis followed by decisive corrective action);
- Quality monitoring (cold file reviews and hot file reviews which act as a preventative control);
- Resources – investment in well-qualified people (staff and Partner appraisals and training);
- Information and communication (training scope is broadening to include soft skills and critical thinking training.
Among the key best examples of audit techniques identified in the report are the following:
- “The journal entry testing across the group was thorough and well controlled; in particular the selection criteria used for journal entry testing and the communication of those detailed criteria as required procedures for the component teams. This ensured that the identified fraud risks associated with revenue recognition and management override of controls were appropriately considered across the group.”
- “In those areas which required the exercise of significant judgement by management, the audit team structured its audit working papers in such a way to identify the key judgements, how they were challenged and how that challenge was concluded. The approach adopted was particularly effective and helped provide clear context to the audit and the conclusions reached.”
- “The audit team obtained direct confirmations from customers to verify that revenue for major contracts for the first ten months of the year had been appropriately recognised.”
- “The audit firm integrated the key audit behaviours into the performance evaluation forms for all audit staff”
- “The firm achieves a very high completion rate for mandatory training and has clear consequences for individuals that do not attend, including a process for identifying repeat offenders.”
The report makes for very interesting reading and is available here.
For more details recently published Audit Quality Control Manual (October 2021) (implementing the latest Irish Audit & Accounting Supervisory Authority standards including ISQC1 on audit quality control). View the Table of Contents here.
We also have an up to date Anti-Money Laundering Procedures Manual (September 2021) – View the Table of Contents here.