Have You Developed Your Quality Management Strategy Yet?

Have You Developed Your Quality Management Strategy Yet?

by | Oct 24, 2022 | Blog, News

Continuing on from our recent blog where we looked at assessing the quality risks for the ISQM, this week we look at how to develop a quality management strategy.

Have You Developed Your Quality Management Strategy Yet?

There are four key steps involved in developing a quality management strategy:

  1. Respond to quality risks – what is required in ISQM 1?
  2. Map and document your responses
  3. The role of the RI in embedding audit quality
  4. Practical considerations for less complex firms

We will look at the first of these steps today.

Bear in mind that the quality management process is iterative, so you are expected to adjust the assessment at any time if you notice any risks have changed since they were last assessed. Make sure to document your changes and the reasons for the change.

Respond to quality risks – what is required in ISQM 1?

The types of quality risks that may exist will vary from firm to firm and will be influenced by the size and complexity of the clients as well as the size of the firm and the numbers of offices it has, as well as the non-audit services it provides.

The responses will be influenced by factors like the specific responses that are required by Paragraph 34 of ISQM 1 which includes responses that the firm is required to design and implement. However there is the caveat that ‘unlike the quality objectives …the specified responses are not comprehensive and would not fully address all quality risks. Accordingly, the firm is expected to design and implement responses in addition to those specified in the standards.’

There are also the 12 additional requirements to paragraph 34 added by the Irish Audit & Accounting Supervisory Authority.

Factors to be aware of will include:

  • The type of audit programme used and whether ether is an updating service;
  • The type of ISQM Manual used;
  • CPD training policies within the firm;
  • Whether the firm is part of a Network and what types of support it may offer;
  • Technical resources and having confidence that they are competent and up to date;
  • The types of non-audit services provided and whether these are offered to audit clients where there could be an ethical threat;
  • The length of time the audit partners have provided the audit service to their clients with the potential for long association risk.

This list is not exhaustive.

It’s impossible to cover everything in this brief blog. For more assistance please see our new ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie

Publications and AML webinar

  • The ISQM TOOLKIT 2022 is available to purchase here.
  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
Have You Assessed Your Quality Risks Yet?

Have You Assessed Your Quality Risks Yet?

by | Oct 10, 2022 | Blog, News

Continuing our blog where we looked at how to establish quality objectives for the ISQM, this week we look at how to assess the quality risks.

Have you assessed your quality risks yet?

The first step is to consider the likelihood and significance of a particular risk crystallising.

Bear in mind that the quality management process is iterative, so you can adjust the assessment at any time if you think it has changed since it was last assessed, as long as you document your changes and the reasons for the change.

Develop and implement responses

There are broadly 6 mandatory responses set out in ISQM 1 (see paragraph 34 of ISQM 1) to which the IAAASA have added a further 12 of their own (see paragraph 34D-1 of ISQM 1). Paragraph 34D-2 adds some requirements for auditors of listed entities and Paragraph 34D-3 mentions  adjusting the requirements for the scalability and complexity of the audit firm and the entities it audits.

On their own they will not be sufficient for full ISQM 1 compliance.

Many of the policies and procedures you already have in place on your ISQC1 may be appropriate but be careful not to take the attitude that this is a copy and paste exercise.

The responses identified need to link back to the quality risks already identified and the established quality objectives. Please don’t give in to the temptation to work backwards by starting with your policies and procedures and then doing the responses followed by the risk assessment.

Follow this sequence:

  1. Document the key information about your firm and engagements;
  2. Think about the quality objectives in the standard and the risks that could arise by not achieving those objectives; and
  3. Then look at your current procedures and policies to identify gaps.

Where you find that your existing ISQC 1 policy or procedure doesn’t fit any of the risks, you have identified, it has one of two main consequences either:

  1. The procedure isn’t needed or
  2. You have missed a risk that needs more attention in the new ISQM 1 System of Quality Management (SOQM).

Monitor and revisit

As you progress through the standard and you evaluate and monitor your System of Quality Management (SOQM), you may revisit and change objectives, risks and responses. If deficiencies are identified, you must perform root cause analysis, the outcome of which may then involve revising either your objectives, risks or responses.

You may have already been doing this by responding to cold and hot file review and inspection findings, but perhaps not being sufficiently proactive about correcting deficiencies and ensuring they are much less likely to recur.

If you haven’t, please don’t need to wait until 15 December 2022 to start – get started now.

It’s impossible to cover everything in this brief blog. For more assistance please see our new ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie

Publications and AML webinar

  • The ISQM TOOLKIT 2022 is available to purchase here.
  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
Establishing Quality Objectives for the ISQM

Establishing Quality Objectives for the ISQM

by | Oct 3, 2022 | Blog, News

Six of the eight components have mandatory quality objectives established in the International Standard on Quality Management (ISQM) 1 (see paragraphs 25-34 of ISQM 1). For assistance with implementing the ISQM see our ISQM TOOLKIT available for immediate download here. There is 20% off for simultaneous purchases of five items or more.

There are no mandatory objectives for the two remaining areas:

  • risk assessment or
  • monitoring and remediation.

Smaller firms may find that the quality objectives already included in ISQM 1 are sufficient for their needs, but some firms may need to establish other objectives or sub-objectives. Every firm must consider (and evidence they considered) whether they need additional objectives – it’s not safe just to assume you don’t need them.

Note that if a quality objective included in ISQM 1 is not relevant to your firm then you can ignore it.

The next step is to identify quality risks that threaten the achievement of those quality objectives:

  • Consider
    • the nature and circumstances;
    • the conditions and events;
    • the actions and inactions; and
    • the type and nature of the client engagements.
  • Much of a firm’s nature and circumstances is dictated by:
    • the people working there;
    • the environment within which it operates; and
    • the types of client it serves.

All of the above variables may have an impact on the quality risks that are most relevant to the firm, and each firm will need to assess the significance/likelihood of those risks crystallising.

The emphasis will need to be on identifying quality risks rather than focusing on the consequences of a risk crystallising – e.g.

  • not understanding the requirements of the Ethical Standard is a quality risk;
  • rather than a breach of the Ethical Standard which would be a consequence of that quality risk

Watch out that where you identify a quality risk that doesn’t result from a quality objective in ISQM 1 then you will need to establish a new quality objective.

Next week we will look at assessing risks.

It’s impossible to cover everything in this brief blog. For more assistance please see our new ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie

Publications and AML webinar

  • The ISQM TOOLKIT 2022 is available to purchase here.
  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
Tailoring your ISQM

Tailoring your ISQM

by | Sep 20, 2022 | Blog, News

Audit firms of all sizes, with differing levels of complexity will expect their service providers to publish an off the shelf manual to help implement ISQM 1, just like they did with its predecessor ISQC1. Our new ISQM TOOLKIT is here to help you with documenting your ISQM compliant audit quality risks and responses.

The new ISQM standard requires each audit firm to tailor the ISQM TOOLKIT in such a manner that the risks and responses are unique to each firm. In this regard the new ISQM TOOLKIT is very different to, its off the shelf predecessor, the ISQC1.

Each audit firm must document its:

  • audit objectives (which will be unique, depending on the size of each firm and the nature, size and complexity of its client base),
  • audit risks; and
  • responses to those audit risks

because ISQM 1 requires that these responses are tailored to each firm’s particular circumstances. Each audit firm will need to consider the firm’s particular risks and ensure the responses are tailored appropriately, and document these with an annual review and updates in subsequent years. The process is iterative by its very nature.

The good news is that our new ISQM TOOLKIT has just been published to help audit firms implement the Action Plan below.

Action Plan

Here’s how to start.

  1. Write down key information about the firm and its audit engagements (e.g. do we audit any groups);
  2. Think about the quality objectives in the standard and
  3. The risks arising if those quality objectives are not met.

Then take a look at the firm’s current audit policies and procedures to identify gaps e.g. do we have  up to date letters of engagement, representation, Financial Statement Disclosure Checklists or the latest audit manual for charities, insurance brokers etc.

If you find that you currently have an ISQC 1 policy or procedure that doesn’t fit any of the risks you have identified, either it isn’t needed or you have missed a risk. The answer will be unique to your firm and you will, need to decide which is the correct response. You can’t copy/past the answer from your friend down the road. It goes without saying that these blogs cannot be a substitute for reading the ISQM 1 itself.

More on documenting these risks in one of our upcoming blogs.

If you would like a bespoke consultation remotely or on-site to discuss the new ISQM 1 in more detail please send an e-mail to john@jmcc.ie

Future blogs

Over the coming weeks we will publish a series of blogs, alongside the publication of our new Audit Quality Control Manual called the ISQM TOOLKIT, to help auditors implement the new process.

Publications and AML webinar

  • The ISQM TOOLKIT 2022 is available to purchase here.
  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.

Tags: ISQM TOOLKIT, IAASA, International Standard on Quality Management (ISQM) 1, Root Cause Analysis, Anti Money Laundering Policies Controls & Procedures Manual, AML Training webinar.

Are You Ready For The ISQM?

Are You Ready For The ISQM?

by | Sep 11, 2022 | Blog, News

There are several new acronyms for auditors in Ireland to grapple with before Christmas. From 15 December 2022 the International Standard on Quality Management (ISQM) 1, issued by the Irish Audit & Accounting Supervisory Authority, comes into force. The ISQM TOOLKIT is available here to purchase now for immediate download.

It is and deals with the quality management of audits with special emphasis on:

  • designing, 
  • implementing and 
  • operating 

a system of quality management (SOQM) for audits or reviews of financial statements or other assurance or related services engagements.

It will have a deep and lasting impact on all audits carried out in Ireland, whether they are of public or private companies. Early preparation, well before 15 December 2022, is highly recommended.

The new standard requires audit firms to be much more proactive than the predecessor document the International Standard on Quality (ISQC) 1, which was more reactive in nature.

Among the changes in terminology and acronyms, the main ones are:

  • IUR = Individual assigned with ultimate responsibility for implementation assigned ultimate responsibility and accountability for the system of quality management, on behalf of the firm, evaluates the system of quality management and concludes whether the system of quality management provides the firm with reasonable assurance that the objectives of the system are being achieved.
  • IOR = Individual assigned with overall responsibility for the audit engagement – usually the engagement partner.
  • SOQM = Systems of Quality Management is the overall description for the eight main areas prescribed by the standard.
  • RCA = Root Cause Analysis – identification of the root causes of audit deficiencies which is an iterative and non-linear evaluation. It is part of the monitoring and remediation process – see below.
  • EP = engagement partner.
  • KAP = for an audit of financial statements, the engagement partner is the key audit partner.

The standard is broken into eight main areas:

  1. The firm’s risk assessment process;
  2. Governance and leadership;
  3. Relevant ethical requirements;
  4. Acceptance and continuance of client relationships and specific engagements;
  5. Engagement performance; 
  6. Resources;
  7. Information and communication; and
  8. The monitoring and remediation process.

The IAASB in New York (from where the standard emanates) have issued a very useful Factsheet that explains the background to the changes.

Over the coming weeks we will publish a series of blogs, in advance of the publication of our new Audit Quality Control Manual called the ISQM Toolkit, to help auditors implement the new process. The Manual will be published soon. Watch this space!

Publications and AML webinar

  • The ISQM TOOLKIT is available here to purchase now for immediate download.
  • See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
  • Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
  • To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.