Practical pointers on quality management

Complying with the International Standards on Quality Management – ISQM 1 and ISQM 2 – can still present auditors with practical difficulties long after the headline implementation deadline of December 15, 2022. 

Since then, firms have been focusing on the ongoing monitoring and remediation of their system of quality management (SoQM). They have also been undertaking some quality management activities that can be challenging, particularly for smaller firms.

Examples include: root cause analysis, engagement quality reviews, and the firm’s first annual evaluation of its SoQM – which are all required by the ISQMs for all audit firms. 

To assist firms, there is a new in-person ICAEW course on Root Cause Analysis (RCA) Fundamentals. It introduces key RCA concepts and a mix of practical and theoretical techniques and tools for identifying, understanding and solving tough and recurring problems.

Before the arrival of ISQM 2, many firms were not required to perform engagement quality reviews and may lack the internal resources to do so. An Audit and Assurance Faculty article outlining what's required by ISQM 2 and providing practical pointers on compliance can be found on the Audit & Beyond hub.

Firms that want to finesse their SoQM and build on their first annual SoQM review going forward will find valuable insights in forthcoming articles in Audit & Beyond and ICAEW Insights. These will be available on the resource hub for quality management in audit firms. These examples highlight how vital leadership and culture are to the success of an SoQM going forward, and why. As Alex Russell, Head of Audit and Assurance Strategy, ICAEW, says in a recent ICAEW Insights podcast: “Leadership should continue to be highly involved in the process.”

Where next on audit and governance reform in the UK?

Update yourself on the future of audit and corporate governance reform in the UK by listening to our 30-minute ICAEW Insights In Focus podcast. 

Auditors discuss progress on corporate governance reform over recent years, the direction of travel and the positive role that auditors, directors, investors, regulators, politicians and others can play in supporting and strengthening the UK’s corporate governance ecosystem.

Along the way, they consider ICAEW’s recommendations for developing a meaningful audit and assurance policy (updated in 2023), changes in the revised Corporate Governance Code 2024 and implications of the Economic Crime and Corporate Transparency Act 2023.

For additional resources, visit ICAEW’s Corporate governance hub,and listen to the Financial Reporting Council (FRC) podcast on key revisions in the revised Corporate Governance Code and explore the associated FAQs.

In case you missed it

The Audit and Assurance Faculty webinar on making sense of sampling and substantive analytical review is now available as a recording in the faculty webinar library. Other topical recordings offer reminders and pointers on ISA 315 and highlight what’s changing in group audits during 2024.

Auditors and firms planning for CASS audits during 2024 can learn all they need to know from a recording of a recent Financial Reporting Faculty webinar. It outlines the regulatory landscape, scoping, testing, quality control and reporting.

New regulations for continuing professional development (CPD) became effective from November 2023. To assist with the transition, there is a guide to CPD and a range of CPD learning resources including articles, courses, technical help sheets and webinars on areas including audit and assurance.

Technical updates

The UK Financial Reporting Council (FRC) has published a summary of key findings and potential actions from research it commissioned into barriers to entry and growth faced by audit firms in the UK.

Other recent FRC outputs include:

• An update to the Ethical Standard for auditors
• Guidance for the UK Corporate Governance Code 2024
• Inspection findings for Tier 2 and Tier 3 audit firms

The International Audit and Assurance Standards Board (IAASB) has proposed significant strengthening of its standard on auditors’ responsibilities relating to fraud, in an Exposure Draft and Consultation papers for revisions to its fraud standard, ISA 240.

Other recent IAASB outputs include:

• Guidance for assurance practitioners when citing IFRS accounting standards
• A new standalone standard for audits of less complex entities

Stay up to date on regulatory developments from the FRC, IAASB and other standard-setters and regulators with Technical news in brief from the Audit & Assurance Faculty.