Devils in the detail
Are your internal quality monitoring processes as robust as they could be? Audit & Beyond highlights some best practices and areas where firms could improve.
When the Financial Reporting Council (FRC) recently published Audit Quality Thematic Review: Firms’ audit quality monitoring it had good things to say on the subject. “We welcome audit firms’ commitment to audit quality and ensuring that their quality control systems for audit are effective,” said Paul George, executive director of conduct at the FRC. However, the FRC is a regulator and as you might expect, there are some little devils lurking in among the details.
Although firms allocate substantial resources to their monitoring of the quality of audits, some do not devote a similar level of resources to monitoring their own quality controls. “Given the importance of these control systems, we would expect firms to challenge individual audit engagement teams more rigorously and apply a consistently equivalent level of resources to monitoring the effectiveness of the firms’ overall controls,” said George.
The findings in this thematic review are based on visits the FRC Audit Quality Review (AQR) team made to nine of the largest audit firms in the UK. However, firms of all sizes may learn from the findings, because they highlight good practices and make recommendations for how firms can improve their policies and procedures – and their monitoring of them.
All audit firms must establish and maintain appropriate quality control systems (guidance on quality control, opposite) and perform annual monitoring of their compliance with these, with the firms' own policies and procedures and with auditing, ethical and quality control standards.
Firms are required to establish a system of quality control that promotes an internal culture that recognises quality is essential in performing audits. The firms' monitoring programmes should assist in identifying where improvements can be made, by the firm or by individuals, and enable high quality audit work to be recognised.
This is an extract from an article in the April 2016 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.
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