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IRBA Public Inspections Report 2017 – ISQC 1

Have you looked at the IRBA Public Inspections Report 2017 yet? Several critical issues were identified at firm level that all firms should consider.

Firm leadership:

  • Tone at the top – lead by example
  • Development of internal culture of quality
  • Promptly monitor, identify and communicate common weaknesses
  • Root cause analysis for deficiencies identified
  • Balanced commercial interests to protect audit quality
  • Consistent audit quality on all audits

Independence as underlying root cause for most deficiencies:

  • Prohibited non-audit services (preparing financial statements)
  • Audit tenure disclosed in audit report was incorrect or omitted

Acceptance and continuance of clients and engagements:

  • Firms are not sufficiently weighing up risks in relation to the perceived benefits of taking on clients

Human resources:

  • A common root cause cited by auditors – insufficient personnel of necessary technical competence

Engagement performance and internal quality reviews:

  • Timing of procedures by the reviewer was only shortly before the audit report was issued, or after the audit report was issued
  • Insufficient evidence that EQCR recommendations were implemented or made before the audit report was signed off

Monitoring:

  • The scope and outcome of internal monitoring reviews wasn’t always appropriate
  • Audits not selected for internal monitoring weren’t consistent at the required level of quality

It is crucial that firms perform thorough root cause analyses to find the most effective and appropriate remedial action plan to address deficiencies identified while improving efficiency and level of knowledge of audit staff. At LEAF our experienced specialists are waiting to take your firm to the next level of quality.