AQI3 – Exploring Tenure: Firm (years)

Understanding the duration of a firm’s tenure with an audit client is crucial in assessing independence and familiarity threats. Let’s delve into the significance of this metric and its implications for audit quality.

Indicator: Tenure: Firm (years) measures the average number of completed years a firm has served as the audit firm for a client.

Purpose: This indicator provides insights into the level of independence or familiarity threat associated with the auditor-client relationship.

How to Interpret the AQI:
Longer Tenure: Poses a greater familiarity threat to independence, as prolonged relationships may lead to complacency or undue sympathy towards the client’s interests.
Shorter Tenure: Indicates less experience and knowledge of the client’s business, potentially impacting the depth of the audit. However, it also mitigates familiarity threats associated with long-term relationships.

IRBA Code Considerations:
Familiarity Threat: Arises from a long or close relationship with a client, potentially compromising the auditor’s objectivity and independence. This threat underscores the importance of vigilance and professional skepticism in maintaining integrity throughout the audit process.

This AQI, presented as an average per firm, offers valuable insights into the dynamics of auditor-client relationships and their impact on audit quality. As auditors, it’s essential to balance the benefits of long-term client relationships with the need for independence and objectivity. Let’s leverage these insights to enhance audit quality and uphold the highest standards of professionalism. Caseware Cloud allows for the documentation of “Client Since” field for easy reporting on client tenure.

AQI2 – Exploring Independence: Fee Recovery (%)

Understanding the nuances of audit fee recovery, is pivotal in assessing audit quality and efficiency. In this piece, we are going to explore the intricacies of this vital metric and its implications for audit firms.

Indicator: Total audit fees billed to the client as a percentage of the total audit fees internally charged for completed engagements.

Purpose: This metric sheds light on how effectively firms recover fees for their services.

How to Interpret the AQI:

  • Low Percentage: Indicates that a firm has charged less for its services, leading to fees being “written off” and not fully recovered. This could stem from inefficiencies in supervision, project management, or succumbing to fee pressures.
  • High Percentage: Reflects efficient fee recovery, indicating better project management, accurate budgeting, and alignment of actual time spent with budgeted hours.

IRBA Code Considerations:

  • 300.6 A1 (a): Highlights self-interest threats arising from quoting excessively low fees, compromising the ability to deliver services by professional standards.
  • 330.3 A1 & A2: Emphasizes the impact of fee levels on an auditor’s ability to perform professional services and the ethical considerations associated with quoting fees below market standards.

This AQI provides valuable insights into audit firms’ operational efficiency, budgeting accuracy, and adherence to professional standards.

As we navigate the complexities of audit quality, let’s leverage these indicators to drive improvements in service delivery, project management, and adherence to professional standards.

AQI1 – Understanding Independence: Non-audit Fees (%)

In the world of auditing, maintaining independence is paramount. One crucial metric in assessing this independence is the percentage of non-audit fees billed in relation to total audit fees. In this piece, we are going to unpack what this metric entails and delve into how it impacts decision-making and quality.

Indicator: Non-audit fees billed as a percentage of total audit fees to the client.

Purpose: To provide insights into the firm’s dependency on a client for non-audit services.

How to Interpret the AQI: The AQI (Audit Quality Indicator) measures the firm’s reliance on non-audit services compared to audit services. A higher percentage suggests a greater reliance on non-audit services like taxation and consulting. While this may signal client demand or diversified services, it can also raise concerns about independence.

Implications of a Higher Percentage:

  • Diminished Independence Perception
  • Potential Threats to Audit Quality
  • Increased Demand for Non-Audit Services from Clients
  • High potential for Conflicts of Interest

Regulatory Guidance:

King IV Report on Corporate Governance for South Africa, 2016: Recommends audit committees oversee non-audit service provision by external auditors.
Companies Act 71 of 2008: Requires auditors to be deemed independent by the audit committee.
IRBA Code of Professional Conduct for Registered Auditors: Addresses fee dependencies and independence considerations extensively.

Understanding and upholding independence is not just a regulatory requirement but also a cornerstone of trust and reliability in auditing. Let’s stay vigilant in ensuring practices uphold the highest standards of independence and quality.

IRBA released the 2023 Audit Quality Indicators (AQI) report

The Independent Regulatory Board for Auditors (IRBA) released the 2023 Audit Quality Indicators (AQI) report on 16th February. The full report can be accessed here. Over the coming weeks, I’ll be diving into these AQIs to understand how they can enhance audit quality for firms and share the insights with you every Friday, starting from the 8th of March. The 14 AQIs are an invaluable resource for stakeholders in the financial reporting ecosystem. They provide tangible, measurable insights for meaningful discussions on factors influencing audit quality. The full report can be accessed here.

The 5 AQI categories include:

  • Independence
  • Tenure
  • Review
  • Workload
  • Other

Owning your data: How smart analytics makes CFOs more valuable

By Jodi Joseph, Divisional Executive, Caseware Africa.

As a former CFO, I know that reporting and compliance are top priorities, but they can be time consuming and prone to error. Every CFO wants to be thorough and accurate, and no CFO wants the auditors to find something they haven’t. But the volumes of data to be processed are growing exponentially, and it is becoming harder for CFOs to keep their fingers on the pulse of everything happening in the business.

This challenges a growing requirement for the CFO to become a strategic partner to the CEO and a catalyst for better business. Deloitte reported last year that today’s CFOs need to add long-term value to the organisation and help shape corporate strategy.

At the same time, risk is growing and the need to control costs is a top concern. Traditional ways of doing things aren’t enough anymore. CFOs today need smarter tools to empower them to work more efficiently and strategically.

Most organisations are still working in traditional ways, assuming analytics is the domain of internal and external auditors, where it is only used a few times a year. Times have changed and this model needs to be redefined. Accountants and CFOs should be becoming data scientists, using advanced analytics to save time, underpin governance and improve business outcomes all the time.

Unfortunately, this concept has been slow to gain traction, partly because stakeholders aren’t pushing it as an expectation, and possibly because many organisations, auditors, and CFOs themselves don’t fully understand the benefits. There may also be misconceptions around the cost and resources needed to bring advanced analytics into the CFO’s domain.

Simple, smart risk mitigation

The technology allowing CFOs to leverage data analytics has advanced dramatically, becoming user-friendly and cost-effective, with an exponential return on investment (ROI). Using data analytics tools helps CFOs reduce risk so that they are more enabled to find anomalies, outliers, and fraud. This frees up time so that CFOs are empowered to transform the way they work and are better enabled to help run the business more effectively.

Accountants have always been analysts and data scientists. However, modern software is an evolution allowing them to interrogate vast volumes of data across the business – all the time. While younger accountants will enter the workplace expecting technology such as this to help them be more efficient, the older accountants and CFOs also need to change the way they work to become more valuable to the business.

The technology exists now to empower finance teams more than ever before, making them more thorough and proactive, reducing fraud and losses, and ensuring that there are no surprises at internal and external audit. In organisations where risk is high, CFOs can schedule and run tests daily, or build in real time checks to send alerts before a payment is released.

Everyone in the value chain should be using the technology to be more effective and provide better assurances. This empowers auditors too. Given the risk and size of datasets they are now auditing, they need new approaches, too. If CFOs were running analytics monthly – or even more frequently – as a standard part of processes, auditors could validate the reports annually as a test of controls. This reduces audit risk and the audit work.

Better business

At CFO level, the first time you run the datasets and observe the patterns exposed in a user-friendly way, that’s it – the results cannot be unseen after that. This dispels long held beliefs and assumptions about the business. Suddenly, the business can be better understood with all its hidden patterns, risks, and opportunities to do things in new ways.

Proper use of analytics slashes costs and improves profitability. CFOs armed with the appropriate analytics tools can detect interesting discounting practices, misallocation of payments and fraud. By building analytics into the payroll system, they can mitigate the risk of fraud and ghost employees. They can also expose waste in systems, such as not optimising ordering to maximise payment periods.

Often, we think of data analysis in financial terms, but data also allows us to examine user patterns, document terms, emails and communications. We often start in the land of numbers, but all data – financial and non-financial – could be valuable for the CFO. Non-financial data could also help to deliver a deeper understanding of the business risk, performance, profitability, and sustainability. It’s up to the imagination as to how wide this could go. For example, one might support revenue forecasts by analysing complaints and collections emails to understand how happy customers are.

Many organisations have rich data sources, but they don’t monetise and use them effectively. You can’t know what you don’t know, but CFOs who have embraced analytics have gained a world of unexpected insights into the business. Once they can view and interrogate data from across the enterprise, CFOs report that they don’t know how they ever managed without it. They become more strategic and valuable to the enterprise, identifying opportunities to reduce losses and boost revenue.

In time, those who understand their data best and act on the insights, will win.

Jodi Joseph, Divisional Executive, Caseware Africa, a division of Adapt IT.

Jodi is a Chartered Accountant (SA) with incomparable experience as a financial professional. She completed her articles at Grant Thornton – Kessel Feinstein and thereafter joined Investec in various roles including Chief Operating Officer and Chief Financial Officer. In 2013 she was appointed Chief Operating Officer of CQS Holdings – which was subsequently acquired by Adapt IT.

Africa Health Care

Business challenge

Fresenius Southern Africa’s, Vernon Beck (external advisor to SSA CFO, Jason Fraser) says that the company faced significant challenges in creating bi-annual and annual financial statements per requisite IFRS. Fresenius SSA operates the SAP ERM but the complexity of exporting the necessary financial information from the system into Caseware made financial reporting in line with the IFRS framework challenging.

“Caseware was the most effective and efficient financial reporting software application that was able to solve this perennial issue for us efficiently,” Mr Beck says. “We also needed to be absolutely confident that we are utilising the latest Financial Reporting Standards, issued by the IFRS which Caseware addresses by consistently updating its Financial Reporting Standard Templates with the latest standards.”

Business benefits: Streamlining the development of accurate, compliant, and timely financial statements

Fresenius Medical Care South Africa implemented the Caseware IFRS Interim, Annual and Consolidation Financial Reporting suite in January 2023.

Fresenius runs on SAP, and the process of converting the data from the SAP system into a format that is compatible to importing into Caseware to produce fully IFRS compliant financials is a complex one, Mr Beck explains. “This is where the immense technical expertise of the Caseware technical and support team proved invaluable”.
“All our requests to Caseware – no matter how large, time constrained, or complex – have been attended to and delivered,” he says.

He says that already the process of preparing financial statements for multiple companies across sub-Saharan Africa has been significantly streamlined and is now internally managed as opposed to being reliant on external consultants for financial reporting purposes. The process is far more effective, and the results are more accurate, relevant, reliable, and timeous. The automated balancing routines immediately indicate and identify anomalies and incorrectly mapped accounts which further enhances the efficiency of the account mapping and financial reporting.
For Mr Beck, the cloud functionality offers several benefits, notably the ability of users to access the system from multiple points and the reliable backups. It’s also useful that we can access the system from the office or remotely and even designated colleagues at the Fresenius head office in Germany, can access the system if required.

“Caseware’s IFRS solution is the optimal solution we found to address the SAP’s accounting data structure and the dynamic IFRS requirements but most impressive and important is the quality of the backup from the entire Caseware support team – technical and other. “It is simply outstanding”, he says.

The Solution

iXBRL Reporting

iXBRL Reporting

Prepare CIPC iXBRL reports based on annual financial statements.

Caseware Cloud

Caseware Cloud

World-class compliance and streamlined automation, from any location, on any device, at any time.

Caseware Working Papers

Caseware Working Papers

A flexible project management solution that integrates everything needed to conduct assurance and reporting engagements.

Caseware Consolidation

Caseware Consolidation

Combine several entities into a single parent company to create consolidated financial statements.

Fresenius Medical Care

Business challenge

Fresenius Southern Africa’s, Vernon Beck (external advisor to SSA CFO, Jason Fraser) says that the company faced significant challenges in creating bi-annual and annual financial statements per requisite IFRS. Fresenius SSA operates the SAP ERM but the complexity of exporting the necessary financial information from the system into Caseware made financial reporting in line with the IFRS framework challenging.

“Caseware was the most effective and efficient financial reporting software application that was able to solve this perennial issue for us efficiently,” Mr Beck says. “We also needed to be absolutely confident that we are utilising the latest Financial Reporting Standards, issued by the IFRS which Caseware addresses by consistently updating its Financial Reporting Standard Templates with the latest standards.”

Business benefits: Streamlining the development of accurate, compliant, and timely financial statements

Fresenius Medical Care South Africa implemented the Caseware IFRS Interim, Annual and Consolidation Financial Reporting suite in January 2023.

Fresenius runs on SAP, and the process of converting the data from the SAP system into a format that is compatible to importing into Caseware to produce fully IFRS compliant financials is a complex one, Mr Beck explains. “This is where the immense technical expertise of the Caseware technical and support team proved invaluable”.
“All our requests to Caseware – no matter how large, time constrained, or complex – have been attended to and delivered,” he says.

He says that already the process of preparing financial statements for multiple companies across sub-Saharan Africa has been significantly streamlined and is now internally managed as opposed to being reliant on external consultants for financial reporting purposes. The process is far more effective, and the results are more accurate, relevant, reliable, and timeous. The automated balancing routines immediately indicate and identify anomalies and incorrectly mapped accounts which further enhances the efficiency of the account mapping and financial reporting.
For Mr Beck, the cloud functionality offers several benefits, notably the ability of users to access the system from multiple points and the reliable backups. It’s also useful that we can access the system from the office or remotely and even designated colleagues at the Fresenius head office in Germany, can access the system if required.

“Caseware’s IFRS solution is the optimal solution we found to address the SAP’s accounting data structure and the dynamic IFRS requirements but most impressive and important is the quality of the backup from the entire Caseware support team – technical and other. “It is simply outstanding”, he says.

The Solution

IFRS Financial Statements

IFRS Financial Statements

Empowering professionals with an automated annual financial statement solution.

Interim Financial Statements

Interim Financial Statements

Empowering professionals with an automated IAS 34 interim financial statement solution.

Caseware Cloud

Caseware Cloud

World-class compliance and streamlined automation, from any location, on any device, at any time.

RSM Eastern Africa LLP Certified Public Accountants

RSM Eastern Africa LLP Certified Public Accountants

We are writing to highly recommend the services of Caseware Africa as the providers of Caseware IDEA.

We have been a customer of theirs for the past 12 months on a renewable license, and we use their product for data analysis and audit purposes.

The product has been extremely useful and has significantly improved the efficiency of our data analysis processes. We would highly recommend Caseware Africa to anyone in need of data analysis software, and we are confident that they will provide excellent service and support.

George Mutua
Partner

The Solution

Caseware IDEA

Caseware IDEA® : Corporate, Public Sector & Governance

Perform Root Cause Analysis & Protect Revenues

Caseware IDEA

Caseware IDEA® : External Audit​

Use Data Analytics & Drive the Quality of the Analysis

Caseware IDEA

Caseware IDEA®: Internal Audit

Data Analytics Transforms Internal Auditors Into Strategic Advisors

Office of the Auditor-General Namibia

Office of the Audit General Namibia

This letter serves to confirm that the Office of the Auditor-General Namibia used Caseware for engagement management, data analysis and time recording.

We purchased Caseware IDEA from Caseware Africa in 2013 and have successfully rolled out this data analytics tool internally. Caseware IDEA assists us with investigating fraud, financial analysis, security reviews, operations and system audits.

The licences are renewed on an annual basis. It is against this background that this Office recommends them as a reliable service provider.

Erica Dien
Director Administration

The Solution

Caseware IDEA

Caseware IDEA® : Corporate, Public Sector & Governance

Perform Root Cause Analysis & Protect Revenues

Caseware IDEA

Caseware IDEA® : External Audit​

Use Data Analytics & Drive the Quality of the Analysis

Caseware IDEA

Caseware IDEA®: Internal Audit

Data Analytics Transforms Internal Auditors Into Strategic Advisors

Herbert and Liebisch Incorporated

Herbert and Liebisch incorporated

I am writing to highly recommend the services of Caseware Africa as the providers of Caseware IDEA. We have been a customer of theirs for the past 20 months on a renewable license, and we use their product for data analysis and audit purposes. The product has been extremely useful and has significantly improved the efficiency of our data analysis processes.

We would highly recommend Caseware Africa to anyone in need of data analysis software, and we are confident that they will provide excellent service and support.

Carmen Arce
Chartered Accountants (SA)

The Solution

Caseware IDEA

Caseware IDEA® : Corporate, Public Sector & Governance

Perform Root Cause Analysis & Protect Revenues

Caseware IDEA

Caseware IDEA® : External Audit​

Use Data Analytics & Drive the Quality of the Analysis

Caseware IDEA

Caseware IDEA®: Internal Audit

Data Analytics Transforms Internal Auditors Into Strategic Advisors

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