Caseware Africa Transforms Firms’ Quality Management with their new SQM App

An innovative solution that proactively manages quality

Johannesburg, 19 August 2022: Powering 20 000 users across the African continent, Caseware Africa, a division of Adapt IT, is a global leader in audit and financial reporting software. With decades of expertise in helping auditors and accountants automate compliance, Caseware Africa has introduced a brand-new cloud-based app to help firms manage their System of Quality Management: SQM Quality.

SQM Quality is designed by audit, data, and quality experts, and provides a quality management system intended to assist firms in fully, and efficiently, complying with the requirements of the International Standard on Quality Management 1 (ISQM 1), whilst leveraging the benefits of technology to proactively facilitate quality management, and ultimately, promote compliance.

The industry shift from the International Standard on Quality Control 1 (ISQC 1) to ISQM 1 has signalled a subtle, yet significant change in focus from ‘control’ to ‘management’. In pursuit of compliance to the new standard, professional audit and accounting firms providing services in various fields, have been required to update their engagements and processes to establish a system of quality management that extends beyond the possession of a manual with policies and procedures.

“In light of how the new standard has done away with most of the mandatory policies and procedures previously included in ISQC 1 and leaving it up to the firms to determine what’s most appropriate for their specific circumstances, it’s more important than ever for every employee to be their own compliance officer. In addition, it is imperative that firms establish a firm-wide environment of collaboration between people and technology to address the problems of the past, and ultimately make compliance more efficient,” says Christiaan Steyn, Assurance Product Manager at Caseware Africa.

SQM Quality empowers finance professionals to design, operate, and monitor their quality management system through the processes of establishing quality objectives, identifying, and assessing risks, and designing and implementing risk responses, in a manner that is effortless and efficient. It also includes a component that allows for the monitoring and remediation of processes to drive continual improvement of the system and, ultimately, the firm’s ability to fulfil the requirements of ISQM 1.

The Benefits of SQM Quality:

  • SQM Quality empowers professionals and firms to easily attend to all parts of the quality management system.
  • Numerous international standards are supported, empowering firms to meet the requirements of various local markets across the world with a single system solution.
  • User permissions differentiate between roles and responsibilities across the firm.
    Responsible parties are guided to document their understanding of the firm, and the nature of its services, to assist in identifying and assessing quality risks.
  • Firms can select objectives, risks, and policy and procedure responses, from a pre-populated library that can be customised and expanded upon as needed.
  • Network firms can export network-wide objectives, risks, and responses to member firms.
  • A built-in form builder enables firms to design tasks as instructions to users to direct, and track, the completion of actions linked to policy and procedures responses.
  • Throughout the process, users can hyperlink to documents and other records saved elsewhere on Caseware Cloud for ease of reference and secure storage.
  • SQM Quality includes a firm-specific quality risk assessment matrix that automates the identification of quality risks for which responses are required.
  • The user with the final responsibility of the system of quality management will be able to review dashboards of information and oversee the publishing, or export, of that information as required by the firm’s operations.

    Designed to optimise the changes and opportunities of ISQM 1, SQM Quality enables firms to design, operate, and monitor their system of quality management with ease, offering a single solution that attends to all parts in a way that is automated, accurate, and complete.

“In a rapidly developing world where spreadsheets are no longer the answer, everyone is accountable and collaboration is key. A solution like SQM Quality becomes more than a ‘nice to have’, it’s a necessity and an investment in efficiency, accuracy, and automation that will get things done – and done properly.” Steyn concludes. 

ISRS4400(R): Agreed Upon Engagements

What is an agreed-upon procedures engagement?

This can be defined as an engagement in which a practitioner agrees on specific procedures, usually audit-like in nature, with a client or a third party, and provides a report on findings against those agreed procedures. There is no assurance provided by the report, and the user is left to draw their own conclusions based on the agreed procedures and the findings reported against them. Previously, these were often referred to as factual findings.

Are these engagements subject to a standard?

Yes! The standard that applies to Agreed-Upon Procedures is ISRS4400 – International Standard on Related Services 4400 (Revised): Agreed-Upon Procedures Engagements. This standard was recently revised by the IAASB, and the revised standard is applicable for engagements where the terms of engagement are agreed on or after 1 January 2022. The revision of this standard by the IAASB (previously ISRS4400 – which replaced ISA920) Engagements to Perform Agreed Upon Procedures Regarding Financial Information) addressed the increasing demand for these types of engagements for both financial and non-financial information and incorporated the types of updates generally being made to the standards to enhance professional judgment, independence, accountability and consistency in the profession.

Are these engagements common?

Yes, increasingly so. In many cases, agreed-upon procedures are requested by third parties on specific aspects of a client’s business, and often these parties have a template or format for the reports they require. When this happens, practitioners may not always identify that the engagement being performed falls into the scope of ISRS4400. The term “factual findings report” may be more commonly used or identified. These engagements are the ones that fall into the scope of ISRS4400 (and are now referred to only as findings, and not factual findings). Some common engagements that fall into the scope of agreed-upon engagements include:

  • Reports to a funder on whether grant expenditure by a grant recipient is incurred in terms of the conditions of the approved grant or contract.
  • Confirmations or certificates of turnover provided to franchisors on the turnover earned by franchisees.
  • The verification of claims against investment or incentive schemes managed by the Department of Trade and Industry (for example in automotive, IT, import and export sectors).
  • Section 18 certificates for non-profit organisations confirming that donations are spent for the intended purpose.
  • Business TV licence audits.
  • Due diligence reviews.
  • Confirmations of earnings or EBITDA or other calculations for debt covenants

What is challenging about accepting and conducting these engagements?

Even with the revisions in the new standard, the nature and extent of these engagements varies greatly in size, frequency, complexity and risk. Although they are not assurance engagements, the report issued by a practitioner must still comply with the standard as well as with the extant ISQC1 and the new international standards on quality management – these will become effective in 2022, and thus, still exposes practitioners to quality risks. Given the extremely varied nature of these engagements, applying a consistent approach has been challenging in the past. Some of these challenges have arisen from the following:

  • The previous standards applied to financial information which provided very little guidance on procedures that were compliance, performance or non-financial in nature.
  • Difficulty in establishing a consistent, repeatable approach between engagements and between recurring engagements. Because all engagements require procedures that are unique to the activity, it is not possible to apply a standard set of work programmes, and therefore, very difficult to obtain, and maintain, a consistent approach with comparable work flows, work programmes and internal quality management mandates.
  • The standard is not well known and does not generally form part of the graduate accounting education syllabi. This means that practitioners need to read, understand, and interpret, the standard for themselves, if they are aware of it at all. This has resulted in the past in inconsistent approaches between practitioners.
  • Difficulty in communicating requirements of procedures with clients or third parties. The engaging party is usually clear on what they need in a report and what it will be used for, and thus provide their understanding of the procedures they require to be performed. In the execution of these procedures, there is often more detail or a sub-set of additional processes that the practitioner needs to perform to identify and acquire the information required to report against the original method. It can be challenging for team members to determine how to obtain the evidence needed to perform the required tasks, or what to request from the client – this may need to be explained differently to the wording of the agreed-upon process.
  • Where these engagements are performed manually i.e., not through specifically designed software, there is substantial repetition between recording the agreed-upon procedures in an engagement letter; doing so again in the working papers and again in the Agreed-Upon Procedures Report. Where the engagement comprises many procedures, this is very time consuming and subject to many errors of omission or transposition and carries a higher risk of the report not aligning with the initial required methods in the engagement letter.
  • The higher volume of manual documentation and repetition can also result in these engagements not being as viable – in terms of the time required in relation to the fees earned for these activities.
  • There is also the additional cost of having to repeat, or re-populate, documentation on engagement files for recurring activities in said manual files.
  • The use of manual engagement files always carries an increased risk to practitioners’ inefficiencies through the requirements for manual signoffs, document misplacements, lack of evidence on completion, timelines of reviews etc., and ensuring that file assembly and archiving requirements are met.

An efficient, quality solution to conduct Agreed-Upon Procedure engagements

Caseware Africa has introduced a cloud-based Smart Engagements solution for Agreed-Upon Procedure Engagements called ISRS AGREED UPON, that addresses and resolves many of the quality and efficiency challenges.

  • By using ISRS AGREED UPON, for engagements, files can be populated with client and standing information relating to acceptance, continuance, skills, capacity, and independence requirements in the first engagement, and rolled forward to subsequent encounters, enabling practitioners to harness efficiencies in recurring events.
  • The procedures included in the ISRS AGREED UPON, solution have been compiled to ensure compliance with the requirements of the new ISRS 4400(R) standard relating to acceptance and continuance, ethical and independence requirements and the other changes brought into the new standard, for example, the use of experts. These changes have been fully incorporated and thus practitioners using this product will not have to rewrite previous manual work programmes for the changes in the standard.
  • ISRS AGREED UPON, can be adapted for the level of guidance required by your team. There is an option to select procedures that are core, or that are extended. Both facilitate compliance with the ISRS(R)4400 standard. Core procedures create efficiencies by reducing the number of procedures required for experienced users who understand the requirements for documentation, whist the extended procedures facilitate better documentation and therefore, make compliance easier for inexperienced users who require more detailed prompts or questions in order to arrive at the conclusions that an experienced user would.
  • ISRS AGREED UPON, automates the inclusion of the actual agreed-upon procedures throughout the engagement file and related documents. The procedures themselves are captured once, and the engagement letter, work programmes and the Agreed-upon Procedures Report is populated from this source. This drives efficiencies by reducing the amount of repetitive documentation, and also resolves challenges relating to inconsistencies between agreed processes and reported procedures and findings.
  • ISRS AGREED UPON, enables the practitioner to “reword” or tailor an initially agreed procedure to an inquiry or procedure that will facilitate asking for relevant information from clients in a manner that is understandable and will elicit the correct information/response. This “rewording” continues to be linked to the originally agreed procedure, ensuring a clear link between the work performed and the procedure to which it relates.
  • ISRS AGREED UPON, enables the practitioner or team members to capture, at the time that the procedure is performed and concluded upon, the finding that should be integrated into the Agreed-upon procedures report. This finding is automatically transferred to the report within ISRS AGREED UPON,, creating efficiencies between executing procedures and compiling the Agreed-upon procedures report. This also ensures that the agreed-upon procedures are directly aligned to the conclusions per procedure that are included in the Agreed-upon procedures report.

Last say

One of the primary drivers of the IAASB’s revision of the Agreed Upon Procedures standard was the increasing use of these engagements for both financial and non-financial information. Taking into consideration the changes and expansion in financial and non-financial reporting and the increased level of assurance that users, funders, and regulators require from businesses, the investment in a solution that facilitates compliance and drives efficiencies will ensure that you are able to viably provide these services to clients with confidence, increasing the value offered to clients and improving efficiencies and quality.

Five Keys Area To Test When Building An Audit Plan

Auditors today are working in an exceptionally complex and ever-evolving industry. In an environment where there is pressure to add more value with fewer people and less time, auditors are challenged to discover more risks, audit more areas, more frequently, and uncover fraud for their clients.

Yesterday - Ineffective Audit Planning Methods

Many audits today are conducted at planned intervals rather than based on thoughtful consideration of evidence that points to patterns or areas of risk. Instead, auditors select a given area and assess risk areas based on consultation with the organisation. Depending on responses, an audit will either be performed annually or every two to three years for internal controls if it’s deemed to be less risky. Unfortunately, this method can facilitate overlooking risk areas and permit fraud or other issues to go undetected.

Today - Effective Methods For Building An Audit Plan

To help improve the effectiveness of audits and clearly demonstrate their value, auditors can deliver more value for their clients by firstly optimising audit planning. Secondly, empowering teams with systems and tools that focus subject matter expertise on the audit, as opposed to spending unnecessary time in extracting information from systems and preparing data within spreadsheets.

Thirdly, it is important to pinpoint findings that will save the company money and improve business operations. A more systematic approach to audit planning offers a variety of advantages, including:
• Breaking risks down into individual factors and then being able to align them across the audit landscape
• Individually scoring risks for each financial statement area.
• Calculating an overall score but also ensuring that specific levels of risk are clearly reflected on financial statements.
• Evaluating relative risk levels in order to establish the audit scope.

The Data Analytics Approach to Audit Planning

It’s well known amongst auditors that data analytics helps to simplify and improve audits, eliminate manual tasks, reduce costs, detect potential fraud, errors, and abuse – and most importantly these valuable insights are attained earlier in the process. However, many auditors are missing the opportunity to leverage data analysis software to help prepare a rounded and well-thought out audit plan. Using data analytics during the audit planning phase helps to focus audits, allocate resources effectively, optimise audit expertise resources, save time, and identify significant information about the business.

Audit Planning – Get It Right With Data Analysis

Running data analytics tests during the audit planning phase, helps to provide a better understanding of what is happening and highlights the areas of greatest risk. Moreover, it shows where control breakdowns are occurring, and the state of risk management in the company. Utilising insights provided by data analysis in this phase of the audit process helps shift or refine the focus of the audit early on. Also, if used in the planning process it can provide auditors with a comprehensive understanding of the scope of the business and can help to identify specific questions that need to be put to the company to adjust the focus of the audit – as and where required. Moreover, data

analytics helps to automate a significant number of manual tasks and save considerable time and costs. What can often take days to complete can be executed within minutes when the audit commences.

What Is The Best Approach To Build An Audit Plan?

Firstly, complete a risk assessment – but where to start? Trying to analyse each area can be time-consuming and overwhelming. Instead, the best option is to start with a few key areas at a time and the ones that reveal the most problems are the ones that should be audited first. Testing can then be expanded from there.

The Five Key Areas To Test

Data analytics applied to the following five key areas will reveal potential risk – an audit plan can be built based on the information revealed from scrutinising the following:

1. Accounts Payable
2. Accounts Receivable
3. General Ledger
4. Payroll
5. Stock and Inventory

Why Use Caseware IDEA®

Advanced data analysis tools help auditors strategically plan their audits and lead to better, more effective, audits. Caseware IDEA® has been the trusted industry leader for audit analytics for over 25 years. Caseware IDEA® has a strong presence in over 130 countries, is used by more than 250,000 users globally, and is trusted by audit firms of all sizes.

The Value Proposition Caseware IDEA® Brings To Audit Capabilities

Increases audit scope by allowing users to import all their records, including spreadsheets, and exported data from databases, accounting programs such as Pastel, for example, other ERP systems plus travel and entertainment applications in formats such as PDFs, plain text (.txt), print-report (.prn), open database connectivity (ODBC) and SAP.

  • Automates the sampling processes by eliminating the need to export data into spreadsheets and preparing manual sample sets.

  • Analyses 100 percent of the data across a multitude of datasets.

  • Streamlines testing procedures with built-in workflows.

  • Protects the integrity of the data by locking source data files so that they are read-only.

  • Creates an auditable trail so analysis can be documented, shared, and repeated.

  • Creates repeatable tests to reduce time spent on routine tests. Caseware IDEA® also offers more than 100 audit-relevant tasks and a variety of advanced features to help auditors better plan and execute their audits.

  • The following is a sample of these features:

    • Universal file conversion capabilities make it fast and easy to import all records.

    • Advanced audit functions with just a click, including Gap Detection, Benford’s Law, advanced fuzzy duplicate, summarisation, stratification, sampling, and more.

    • Data visualization with the ability to either auto-populate or custom-build dashboards with charts and field statistics into which auditors can drill down.

    • Audit automation through languages like Python or IDEAScript.

Brief Bio:

Christiaan Steyn, Assurance Product Manager, Caseware Africa, a division of Adapt IT. Christiaan is an Associate General Accountant (SA), with extensive technical knowledge and a passion for technology. He completed his articles at a medium-sized auditing firm where he gained experience in various industries. He was later appointed Template Developer and then moved to the role of Product Manager at CQS Holdings – which was subsequently acquired by Adapt IT and renamed to Caseware Africa.

Caseware Africa launches ISRS Agreed-Upon engagements

Caseware Africa, a division of Adapt IT, has released details of its latest addition to the assurance product suite, ISRS Agreed-Upon.  This additional app on the Caseware Cloud platform facilitates accepting, performing and reporting on findings of ISRS 4400 (Revised) Agreed-Upon procedure engagements.

“It is estimated that audit teams spend a significant portion of their time reconciling reporting of the performed procedures and the gathered findings”, says Christiaan Steyn, Assurance Product Manager, Caseware Africa. “This together with facilitating and documenting inquiries from management, as well as obtaining accurate, high-quality feedback on questions to management, often leaves very little room to optimally focus the team’s time on performing the agreed procedures and improving the efficiency of the engagement”.

Steyn says that reconciling procedures from accepting, agreeing terms of engagement, performing and finally reporting, as well as client collaboration via countless emails and phone calls, is both tedious and daunting – leaving too much room for potential errors in the repetitive manual transfer of information between documents. “This entire process results in long and delayed engagement turnaround times and repetition in the workflow. By using Excel spreadsheets and emails to document procedures and communication with management, many engagement teams end up with a multitude of disconnected datasets. Additional potential errors are then also introduced and compounded when teams are working under pressure to complete and submit the ISRS Agreed-Upon findings report,” he says.

“ISRS Agreed-Upon provides audit teams with a streamlined workflow that guides users through the entire engagement process – including all applicable documentation like agreeing the terms, documenting the procedures and completing the agreed-upon procedures report”, notes Steyn. “The app offers numerous built-in efficiencies, as the documentation of agreed procedures are completed only once-off, and are automated further throughout the engagement by incorporating the collection of client inquiries via digital queries, that then automatically store the information in the relevant procedures – saving significant time and effort”.

ISRS Agreed-Upon offers a centralised data storage in a single format on Caseware Cloud with integrated reporting on engagement progress. “This new addition to our Assurance Cloud suite offers a multitude of benefits including the presentation of a clear view of engagement status, client inquiry status and outstanding deliverables” Steyn adds. Built-in dashboards ensure that deadlines are never missed and that efforts can be directed to the most urgent action items. “By managing all client contact information in one place, teams can collaborate directly with clients from within ISRS Agreed-Upon.”
“Powered by Caseware Cloud, ISRS Agreed-Upon is always available from any location, on any device, at any time” Steyn concludes.

ISAE Attestation For Auditors

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ISAE Attestation is auditing software that allows auditors to gather appropriate evidence for the compliance reporting requirements of the Legal Practice Council and the Estate Agency Affairs Board. Powered by CaseWare Cloud, ISAE Attestation is always available from any location, on any device, at any time, and is licensed on a per-engagement basis, which means you can buy what you need when you need it and top up at any time.

ISAE Attestation Assisting Auditing Practitioners

ISAE Attestation assists practitioners in performing engagements based on ISAE 3000 assurance engagements, other than audits or reviews of historical, financial information. It contains a built-in methodology based on ISAE 3000 and specific compliance requirements of the Estate Agency Affairs Board and Legal Practice Council.
ISAE Attestation is designed to incorporate the four major elements of an attestation engagement into one seamless process:
  • Accepting
  • Planning
  • Performing
  • Reporting.

The ISAE Attestation Accepting Phase

This assists with understanding the company’s policies for attestation engagements as well as performing acceptance or continuance procedures. With advanced optimisations, ISAE Attestation, utilises checklists, questionnaires, queries, and work programmes that intelligently expand or collapse according to the engagement.

The Planning Phase

This enables practitioners to gain an understanding of the entity’s business, assess materiality, perform a risk assessment and plan the overall strategy for the engagement. By utilising queries, ISAE Attestation, allows practitioners to communicate and collaborate directly with clients within the app whilst providing transparent visibility to partners at all times.

The Performing Phase

This phase allows practitioners to perform procedures on the service activities relevant to the engagement. Prebuilt work programmes set forth the procedures necessary to complete an efficient and effective engagement. The procedures consist of a detailed plan of the work that must be performed, encourages a thorough understanding of the service activity, and includes the steps required to achieve the reasonable, assurance, engagement objectives. With engagement management built-in, the progress of every engagement and statuses of all engagements across the firm can easily be tracked and monitored.

The Reporting Phase

And finally, the Reporting phase assists in discussing significant judgments with management, preparing the reasonable assurance report, ensuring the report is appropriately worded, completing and locking down the engagement. With built-in roll forward technology, efficiency can be significantly increased, by leveraging extensive, built-in logic to roll forward selected information related to the client into next year’s engagement.
This product is empowering auditors with streamlined attorney trust and estate agent trust account assurance engagements. Find out more about ISAE Attestation here.

Audit International – Leading Paperless Auditing Solution

Completely integrated with accounting and a Caseware engagement file, Audit International is the leading, paperless audit solution, designed to produce shorter, faster, risk-focused audits. Built using the Caseware International audit platform and designed around the international standards on auditing.

Templates are available in the following profiles:

  • Minimal
  • Basic
  • One Form
  • One Form+
  • Core
  • And can be tailored for engagement

The dashboard screen, which is divided into planning and risk assessment, risk response and completion and reporting stages, makes navigation easy for inexperienced users and gives a simplified view of the status of the audit at any time. Using Caseware’s audit optimiser, the file is tailored very rapidly to focus only on the areas required and eliminating any unnecessary work.

What Else Can Our Paperless Audit Solution Do For You?

Checklists are answered using simple, dropdown menus with automated sign-off and the lightning buttons allow users to answer entire sections in one go. Risks, controls, and management letter points can be raised at any time on a simple to follow dialogue and associated to work programmes or other documents.

The financial statement areas, FSA worksheet records, allows you to plan your audit based on risks and provides a central point for recording your risk response. Any risks raised are automatically fed through to the associated work programme as is materiality and the planning information from the FSA documents.

Work programmes can be easily tailored to address and identify risks and the results fed back to the risk dialogue and risk report. Results are easily recorded in the comment boxes, which expand to accommodate text and you can refer to any piece of supporting evidence in the document manager. Any audit issues can be identified, assigned, and cleared and reported easily.

On-screen review, times are reduced and audit quality is improved by channelling critical information to the completion documents, automated management letters, and associated reports.

Empower Your Auditing Firm With Audit International

Our leading paperless auditing solution will help you empower your auditing firm, while exceeding expectations, reducing risk, complying with the latest regulations and improving profitability. Caseware Africa, an adapt IT company, a leader in assurance software solutions.

ISRS Agreed-Upon Compliant Financial Reporting

ISRS Agreed-Upon allows auditors to gather appropriate evidence for the compliance reporting requirements of ISRS 4400 in line with procedures agreed. Powered by Caseware Cloud, ISRS Agreed-Upon is always available from any location, on any device, at any time, and is licensed on a per-engagement basis, which means you can buy what you need when you need it, and top up at any time.

An accounting module that enables compliant financial reporting, it assists with performing the responsibilities of a practitioner engaged to perform an agreed-upon procedures engagement in accordance with ISRS 4400. To balance efficiencies and make compliance easier, ISRS Agreed-Upon includes two profiles, Core and Extended.

ISRS Core Profile

This is designed with experienced practitioners in mind, provides only the procedures needed to meet the minimum requirements of ISRS 4400, removing all additional procedures to assist with documentation.

ISRS Extended Profile

This is designed with inexperienced practitioners in mind, expands on the Core Profile by adding procedures that take the application and explanatory material of ISRS 4400 into account, and guides practitioners with more detail in documenting the relevant requirements.

Three Elements Of Agreed-Upon In One

This accounting software module is designed to incorporate the three major elements of an agreed-upon into one seamless process, Accepting, Performing, and Reporting.

The Accepting Phase will assist with understanding the firm’s policies for agreed-upon engagements as well as performing acceptance or continuance procedures and agreeing procedures with clients. With advanced optimisations, ISRS Agreed-Upon will utilise checklists, questionnaires, queries, and work programs that intelligently expand or collapse according to the engagement.

The Performing Phase allows practitioners to perform agreed-upon procedures as defined in the planning phase. The work program consists of a detailed plan of the procedures that must be performed and also includes the steps required to conclude on the procedures and document the respective findings to achieve the engagement objectives.

By utilising queries, ISRS Agreed-Upon allows practitioners to communicate and collaborate directly with clients within the app whilst providing transparent visibility to partners at all times. With engagement management built-in, the progress for every engagement and statuses of all engagements across the firm can easily be tracked and monitored.

And finally, the Reporting Phase assists in discussing findings with management, preparing the agreed upon report, ensuring that the report is appropriately worded, completing and locking down the engagement. With built-in workflows, information is recorded once-off, using a structured methodology that reduces the risk of inconsistencies and errors in the agreed-upon procedures report.

Find out more about ISRS Agreed-Upon, an intuitive, cloud-based solution to streamline agreed-upon assurance engagements and enable compliant financial reporting.

Audit Quality – a Strategic Imperative

“Audit quality and independence needs to be aligned”

Edwin Selbst, Owner SARE Consulting, Assurance and Quality Specialist, lifts the lid on the production of Quality Audits.

Co-Dependence of Quality and Ethics

Recent audit scandals and failures, both locally and internationally, have served to highlight the crucial need for quality and ethics – both need to be positioned front and centre of every: audit firm; regulatory body; shareholders; business leaders and the greater investment community’s, agenda. Audit quality and independence needs to be aligned to ensure that the expectation gap in the market is narrowed and to ensure investor confidence is restored.

What is the backdrop to this?

“Audit quality is directly linked to ethics”

The International Ethics Standards Board for Accountants (IESBA) revised the International Code of Ethics in 2018 and audit regulators around the world responded with local amendments to their ethical codes. As audit quality is directly linked to ethics and specifically independence, this necessitated audit firms to respond to incorporate the additional requirements in their audit quality systems. A system of quality control sits at the forefront of audit quality maintenance as it focuses on: the independence of audit teams; the servicing of clients with competence plus due professional care; providing skills that will deliver audit quality whilst ensuring familiarity threats do not prevent the achievement of quality.

Audit Quality and Independence

“The managing partner of a firm is responsible for overall quality”

While audit quality is a collective effort, responsibility rests on leadership. Organisation’s quality control manuals incorporate the policies and procedures required to effectively carry out a quality audit. In the audit context, this means the managing partner of a firm is responsible for overall quality. On an audit engagement, an engagement partner is responsible for the audit quality for audit opinions which he issues.

“Independence is crucial”

Independence in the assurance market is crucial. The greatest challenge is how the auditor is perceived by other stakeholders. It is in this context that regulators around the world have focused on the independence aspect of ethics. As audit quality is directly linked to an auditor’s perceived independence, numerous improvements to quality control systems have been implemented to enhance independence. Enhancements include: clarification of roles such as key audit partners, external quality control reviewers as well as those that provide technical knowledge. Cooling off periods have been increased in order to further reduce the familiarity threat – this is where members of an assurance team either rotate; move off an engagement, or change roles while still involved. Increased levels of protection have also been introduced for clients where an audit firm has custody of client money or assets.

Focus of Audit Quality

“It’s a winning formula”

Enhancements to audit quality implemented as a result of international changes include:

    • Clarification of roles and responsibilities of key players as part of the assurance model.
    • Additional guidance around inducements received by the auditor, including gifts and hospitality.
    • The management of self-interest threats and the appropriate use of safeguards.
    • Alternative courses of action to be followed where a safeguard is not deemed an adequate response to reduce a threat to an acceptable level.

Are you compliant?

“You need to get with the programme”

The changes to the International Code of Ethics were effective from 15 June 2019, mandating all audit firms to implement same as part of their system of quality control. In this way they will ensure that they have responded to international and local compliance requirement and updated their systems of quality control to provide stakeholders with the enhanced independence and audit quality upgrades which are now effective.

Brief Bio:

Edwin Selbst, Owner SARE Consulting, Assurance and Quality Specialist
Edwin is a Registered Auditor and Chartered Accountant South Africa. He has in excess of 20 years in the assurance market, previously Head of Assurance at and prior to that was the audit technical partner at a medium-sized audit firm with a focus on both listed and family owned businesses. Edwin is the past chairman of SAICA’s Assurance Guidance Committee and still an active participant at the IRBA’s Committee for Assurance Standards.

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