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I NSPECT I ONS
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Rebalancing workloads/realigning staff – allowing
sufficient time;
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Allocating an engagement team that is experienced, know
the industry and the client and can execute consistently;
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Encourage consultation;
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Improving tools to assist engagement teams execute
quality audits consistently;
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Creating a culture of shared accountability for audit
quality;
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Incorporating and recognising audit quality in performance
reviews;
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Limiting who audits listed/specialised entities –
concentrating expertise;
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Moving technical support into the practice offices, near
audit teams; and
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Balancing commercialismand professionalism.
FirmRemedial Action – 2014
Effectively from this year (2014/15), the IRBA Inspections
Department implemented a process whereby firms and RAs
that had unsatisfactory inspections are requested to submit
(together with their written undertaking) a root cause analysis
and action plan to address significant audit quality issues
reported to them. These plans can be highly effective and can
yield the necessary improvements needed if the firms and
practitioners buy into the remediation process through the
development and implementation of appropriate prospective
remedial plans. Therefore in an effort to promote sustainable
audit quality, the IRBA will continue to engage more with the
firms at the right level and at the right intervals to:
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Encourage firms to enhance their action plans and
incorporate same into their annual cycle of continuous
improvement.
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Follow up on the firms’ action plans during re-inspection
within/after approximately 12 months. (Every firm is
unique and knows best what initiatives should work in its
particular environment/culture).
Although not exhaustive, below are some general actions that
can be implemented by firms as part of their remedial plans
(these are general and not specific to any firm):
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Embedding quality throughout the audit process;
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Fortify the importance of professional scepticism by the
engagement team, and overcome the trust relationship
with clients froma business perspective;
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Support from firm leadership – sound tone at the top. Do
audit leadership create the right culture for quality audits?
Inspections Findings Newsflash 1 of 2014
In terms of our objective to improve communication and share
information, the Inspections Department implemented a
process whereby a newsflash will be issued from time to time
to highlight significant non-satisfactory findings which were
identified during inspections.
Based on the fourth quarter Inspection Committee results of
2014 that ended on 31 March 2014, we provided a summary of
examples of the most common non-satisfactory inspection
findings identified.
The examples below should be interpreted with caution and
should not be seen as exhaustive nor be considered in
isolation. The selection of firms, engagements and focus
areas for inspection is based on identified risk factors and
these results may not be representative of the profession as a
whole. Not all findings apply to every firm and where they do
apply to more than one firm there are inevitably differences in
the degree of application.
Engagement Inspections:
The following are examples of findings that resulted in the
most non-satisfactory inspection outcomes:
Materiality
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Insufficient or no justification on file for the basis and level
of planning, performance and final materiality, that is
fundamental to ensure that the engagement team obtains
sufficient audit evidence to support the audit opinion.
This process is based on one of the core principles of the
International Forumof Independent Audit Regulators (IFIAR), of
which the Irba is a founding member. The core principle states
the following:
IFIAR Core Principle 11: Audit regulators should have a
mechanism for reporting inspections findings to the audit firm
and ensuring remediation of findingswith the audit firm.
Audit regulators should have a process that ensures that criticisms
or potential defects in an audit firm’s quality control systems and
issues related to an audit firm’s performance of audits that are
identified during an inspection are reported to the audit firm. Audit
regulators’ reporting processes should include the preparation and
issuance of a draft inspection report, a process for the audit firm to
respond, and the preparation and issuance of a final inspection
report. In addition, audit regulators should have a process for
ensuring that audit firms satisfactorily address inspection findings
that were reported to the audit firmby the audit regulator.
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Issue 26 April - June 2014