IRBA Newsletter Issue 53

Issue 53 | January-March 2021 5 STANDARDS cont. The standards direct audit firms to improve the robustness of their monitoring and remediation; embed quality into their corporate culture and the “tone at the top”; and improve the robustness of engagement quality reviews. Key changes in the standards are focused at achieving the following: • Increase firm leadership responsibilities and accountability, and improve firm governance. • A risk-based approach focused on achieving quality objectives. • Modernise standards to address technology, networks and the use of external service providers. • Increase the focus on the continual flow of information and appropriate communication internally and externally. • Proactive monitoring of quality management systems, as well as timely and effective remediation of deficiencies. • Enhance the engagement partner’s responsibility for audit engagement leadership and audit quality. • Clarify and strengthen requirements for a more robust engagement quality review. Implications for Practice in South Africa • The matters that have to be considered for implementation in South Africa are as follows: o The standards provide for some requirements to apply in areas where regulators may have decided to regulate (i.e. each standard is not prescriptive in setting a global standard where some local law and regulation may be better suited and adjusted). The Committee for Auditing Standards, a statutory committee of the IRBA, has singled out a project in its work programme to identify the areas in the standards where local regulation is envisaged, and determine whether there is a need for such regulation in South Africa. o ISQM 1 and ISQM 2 will affect all firms, even those that do not perform audits, but only do reviews. Awareness will need to be raised directly with firms; while all accounting institutes, vendors (service providers) and others working in this industry will find new opportunities, as needs arise, to support the implementation of the new standards. o Updating of the firm’s methodology, across audit and non-audit service lines. o Amendments to the firm’s policies and procedures. o Training for the firm’s personnel across all levels. o Transitional arrangements. Effective Dates The effective dates for the QM standards are as follows: • ISQM 1 o Systems of quality management in compliance with this ISQM are required to be designed and implemented by 15 December 2022; and o The evaluation of the system of quality management required by paragraphs 53-54 of this ISQM has to be performed within one year following 15 December 2022. • ISQM 2 o Audits and reviews of financial statements for periods beginning on or after 15 December 2022; and o Other assurance and related services engagements beginning on or after 15 December 2022. • ISA 220 (Revised) o Audits of financial statements for periods beginning on or after 15 December 2022. • Early adoption is permissible and is encouraged by the IRBA. These three QM standards may be downloaded from the IRBA website . Implementation Guidance The following guidance material for the three QM standards is also available on the IAASB website : • Basis for Conclusions. • Introduction to ISQM 1, ISQM 2 and ISA 220 (Revised) – Fact sheets and videos. REGULATED INDUSTRIES AND REPORTS STANDING COMMITTEE (RIRSC) Revised Illustrative Banks Act Regulatory Auditor’s Reports The CFAS, at its meeting on 3 March 2021, approved the issue of the following revised illustrative Banks Act regulatory auditor’s reports (revised illustrative regulatory reports), for use by registered auditors: • South African and Consolidated Operations – revised illustrative regulatory reports A-I; and • Foreign Operations (BA 610 returns) – revised illustrative regulatory reports A-H. In terms of Regulation 46(6) of the Banks Act, the revised illustrative regulatory reports have been rendered in accordance with the wording and practices that the Prudential Authority, the South African Institute of Chartered Accountants and the IRBA agree to from time to time. The revised illustrative regulatory reports are available in both PDF and Word formats and may be downloaded from the IRBA website . These revised illustrative regulatory reports are effective for banks with periods ending on or after 1 January 2021.