![]() ![]() Typically, in such instances the auditor clearly explains: For example, it is often the case that work that represents good practice typically tells the story of an aspect of the audit. “In our role reviewing audit files, many good practice points are identified through the quality of the audit documentation,” Smith explains. Just as documentation can reveal areas of weakness in an audit, it can also reveal examples of good practice. “Examples of good practice on particular audits can be used by the firm as a case study or example of how to approach or document a particular area of the audit, for others in similar circumstances,” he explains, while emphasising that good practice examples are not necessarily templates to be used on other audits. “Increasingly, we are able to highlight and share good practice examples with the audit firms that we review,” says Smith. But QAD also shares insights from its audit quality review findings that offer a more positive route to improvements in audit quality. This is going to change over the next year or so, as RCA will be a component of all firms’ implementation of the new International Standards on Quality Management.Īs well as getting an introduction to RCA and its potential through the Audit Monitoring Report 2020/21 and its case studies, auditors can access specialist resources from the faculty.Īspects of the quality monitoring report that focus on weaknesses can be used by firms to challenge themselves about whether the same factors may present a risk to audit quality on some of their audits. It may not be necessary to complete an accounts disclosure checklist annually, but you certainly need to do so when transactions or developments at your client result in new disclosure requirements.Īlthough there is nothing new about RCA, its use across audit firms is not as widespread as some other sectors and many auditors will not be familiar with the practice – yet. ![]() Review procedures and ‘things that you do’ to assess whether they are effective in addressing potential quality risks.It is much easier to identify issues if you have not been involved in the detail of the work performed. Ensure sufficient resources for effective manager and partner review – the manager and partner should bring a depth of experience and eye for detail to identify errors and mistakes that even the most experienced staff will make from time to time.Risk assess your audit portfolio – do you and your staff have the necessary training and knowledge to deal with more complex audits, including group audit situations and contract accounting?.There are some key points for all firms from the RCA findings that QAD reviewed: The report from QAD includes four RCA case studies focusing on: lack of knowledge in an audit engagement team flawed design of audit tests inadequate review and lack of knowledge of accounting standards. ![]() ![]() The number of disclosure errors caused by a lack of knowledge of the UK Financial Reporting Standard (FRS) 102, or by failing to use disclosure checklists regularly, was a concern for QAD and it should concern audit firms too. lack of review by senior members of audit engagement teams.lack of knowledge of relevant auditing and accounting standards.“Firms cited similar root causes for these failings,” says Smith, with the most common being: the degree of disclosure within the financial statements.risk assessments at the planning stage of the audit.After reviewing a sample of root cause analysis (RCA) conducted by firms, QAD analysed this with a focus on audits that required improvement or significant improvement in: This latest audit monitoring report digs deep. “Dealing with the symptom alone may address the immediate issue, such as a review finding,” says Smith, “but identifying and addressing the underlying or root cause is likely to be a far more effective way to reduce future recurrence and bring lasting improvements.” “This is only to be expected, as these three areas are central to every audit engagement,” says Trevor Smith, QAD Director, and in order to properly address these areas of weakness on audits, firms need to understand why they occur. They are: evidence documentation and identification and assessment of risk. The main areas where QAD reviews most commonly find weaknesses tend to be consistent from year to year. The Audit Monitoring Report 2020/21 identifies areas where audits can be improved, examines root causes of issues that were identified by QAD during file reviews and shares some insightful and informative case studies, along with other material, to help firms target areas of weakness and adopt best practices. The findings in ICAEW’s annual Audit Monitoring Report always provide opportunities for firms to improve audit quality and the report on the 2020-21 review cycle carried out by ICAEW Quality Assurance (QAD) is no exception. ![]()
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