Audit quality has been at the forefront of the minds of regulators, standard setters, and stakeholders in Australia and overseas for many years. They have focused on audit quality because doing so can help entities reduce the risk of corporate collapse and, consequently, its follow-on effects on markets and economies. Audit quality has been the subject of recent reviews at home and abroad, including an Australian Government review in 2020 into regulation of auditing in Australia.
Shortly following this review, the Australian Auditing and Assurance Standards Board (AuASB) adopted the International Auditing and Assurance Standards Board’s (IASB) International Standards on Quality. The AuASB adopted 3 revised standards known as ASQM 1, ASQM 2 and ASA 220. All audit practices are required to have implemented the standards by 15 December 2022.
Respectively, they address QAO’s own systems of quality management, our approach to quality reviews at an audit level, and the engagement leader’s quality responsibilities during an audit. Audit quality has always very much been a crucial and key part of our focus in delivering independent, valued assurance and insights, and we welcome these standards changes.
The new ASQM 1 standard takes a principles-based approach to quality management, which means it’s scalable for the size of the audit firm or office. It encourages a proactive approach to identifying and responding to quality risks. All audit firms, including QAO, are required to define their quality objectives, identify the risks to achieving those quality objectives, and develop action plans to minimise those risks occurring.
What is QAO doing?
At QAO, we identified 35 quality objectives for maintaining our system of quality management. We assessed that each of these has risks to achieving our quality objectives. In response to these risks, we improved our policies and procedures and focused our staff training on quality management at the audit engagement level.
One of the bigger changes we made was to improve the root cause analysis for quality issues, allowing us to quickly understand the underlying issues that led to it. This means that we can respond in a timelier manner to reduce the risk that the issue will occur again.
We’ll review our quality management within a year to ensure the changes we have made are working and we are getting the desired outcomes.
What does it mean for our clients?
We have always maintained robust systems of quality control, and these new changes will only strengthen our products, build our people’s skills, and foster a culture of openness and transparency. The changes will help to maintain our independence.
Just as our clients have in the past, our audit quality program will ensure they can continue to place trust in our work and value our services.