COMMON ISSUES & IMPORTANT MESSAGES ARISING FROM QCRs Mohammed Yaqoob Technical & Quality...

COMMON ISSUES & IMPORTANT MESSAGES ARISING FROM QCRs

Mohammed Yaqoob Technical & Quality Manager

Nexia InternationalAudit Forum - Paris 2011

MAIN MESSAGES:

•COMPLIANCE CULTURE•GET IT RIGHT FIRST TIME

QCRs

• Scheduling - need greater priority from regions, firms, need to agree and adhere to dates, not allow slippage of QCRs to next FY

• Advance information - to be provided well in time to enable effective/efficient planning (sections E & F of the QCR work pack and audit client details (largest 10 audits (by audit fee income) for each audit partner together with industry/activity, listed/PI/regulated/other specialist/private/NFP, approx. turnover, audit fee income, total hours spent)

• Advance planning required by reviewee firm – internal transfers, accommodation, availability of audit personnel, manuals, files

• Website content - awareness of QCR process etc• Interpreter(s) – needed where audit papers are not in English• Costs – full details in Audit Committee operating procedures and guidance for

reviewees

QCRs – cont’d• 2010/11 – delays in scheduling, replying to QCR findings, supplying further

information/documentation

• 2011/12 QCRs – spreadsheet to be emailed to regional chairmen after the Paris conference

• Responding to emails

• Elapsed times

• T&QM and local reviewers

• Limited scope reviews (LSR) & full scope reviews (FSR)

• Advanced QCRs – full cost to be borne by firms

Annual Audit Questionnaire Confirmation (AAQC) survey• Poor response rate (approx. 50%) – no trend across

regions, firm sizes etc

• Recurring simple mistakes

• Very few correct first time

• Difficulty in applying a risk based approach without almost a 100% response rate

• Consideration of FSR/ADV QCRs where no responses forthcoming

NIMo• No data yet on how well populated

• Wholly reliant on firms

• Only addresses non-audit services provided to audit clients

• Other independence threats (e.g. financial interests) have to be covered manually but need to target relevant firms and to avoid sending emails to ALL firms

IFAC Manuals• Nexia does not provide audit/quality control manuals

• Guidance is to use locally sourced material

• If not, then use IFAC Audit Guide (Oct 2010) and the IFAC Quality Control Guide (Aug 2011)

• In any case MUST ensure tailored to firm’s circumstances

IFRS support

• Covered by Christian Fuchs

Caseware

• Marcel Keizer will be present during the conference

• Members should take the opportunity to discuss & resolve any issues

Audit CommitteeOperating procedures

• Board of Directors to consider and approve revised/updated procedures

Common Issues arising from 2010 and 2011 QCRs

Results based on 52 QCRs (13 in FY2011 and 39 in FY2010)

• Files lacked adequate recording and/or evidence of audit procedures leading to doubts as to whether adequate audit work had been conducted or not (33/52=63%).

• Audit manual and quality control manual needed improving/updating (e.g. by ref. To IFAC manuals) (25/52=48%).

• Concerns arising re compliance with IFRSs (15/52=29%).• Concerns over complaince with ISQC1 (15/52=29%).• The auditor should retain control over obtaining third party confirmations

(circularisations, bank letters etc) (12/52=23%).

Common Issues (cont’d)

• Audit working papers not properly signed and dated (9/52=17%).

• No clear system for checking formats/disclosures in financial statements (e.g. by use of disclosure checklists) (9/52=17%).

• Lack of adequate documentation of partner involvement (in planning, conduct of work and completion)

• Incomplete audit file and lack of proper/complete referencing and file completion policy (8/52=15%).

• Incorrectly dated letters of management representations (should NEVER be dated after the date of the audit report) (8/52=15%)

Website

• Firm’s should regularly review the Nexia website for new/updated material and other resources

• Contents of Audit Forum to be published in due course.

Thank you for your attention