What to look out for in your next quality review

Key Points

• The Annual Report on the Quality Review Program: For the year ended 30 June 2010 has been finalised
• Members have been working hard at fulfilling their professional responsibilities and have demonstrated an increased understanding of audit requirements
• However, new standards have identified new areas of non-compliance.

The Annual Report on the Quality Review Program for the year ended 30 June 2010 details the results of reviews conducted by the Institute during the past financial year, and highlights areas of non-compliance.

The 2009-2010 financial year brought with it a unique set of challenges for members in public practice. The Institute assisted members transition through the economic downturn and take advantage of Australia’s unique position in overcoming the downturn relatively unscathed.

Lee White, General Manager of Leadership and Quality, said it was pleasing to note that the number of audit non-compliance issues has reduced as auditors adapt their policies and procedures to the force of law auditing standards.

‘In particular we noticed improvements in the areas of audit documentation, including audit evidence, terms of engagement, fraud, planning, internal controls and going concern,’ Mr White said.

Of the reviews completed, 80 per cent of practices were reported to have either met all of the professional standards and regulatory requirements of standard-setters and regulators, or showed levels of non-compliance that were not regarded as serious.

In 19.5 per cent of practices, the Institute found more significant areas of non-compliance which meant the Institute will conduct a follow-up review. The remaining 0.5 per cent of practices consisted of two sole practitioners who resigned at the conclusion of their review, and prior to being referred to the Institute’s disciplinary process.

The Institute analysed these results in detail so that the areas that needed improvement could be identified. This year, the reviews identified non-compliance areas as a result of the introduction of new standards by the Accounting Professional & Ethical Standards Board (APESB), including APES 220: Taxation Services Engagement and APES 305: Terms of Engagement, which both apply to engagements commencing on or after 1 July 2008.

‘Remediation of weaknesses is a really important element to continually improve the standards of the profession,’ Mr White said.

With this in mind, the Institute is committed to the continuous improvement of the Quality Review Program, and has been fundamentally redesigning its approach to the program. For further details, refer to the accompanying thought leadership paper, Quality Review: past, present and future.

Article last updated 22 October 2010