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2005 Annual Report on Quality Review

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The Institute’s 2005 Annual Report on Quality Review has found that the majority of Chartered Accountants in public practice have adequate quality control policies and procedures in place. However, the report highlighted that work was needed by some firms to improve assurance and compilation policies and procedures.  
 
The Quality Review program is a key part of the Institute’s co-regulatory framework, established to ensure Chartered Accountants in public practice comply with mandatory professional standards. It assesses the quality control policies and procedures implemented in an accounting practice by examining practice manuals, working papers and other documents and reviewing a cross-section of current engagement files.  
 
During cycle 2, 550 practices and 941 members have been reviewed. Reports issued by the Institute to practices in relation to these reviews revealed that:

  • 14.5% of practices had adequate quality control policies and procedures, with no breaches of mandatory professional standards found  
  • 72% of practices had adequate quality control policies and procedures, however minor breaches of professional standards were found  
  • 12% of practices had inadequate quality control policies and procedures, with a significant breach or breaches of professional standards found  
  • 1.5% of practices had inadequate quality control policies and procedures, with a fundamental breach or breaches of professional standards found.
While the results are encouraging, the Institute’s Quality Review Committee has stressed there is need for improvement.  
 
“These figures are evidence of firms acknowledging the importance of the quality review process and that practitioner members are maintaining a consistent standard of quality and service to their clients,” Graeme Sampson, Chairman of the Institute’s Quality Review Committee, said.  
 
However, the committee was alarmed to find some firms had failed to comply with the following assurance and compilation procedures, including:
  • No engagement letter or similar documentation for audit engagements  
  • No documentation of audit plan, audit program or internal controls  
  • No documentation of subsequent events  
  • No documentation of going concern  
  • Financial reports did not specify they were Special Purpose Financial Reports  
  • Compilation reports failing to comply with APS 9
“While these breaches relate to a small section of the membership, it is imperative that all Chartered Accountants uphold the high level of professionalism and integrity of our designation by complying with mandatory professional standards,” Mr Sampson said.  
 
To ensure quality service is provided to clients, it is important that Chartered Accountants understand and comply with mandatory professional standards. To help members achieve this, the Institute is producing a series of technical snapshots focusing on assurance and compilation procedures. This series will be available in coming editions of CA News.