This may seem like a very odd question as the International Standard on Quality Control 1 (ISQC 1) was introduced over a decade ago. However, my discussions with practitioners suggest that this might be the problem. Although the standard was revised in June this year it has attracted relatively little attention since an initial flurry.
I have always considered ISQC 1 to be a very good document and very user friendly. It contains little that is ambiguous or technically demanding but I get the impression it hasn’t been widely read.
There are a number of reasons why a firm’s ISQC 1 procedures may be inadequate. I think these fall broadly into three categories;
- they missed it when it was first introduced,
- they initiated procedures but never updated them, or
- they started to carry out regulated work more recently.
Whatever the reason may be I would urge you to dust off your procedures manual and review it now.
Why? Well every poor audit file or poor piece of regulated work can be traced to poor ISQC 1 procedures. By definition, if the quality of your end product is poor, then your procedures must have failed to some degree.
In my opinion, all firms should have procedures to comply with the matters dealt with in the standard in any case as they are all perfectly reasonable. Good quality output is essential for all firms to succeed and to maintain standards across the profession. The areas covered of leadership, ethics, acceptance and continuance, human resources, engagement performance and monitoring impact all firms.
There are some common pitfalls I feel I should alert you to when you embark upon implementing or reviewing your procedures.
Firstly, some firms take the approach of buying a procedures manual or may subscribe to an Audit Manual (like the Mercia Audit Manual) whereby you also receive a procedures manual included as part of the subscription. Acquiring a procedures manual is a good start but the firm must then ensure it either tailors its manual to reflect the actual procedures they have adopted or they must adopt the procedures as they are stated in the manual. The former will usually represent the best option. It serves no purpose to have a manual which doesn’t accurately reflect the firm’s procedures!
Secondly, many firms have very robust procedures but then fail to implement them at critical points. For example, when consultation may be required on a contentious matter or an independent review of a file is called for by the procedures laid down. This may be due to time constraints or lack of awareness of the procedures established. I have seen a number of files over the years where matters requiring consultation have not been flagged up early enough in the process which leads to time pressure when the principal reviews the file and then a lack of evidence of any consultation having taken place.
Guidance and help for ISQC 1
ISQC 1 is a fundamental requirement for all firms operating in the regulatory arena and needs to be complied with whatever your size. It represents a principles based approach to a range of challenges that firms encounter. To make this auditing task easier for you to manage, Mercia offers a one hour specialist webinar which covers the philosophy behind the standard, how to ensure compliance for your firm and ongoing monitoring issues. For more details, visit our website.