Firmwide systems of quality management show increase in findings. Small decrease in percentage of inspected audit files needing improvement.
Today, IAASA has published its 2024 quality assurance review reports in respect of seven firms that perform statutory audits of public-interest entities (PIEs) in Ireland. The reports summarise IAASA’s inspection of each firm’s internal system of quality management. The reports include any findings and recommendations made by IAASA to the firms regarding these systems.
The reports also summarise the results arising from IAASA’s inspection of a sample of audits of public-interest entities performed by each firm, including the grades assigned to the audits inspected and any key recommendations made to the firm.
In 2024 19% of files inspected required improvement, down from 23% in 2023 but still some way short of the rate of 11% in 2022. While the issues varied across files inspected, there were consistent findings in relation to the review of financial statement disclosure, communications with those charged with governance, risks of management override of controls, and the internal engagement quality review that is mandatory for audits of PIEs.
There were 15 firmwide findings relating to systems of quality management, of which four were graded as amber. These numbers are up substantially on the five findings in 2023. A consistent area of failing was the timely recording of financial interests to guard against conflicts.
Commenting on these results, Chief Executive Kevin Prendergast said
“Since 2022 ISQM (Ireland) 1 has created greater obligations on quality management for audit firms. Those requirements are designed to increase audit quality. As such it is disappointing that so many firms have struggled with the implementation of the requirements. As a result of IAASA’s work many of the firms have introduced more stringent procedures to ensure that potential conflicts are properly recorded. IAASA welcomes this.
On the individual audit file inspection results, while the results show some improvement, and are still ahead of our international comparators, it remains disappointing that almost one in five of audit files reviewed required improvement. IAASA takes a risk based approach to file selection and so these results are not representative of the quality of all audits performed. Nevertheless, we urge these firms to identify and address the underlying causes of poor audit.”
IAASA undertook 31 (2023: 31) inspections of individual audit files in 2024. Of these 25 (2023: 24) were graded as good audits, five (2023: seven) required improvement, and one (2023: zero) required significant improvement. On firmwide systems of audit quality, IAASA raised 15 firmwide findings in 2024, with findings raised in all seven firms inspected (2023: five firmwide findings raised in four firms).