IAASA has today published a Consultation Paper to seek the views of stakeholders regarding the Authority’s intended policy on publication and grading in the quality assurance review process relating to statutory auditors and audit firms that carry out statutory audits of public-interest entities (‘PIEs’).
IAASA’s audit inspections unit has an overall objective to inspect PIE auditors’ work and to promote improvements in the quality of auditing of PIEs. The quality assurance review process is designed to assess the effectiveness of the statutory auditor or the audit firm’s internal quality control system through assessment of the design of the internal quality control system, compliance testing and review of individual audits of PIEs. IAASA intends to make audit quality inspection reports on audit firms that carry out statutory audits of PIEs available to the public from 2019 onwards and to publish the reports in batches.
The proposed audit quality inspection reports will detail findings arising in relation to the effectiveness of the design or implementation of the firm’s quality control system and will indicate the severity of each finding that has arisen along with IAASA’s recommendation for remediation of deficiencies and/or improvements going forward. The proposed audit quality inspection reports will also provide a summary of all PIE audits inspected as part of the quality assurance review and will disclose the grading that has been assigned to each of the audits inspected, though the names of the individual PIE audits inspected will not be disclosed. The proposed mechanism for indicating the severity of findings arising in relation to the effectiveness of the design or implementation of a firm’s quality control system is a red-amber-yellow (“RAY”) system. The proposed grading system for individual PIE audits has four categories of grade ranging from “good” to “significant improvements required”.
IAASA is seeking the views of stakeholders and invites interested parties to provide their comments on the Consultation Paper by email only, to [email protected], no later than 5:00pm on 31 January 2019.