Advisory Services for Public Company Auditors
Quality management is a critical component for firms of all audit practices, including issuer and broker-dealer audits. Firms are required to comply with similar standards related to their system of quality management. Specifically, the IAASB and AICPA have adopted ISQM1 and SQMS1, respectively, and the PCAOB has proposed QC 1000 A Firm’s System of Quality Control. As a result, firms that are required to follow IAASB, AICPA or PCAOB standards need to reconsider their internal quality controls and implement new processes to comply with these requirements.
The following wheel depicts the cyclical nature of the steps that a firm should undertake to initially adopt these standards and then continue year-after-year to remain in compliance:
Through our experiences evaluating systems of quality control, completing hundreds of firm inspections, now as advisors, we see that the firm’s system of quality management compliance requirements are significant changes. These changes will affect firms around the globe due to the amount of effort involved given the rigor of these standards.
We have supported firm’s initiatives to put processes and systems in place around many of the changes to standards related to the system of quality management. These changes include adding governance and leadership controls, adding new firm quality risk assessment processes to comply with the new requirements, expanding firm controls around independence and ethics requirements, and adding firm technological, intellectual, and human resources. This work also includes expanding controls over monitoring and remediation, including developing and implementing root cause analyses.
Firms should consider examining their system of quality management for compliance with these new standards as there are alternative and incremental requirements. JGA has the experience and team to help firms comply with these quality standards.
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Johnson Global Advisory
700 Flower Street #1000
Los Angeles, CA 90017
USA
+1 (702) 848-7084