In order for firms to effectively manage quality control within their business, they need to implement the International Standard on Quality Control1 (ISQC1). While implementing the standard may seem daunting, it is an imperative for firms seeking to continually meet industry standards in terms of engagements and financial reporting.
We’ve listed a few helpful tips below to aid firms with the implementation of ISQC1:
1. Understand the importance of ISQC1
ISQC1 requires personnel responsible for implementing the firm’s quality control systems to have a thorough understanding of the standard, the code of professional conduct as well as local legislation, in order to apply the requirements effectively. Whoever is tasked with these responsibilities should understand the implications of ISQC1 implementation and be able to effectively communicate its value to the firm. If the standard isn’t understood in its entirety, there is a chance that some requirements will be overlooked, some be misread, or that helpful guidance will be misinterpreted.
2. Consider the benefits around improving the quality both internally and externally
By comparing its current quality control system with that of ISQC1, a firm can better understand if each requirement matches its existing policies and procedures; highlight the requirements not currently met; and determine what changes need to be made. Quality control policies and procedures can be collated and documented in a quality control manual. This manual can then relay communication between all personnel to set expectations and can also serve as a structure to develop performance evaluation standards in future.To demonstrate how the quality control policies and procedures meet the requirements of ISQC1, whether for internal or external inspection purposes, firms can cross-reference directly between the quality control manual and ISQC1, or compare the two with the help of a mapping document.
3. Seek professional guidance on the firm’s ISQC1 compliance status
Smaller firms with limited resources may require assistance in ensuring that they’re meeting ISQC1 requirements. The standard recognises areas such as consultation, engagement quality control reviews, monitoring, and dealing with complaints and allegations. It also helps firms identify and arrange for a suitable external party to assist with these elements.
The absence of qualified, independent internal personnel may also pose a challenge when performing a monitoring review, as the firm may not have an eligible person to take on the role of monitoring reviewer. ISQC1 requires the inspection of at least one completed engagement per engagement partner on a cyclical basis and prohibits personnel from also performing an inspection of files for that engagement. For certain firms, these requirements require an external review or decrease in the number of engagements capable of being reviewed internally. Small firms can consider establishing arrangements with external technical experts, so that they can work together on tasks involving internal monitoring, consultation, and monitoring reviews.
4. Only apply what is applicable to your firm
ISQC1 is applicable to firms of all sizes, however, not all firms require the same depth of quality assurance. Firms should adopt the quality control policies and procedures that are relevant and applicable to the operating characteristics unique to them. It is important to note that some requirements are not always relevant to a particular firm. For example, sole practitioners without staff members would not require policies and procedures for the assignment of appropriate personnel to the engagement team as they simply don’t possess the resources to do so.
5. Embed quality into your firm’s inner working with ISQC1
ISQC1 compliance will benefit firms in both the short and long term. Firm-wide training on quality policies and procedures will encourage the continuing professional development of staff, help to improve abilities and retention rates while simultaneously helping lay the foundation for the firm’s ongoing development and skills to respond to the changes in its environment and industry. With transparency and integrity of financial engagements and audits taking centre-stage, firms that measure the quality of their engagement processes against the standards of ISQC1 are ensuring their inner workings are of the highest integrity and that they will continue to meet industry and regulatory standards.
If you would like to know more about CaseWare’s automated ISQC1 Template, contact us for more information or learn more here.