QAD findings

CCAB Training Providers’ ForumOctober 2007

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Introduction

• QAD visits - all sizes of firm

• Session outline– QAD findings– Underlying causes– Key messages

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QAD findings

• ISAs (UK & Ireland) – current issues

• ISQC1

• Ethical Standards

• Accounts disclosure

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ISAs (UK & Ireland)

Overall picture

• Audit quality

• Comparison with SAS compliance

• Main areas of difficulty……..ISA 315!

• Other common points

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ISA 315 (& 330) - main problem areas

• Documenting background information covering all required elements

• Determining what controls are relevant to the audit

• Evidence of design and implementation work• Identification of significant risks and linkage to

work planned• Risk identification – differentiating between

inherent and control risk.

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ISA 315 – extent of work on controls?

• Judgement

• Audits of smaller entities

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ISAs – other common points

• ISA 240; enquiries of management; focus of engagement team meeting; revenue recognition; management override; written representations

• ISA 260 – communicating significant audit findings

• Old chestnuts– rigour of substantive analytical procedures– dealing with uncorrected misstatements

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ISA issues – underlying causes (1)

• Reliance on audit systems without full understanding of the ISAs

• Difficulties in applying internal control concepts to smaller entities

• Ensuring the right people are involved at the right time

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ISA issues – underlying causes (2)

• Coping with extensive checklists

• Some fraud requirements not very visible in audit systems eg fraud risk within revenue recognition, management override.

• Timing issues – update of systems.

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ISQC1

• Still some lack of awareness in smaller firms

• Belief that only applies to large firms

• Lack of tailoring of standard manuals

• Mostly a documentation issue

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Ethical Standards – common issues

• Non-audit services – accounting services– Definition of accounting services (“we just process the TB on

IRIS”)– Documentation of safeguards

• PASE – Confusion between exemptions and alternative provisions

• Long association– Process for monitoring period as RI– Documentation of safeguards/communication to the client

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Accounts disclosure – desktop reviews

Common issues:

• SME accounts - handout

• Charity accounts - review of accounts of smaller charities (incoming resources between £10k and £250K) - handout

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Key messages (1)

Training needs

• Understanding ISA 315• Applying ISA 315 to smaller clients• Substantive analytical procedures• Ethical Standards• Accounts presentation issues – SMEs and

charities

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Key messages (2)

Audit systems

• “Wood for trees”. Too many checklists?

• Catering for increasing requirements in the future

• Prompt and responsive updates

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Wrap up

• Good start with ISA implementation but still some way to go

• Training needs identified

• How much more can be added to audit programmes and checklists? Impact on audit quality?

• Questions?