Proposed firm quality management standards

Learn about an exposure draft published by the AASB that aims to adopt international changes to quality control standards. How will it affect Canadian firms?

The Auditing and Assurance Standards Board (AASB) issued an exposure draft that proposes to adopt revised international standards dealing with quality control. The revisions will apply to all standards in the Handbook, including compilation engagements, and to all sizes of firms. This begs the question: does the new approach to managing quality appropriately deal with differences in the size and nature of firms or the services they provide?

Summary of proposals

There are three key elements to the international proposals:

  • A quality management standard will replace the standard of quality control. The existing standard sets out the required quality control policies and procedures. The new standard requires firms to apply a risk-based approach in the design, implementation and operation of the system of quality management considering the nature and circumstances of the firm and the engagements performed.
  • A separate standard for engagement quality reviews deals with the appointment of the reviewer and the reviewer's responsibilities for performing and documenting an engagement quality review.
  • A revised engagement-level quality control standard clarifies the role and responsibilities of the engagement partner and recognizes the evolving environment, including changes to audit delivery models and the use of audit technology.

The biggest changes from a Canadian perspective stem from the fact that the Canadian quality control standard applies to assurance engagements but not to related services engagements, such as compilation or agreed-upon procedures engagements. The scope of the new standards is broader.

Why expand the scope of quality management to related services engagements?

The AASB's exposure draft identifies three reasons why it is appropriate to adopt the proposed international standards without amendments to their scope:

  • It is in their public interest that practitioners consistently perform engagements of high quality.
  • Related services engagements are being conducted for a broader range of external users, thus the consistent performance of high-quality engagements is of increased importance.
  • The proposed standards accommodate different firms, engagements and subject matters, now and for the future. They recognize that some firms will have a more complex and formal system of quality management than a firm that performs only reviews of financial statements or compilation engagements.

Practitioner input will be critical

The proposals are a significant change for Canada, regardless of whether you are a large, medium or small firm. Therefore, it is important that practitioners provide feedback on whether the proposals are appropriately scalable to a board range of firms and circumstances.

AASB staff are conducting a variety of outreach activities to gather input to inform the board on these matters, including webinars, podcasts, workshops and consultations. Many of these will take place in April and May 2019 so that the AASB can develop a response to the International Auditing and Assurance Standards Board (IAASB) by the comment deadline of July 1, 2019.

Keep the conversation going

There have been and continue to be major changes to standards in all areas of public practice designed to respond to our evolving environment. Keeping pace is challenging to say the least.

I hope you can continue to support the work of the AASB as it moves forward on several fronts. Let me know what you think about this latest development.

Post a comment below or email me directly.

Conversations about Audit Quality is designed to create an exchange of ideas on global audit quality developments and issues and their impact in Canada.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Eric Turner, CPA, CA

Director, Auditing and Assurance Standards, CPA Canada