A monitoring visit can be a daunting prospect, but thorough preparation can make the process smoother and more beneficial.
In Audit: Monitoring Visits - What to Expect and How to Prepare, Colm Owens gave an overview of how to prepare for a monitoring visit and how to ensure that your firm remains compliant with the various institute requirements.
1. Whole Firm Review
Begin with a whole firm review, which is an integral part of the Annual Compliance Review (ACR). This review should encompass all aspects of your practice, including internal policies, procedures, and risk assessments tailored to your firm's size and complexity. Ensure that your firm's quality management system is up to date and reflects the actual practices in place.
2. ISQM Manual
The International Standard on Quality Management (ISQM) 1 requires firms to establish a quality management system that is customized to their unique environment. Your ISQM manual should detail your firm's processes for maintaining audit quality, including how risks are identified and addressed. It should also outline the monitoring mechanisms in place to ensure ongoing compliance with these processes.
3. Independence, Confidentiality, and Fit and Proper Declarations
Independence and confidentiality are cornerstones of audit quality. Firms must ensure that all staff, especially those in front-line roles, annually declare their independence and confirm they have maintained confidentiality. Additionally, declarations affirming that each individual is fit and proper for their role are crucial. These declarations should be consistent and up-to-date, reflecting the firm's commitment to ethical standards.
4. CPD and IES8 (Revised)
Continuing Professional Development (CPD) is essential for maintaining the competence of audit professionals. The IES8 document has been revised to emphasize the importance of CPD in ensuring auditors are equipped with the necessary skills and knowledge. Firms should have a robust CPD program that aligns with the requirements of IES8 (revised), focusing on both planning and outcomes.
5. Annual Compliance Review
The ACR is a critical component of internal monitoring. It should address all key risks and include a review of a representative sample of the client base. The ACR must be conducted annually within 12 months of the previous review and should include both a whole firm review and call file reviews. This ensures comprehensive coverage and helps identify areas for improvement.
6. Audit Procedures
Audit procedures should be scrutinized during the monitoring visit. Firms need to demonstrate that they have effective processes for conducting audits, including ongoing quality file reviews and root cause analysis when issues arise. The goal is to show continuous improvement in audit quality through tailored procedures that meet the specific needs of the firm.
7. Letterhead
Attention to detail is important, even down to the firm's letterhead. It should be current and accurately reflect the firm's legal structure and regulatory status. Any changes to the firm's structure or personnel should be promptly updated on the letterhead and other official documentation.
8. Professional Indemnity
Professional indemnity insurance (PII) is a requirement for audit firms. Ensure that your firm has appropriate PII coverage in place and that any subcontractor agreements are properly documented. This not only demonstrates compliance but also provides protection against potential claims.
9. Responsible Individual Review Process
The Responsible Individual (RI) plays a pivotal role in the audit process. There must be a robust RI review process in place, evidencing the RI's involvement in planning, fieldwork, and completion of the audit. Lack of evidence of an RI review is a common issue identified during monitoring visits, so it's crucial to document this process thoroughly.
10. Previous Visit Follow-Up
Be prepared to discuss actions taken following the last monitoring visit. Address any findings or recommendations made previously, demonstrating that your firm has taken steps to rectify any deficiencies. This shows a commitment to continuous improvement and responsiveness to feedback.
11. Provision of Information
Finally, ensure that you provide all required information to your institute in a timely manner. This includes notifying them of any significant changes to the firm's structure, personnel, or client base. Accurate and prompt communication with your institute is essential for maintaining transparency and trust.
By focusing on these key areas, your firm can approach the monitoring visit with confidence, knowing that you are well-prepared to demonstrate your commitment to audit quality and compliance with professional standards.
The following topics are covered during the session:
- An Overview of the Monitoring Process
- Preparing for your Monitoring Visit
- Post Your Monitoring Visit
- Key audit documentation & execution issues.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.
