Quality Control Reviews[v.Aug-09]

Quality Control Reviews• Welcome• The Nexia International Audit Committee• The quality control programme• Planning the review• Introduction to the reviewer’s pack• Reviewing the firm’s procedures• Reviewing the audit files• Feedback and recommendations• Finalising the report• What happens next?

The Nexia International Audit Committee

• Who are they?

• What do they do?

• How do quality control reviewers interact with the Committee?

Nexia International Audit Committee – who are they?• Chairman – Felix Lozano (N&C America)• Deputy chairman – Michel Girbes (Europe)• Jojo Alveido (Asia Pacific)• Al Anderson (N&C America)• Mike Bishop (Europe)• Grant Block (N&C America)• Horacio Brihet (South America)• George Dakis (Asia Pacific)• Percy Italia (MEA)• Anton Lewis (MEA)• Svetlana Romanova (Europe)• Yvonne Lang (Technical Adviser) (Europe)

Responsibilities of the Audit Committee• Quality control programme• Annual confirmation from members• Audit manual• Information for members• Special projects – e.g. independence requirements• Audit Forum

Interaction quality control reviewers and the audit committee• Here to help each other• Audit Committee produces reviewers pack• Keep us informed through the

Technical & Quality Manager• Completed reports are considered by the

Committee

The quality control programme

• Purpose

• Frequency of reviews

Purpose of the quality control programme

• Protect our reputation

• Confidence amongst members

• Consider new members

• Opportunity for members to develop and learn from each other

Frequency of reviews

• Existing members – at least every three years

• When forms part of recommendation from previous review

• New members – prior to membership

The reviewer’s pack – an introduction

• Guide through the process

• Combines review and reporting in one place

• Suggestions for improvements are always welcome

Planning the review

• Initial contact with firm

• Who pays what?– Time– Travel– Accommodation– Budget

Initial contact with firm

• Audit committee/regional chairman

• Some guidance as to what to expect

• Reviewer liaise with key contact at firm as to logistics of review

Who pays for what - time• 50% of ‘standard’ charge rate• Paid through audit committee budget – bill to Nexia International• Include

– Time spent on review– Time completing report– Time answering any questions from the Audit Committee

• Do not include– Travel time

• Please bill promptly – within 3 months of review

Who pays for what - travel

• Currently under review

• Air fares – economy class within Europe

• Bill to Nexia International

Who pays for what - accommodation

• Should be arranged by firm subject to review

• Paid for by the firm subject to review

• If you pay – bill to Nexia and it will be recharged

The reviewer’s pack

• Combines:– Reporting– Recommendations– Work programme

Section D – Details of review

• Hopefully self-explanatory

Section E – Background informationOrganisation structure• Partner profile

– Succession issues– ‘Sleeping’ partners

• Staff profile– Sufficient– Suitably qualified and experienced

• Sub-contractors and consultants– How are these controlled– Checking of qualifications, independence etc.

Background informationClients• Profile

– High dependence on one client– Small number in specialist sector– One or two listed companies

Background informationRecent regulatory/other reviews• Outcome

– Any matters requiring specific follow up– Extent of reliance

Background informationAudit documentation• In house developed

• Predecessor firms

• Maintenance

Section F – ISQC1 Compliance• Firm-wide procedures• The importance of ‘tone at the top’• ISQC 1• The Nexia International Quality Manual• Consideration of ‘no’ answers

– Acceptable for size of firm now– What about the future?

Reviewing the audit files

• Selecting the sample

• Dealing with groups

• Detail of review

• Recording questions and findings

• Discussion with audit partner

Selecting a sample• Smaller firms

– One file per audit partner minimum

• Larger firms– Cross-section

• Partners• Industries• Consider international work

• Maximum sample ordinarily should be 5• Any questions please ask the technical adviser

Dealing with groups

• Do not have to do the whole group!

• Consolidation

• Significant subsidiary

Approach to review

• Discuss audit with partner/manager

• Financial statements

• Planning

• Fieldwork

• Completion

Considerations

• Does the work reflect what was planned?

• Is it clear what work was done?

• Is it clear how conclusions were reached?

• Do we agree with the conclusions reached?

Detail of review

• Matters requiring clarification– Notes– Discuss with partner/manager

• Complete programme

• Record any explanatory comments

Feedback and recommendations

• Closing meeting

• Grading the recommendations

• Key considerations

Closing meeting

• Important part of process

• Discuss findings and recommendations

• No surprises!

• Explain what will happen with report

• Document meeting in reporting pack

Recommendations - grading

• A – require immediate attention

• B – attention in near future

• C – require attention as practice grows or environment develops

Key considerations

• Summary for Audit Committee

• Include any matters you think are important for the Audit Committee to consider

Finalising the report• Agreeing it with the firm

– Send in draft– Suggest give them a deadline to respond

• Sending it to Technical & Quality Manager– Review

• Further questions

What happens next?

• Consideration by the Audit Committee– Technical & Quality Manager circulates– Highlights any matters of concern

• Further questions

• Recommendation to Board

Quality Control Reviews[v.Aug-09]