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“It really allows us some opportunities to further our continuous improvement mindset and really improve audit quality,” Peo said. “We’re excited about this standard even though there are some challenges.” The implementation efforts are coming as a result of changes by many of the major standard setters in the quality management area: The International Audit and Accounting Standards Board (IAASB) in December issued three quality management standards. International Standard on Quality Management (ISQM) 1 and 2 and International Standard on Auditing 220 (Revised) are designed to move the profession away from quality “control” and toward quality “management.” The PCAOB in December 2019 issued a concept release that proposed changing standards for audits of U.S. public companies in ways that are similar to the new rules prescribed by the IAASB. The AICPA Auditing Standards Board (ASB) issued an exposure draft Thursday proposing three interrelated standards that address quality management. These proposed standards also will be similar to the IAASB’s standards. Particularly for global firms whose work is subject to different regulatory agencies, minimizing the differences between standards is critical. “One challenge could be making all that work together,” said Jennifer Haskell, CPA, chief auditor at Deloitte & Touche LLP. “There’s a lot of stakeholders and interested parties, so aiming for as much consistency as possible will be a challenge but will be a really great reward at the end.” A broad summary of the IAASB’s standards would show that they: Move quality management from a policies-based approach to a risk-based approach. ISQM 1 requires a firm to establish quality objectives, processes, procedures, and controls based on the risks that are particular to the individual firm’s circumstances. Place more rigor around the accuracy and completeness of the information and communications a firm uses in its system of quality management. Establish firm leadership’s responsibility and accountability for quality management and require an annual evaluation of effectiveness. Modernize the standards so they are relevant and compatible with the innovations taking place in the profession. For example, where an element in the old standard referred to the “human resources” element of the system of quality control, the new standard refers to a resources element that includes human, intellectual, and technological components. The requirement to document and test all processes, process risk points, and controls is read more here where the quality management standards most resemble the rules for implementing SOX 404(b). The processes are all in place, Peo said, but documenting and testing them is a different challenge. “Some people thought the same thing about SOX 404 when they first implemented,” Peo said. “It was like, ‘How hard can that be?’ They already have the processes in place.

https://www.journalofaccountancy.com/news/2021/feb/new-standards-drive-toward-better-audits.html

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