Copyright FocusROI 2014

Monitoring your Firm’s Quality Control

STUART HARTLEY FCAFOCUSROI INCSHARTLEY@FOCUSROI .COM

Quality Control Standards• Pervasive - Firm Level - CSQC 1

◦ Deals with a firm's responsibilities for its system of quality control. ◦ Design of firm wide policies and procedures (Firms QAM)

• Specific - Engagement Level

◦ Audits - CAS 220Implementing the firm’s quality control procedures at the engagement level

◦ Reviews – to come…ED issued in Canada in 2013ISRE 2400 issued in fall 2012

Steps to Achieving QC Objectives:

W hat Q C standards need to be m et?

W hat system s are needed to ensure we meet

the Q C objectives

Assess how well we are doing today?

Identify what correctiveactions are required?

Is Q C continuallygetting betterwithin Firm?

Professional standardsClient service standards

Develop Q C P&P Assign Q C leadersImplem ent a F irm Q A m anual

M onitor com pliance w ith P&PUpdate Q A Mreport upon results

Annual updating o f P&PDesign a plan to im prove Q A Com municate/implem ent the plan

Is plan of action being follow ed? Are the Q C leaders doing a good job?

1.

2.

3.

4.

5.

Monitoring Requirement - CSQC 1.48

The firm shall establish a monitoring process…

At Firm Level◦ ongoing consideration and evaluation of the firm's system of quality

control

Engagement Level◦ on a cyclical basis, inspection of at least one completed engagement for

each engagement partner;

Two types of Monitoring

Abel & CoCPA, CA

Has Firm complied with?

= (yearly) monitoringOngoing

= (1-3 years) Completed file monitoring

The Ongoing Monitor Question Response

What is the role? An objective evaluation of compliance with firm policies and procedures

Extent of involvement? 1. Read the firms QAM to assess if complete and up to date

2. Review action plans and responses to prior year monitoring reports and practice inspections

3. Make inquiries and review supporting documentation of compliance with firms QAM

4. Discuss findings and issue an ongoing monitoring report to managing partner

When? Once every year

Who? Suitably qualified person

QualificationsArea to address Consider

CompetenceGood reputation. Previous monitoring experience. Senior person (ideally partner equivalent) with relevant qualifications/experience and industry knowledge

Character High integrity

Chemistry Compatible with firm culture and personnel

Commitment Person is available when needed

Privacy Information about the firm, staff and files will stay confidential. No direct contacts with client

Independence Complies with firm policies. No client conflicts

External Obtain an engagement letter and inform insurance company

Fees Fair. Billed to firm, not client

Ongoing Monitor’s ReportCompliance with the firm’s P&P

Content of Yearly Monitors Report (Aug 31?) Comments

1. Firm QAM is relevant and up to date?

2. QC roles have been assigned and duties properly carried out?

3. Compliance with P&P in Firms QAM including client acceptance?

4. Independence issues were identified, addressed and documented?5. Annual QC improvement plan issued to partners/staff?

6. Corrective actions taken to address QC deficiencies identified in previous action plans and monitors reports?

The Completed File Monitor Question Response

What is the role? An objective evaluation of compliance with firm policies and professional standards on a sample of specific engagements.

Extent of involvement?

1. Select files for review2. Perform a general review of completed file3. Identify specific file deficiencies and systematic

deficiencies for firm as a whole4. Discuss findings and issue a monitoring report to

managing partner

When? At least one completed file every three years

Who? Suitably qualified and competent person NOT involved in performing the engagement

Maintaining/Improving QCEnsure system is operating effectively anddeficiencies are correctedon a timely basis

Annually monitor compliance

with firms QAM

Annually assess need for

changes in firm’s QAM

Annual confirmation (by all personnel)

of compliance with firm’s QAM

Annually communicate results of QC monitoring

to firm personnel

Ensure firm’s QAM is relevant and up to date

Ensure personnel understand and complywith firm’s QAM

Correct deficiencies and e

nsure continual improvement in qualityof work performed

Mai

ntai

ning

t he

S yst

em

Reports from firm leadersReports from firm monitorsAction plans to addressweaknesses

Details of the QAM reviewand the changes (if any)made as a result

Signed confirmationsby all partners and staffDetails on how any issuesarising were resolved

Annual communication topersonnel with action plans for remediation andimprovement

Activity Purpose Documentation

Overview of

Key features:Four sample Quality Assurance Manuals Guidance to help firms customize the sample manuals

Optional best practices sample policies in shaded text

Core chapters provide commentary on each sample policy

The Annual QC Action PlanCSQC 1.50 The firm shall communicate to relevant engagement partners and other appropriate personnel deficiencies noted as a result of the monitoring process and recommendations for appropriate remedial action.

Quality Improvement Action Plan

# Nature of Deficiency Action step Priority

A,B,C. Completion

dateWho resp.

Estimated cost

1Accounting for financial instruments not properly understood by staff

Hold training a session for partners and staff on the accounting requirements

A 6/30/2013 SH 2,500

2Staff appraisals not being completed on regular basis

Remind partners of deadlines for staff appraisals and follow up to ensure compliance.

B 5/15/2013 JK Minimal

3

4

EQCR vs. Completed File Monitoring

Introducing FocusHGKKey Services

Quality Control Monitoring

Training and Coaching

Practice Improvement

Description of ServicesDescription Minimum RecommendedCompleted File Monitoring Review of one assurance file per

partnerReview of two assurance files (audit and review) per partner and provide recommendations

Ongoing Monitoring Review of annual report Perform the review, prepare report and provide recommendations

ECQR’s Engagements meeting the firm criteria

Perform review for all higher risk engagements within Firm

QC Improvement Plans Review of annual plan Prepare cost effective plan based on findings from monitoring activities

OTHER SERVICESF/S Reviews Review of F/S for selected engagements based on pre-determined criteria

Efficiency of Engagement Workflow

Review of current practice and recommendations for changes. Suggestions for revisions to Firm policies and procedures Partner Staff coaching on productivity improvements

Small Group Training and Coaching

Annual refresher course for partners and staff. Coaching aimed at understanding forms and complying with standards Training directed at identified QC weaknesses and changes in standards

Please contact us for further informationinfo@focusROI.com416 594 0005