Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
Hindrance
Unwillingness <strong>to</strong>
Invest in Training
or Development
Lack of Discipline
Description
Conducting a quality audit is dependent on retaining qualified and competent
people <strong>to</strong> perform the work. This requires ongoing professional development and
performance appraisals for all partners and professional staff (every period). Lack of
investment in staff also leads <strong>to</strong> staff turnover.
A failure <strong>to</strong> discipline partners or staff when the firm’s policies are contravened sends
a very clear message <strong>to</strong> personnel that written policies are really not that important.
This undermines compliance with all of the firm’s policies, and increases the risk <strong>to</strong>
the firm.
A healthy <strong>to</strong>ne at the <strong>to</strong>p can be set by the firm’s management and engagement partners through the
activities outlined below.
Exhibit 4.3-2
Setting the Tone
Establish the
Firm’s Objectives,
Priorities, and
Values
Communicate
Regularly
Update the
Quality Control
Manual
Hold People
Accountable
Develop Staff
Competence and
Reward Quality
Work
Continually
Improve
Set an Example
Description
This could include:
• An unwavering commitment <strong>to</strong> quality and high ethical standards;
• Investment in staff’s learning, training, and skills development;
• Investment in the required technological, human, and financial resources;
• Policies <strong>to</strong> ensure sound engagement and fiscal management; and
• Risk <strong>to</strong>lerances for use in decision-making.
Reinforce the firm’s values and commitments by communicating regularly
(verbally and in writing) with staff. Communications would address the need for
integrity, objectivity, independence, professional skepticism, staff development,
and accountability <strong>to</strong> the public. Communications could be made through the
performance-appraisal system, partner updates, emails, office meetings, and internal
newsletters.
Each period, update the firm’s quality control policies and procedures <strong>to</strong> address
weaknesses and any new requirements.
Assign clear responsibilities and accountabilities for quality-control functions (such as
independence issues, consultation, file review, etc.).
Develop staff through:
• Clear job descriptions and documented annual performance appraisals that
make quality of work a priority;
• Providing incentives/rewards for delivering quality work; and
• Taking disciplinary action when the firm’s policies are contravened.
Take prompt action <strong>to</strong> correct deficiencies when identified, such as through the
firm’s engagement file moni<strong>to</strong>ring, including the cyclical inspection of completed
engagement files.
Provide staff with a role model in the positive example set by partners in their day<strong>to</strong>-day
behavior. For example, if a policy emphasizes the need for quality work, a staff
member should then not be criticized for legitimately going over the budgeted time.