Quality Control Reviews (QCRs)[April 2012]

Quality Control Reviews (QCRs)• 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&CA)• Deputy chairman – Michel Girbes (EMEA)• Jojo Alveido (AP)• Horacio Brihet (S)• George Dakis (AP)• Bill Drimel (N&CA)• Christian Fuchs (EMEA)• Yvonne Lang (EMEA)• Steven Schenkel (N&CA)

Responsibilities of the Audit Committee

• Quality control programme• Annual Audit Quality Confirmation survey• Information for members• Independence requirements - NIMo• Annual Audit Forum• Forum of firms/ TAC

Interaction of quality control reviewers and the audit committee

• Here to help each other• Audit Committee produces reviewers packs• Keep us informed through the Audit

Director• Completed reports are considered by the

Committee

The QCR programme

• Purpose

• Frequency of reviews

Purpose of the QCR programme

• Protect our reputation

• Confidence amongst members

• Consider new members

• Opportunity for members to develop and learn from each other

Frequency of reviews

• FSRs at least every 3 years

• LSRs at least every 6 years

• Advanced QCR when recommended from previous QCR

• Pre-admittance FSR QCRs for potential new members

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 & meals– Budget

Initial contact with firm

• Audit Director/Reviewer/Regional Chairman or QC Representative

• Some guidance as to what to expect

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

Who pays for what - time• 50% of ‘standard’ charge out 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 Director/ Audit

Committee• Do not include

– Travel time• MUST bill promptly (at least within 3 months of review)

Who pays for what - travel

• MUST be booked through Corporate Traveller (Tina.Bouwer@corptraveller.co.uk) unless agreed in advance with Audit Director/ Executive Director

• Air fares – economy class for upto 4 hours; business class in excess of 4 hours

Who pays for what – accommodation & meals

• 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– Public Interest Entities– Other regulated clients

Background informationRecent regulatory/other reviews

• Outcome– Any matters requiring specific follow up– Extent of reliance

Background informationAudit documentation

• In house developed

• Predecessor firms

• Maintenance

• IFAC Audit Guide

Section F – ISQC1 Compliance• Firm-wide procedures• The importance of ‘tone at the top’• ISQC 1• IFAC Quality Guide• 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 Audit Director

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 Audit Director– Review

• Further questions

What happens next?• Consideration by the Audit Committee

– Audit Director circulates– Highlights any matters of concern

• Further questions

• Audit Director finalises QCR report and completion letter, send PDF copies to firm

• Summary provided in the Committee’s report to every Board meeting, including highlighting problems firms

Quality Control Reviews[April 2012]