Sound audit quality control

Following these tips can help maintain an audit quality-control system that holds your firm to professional standards and aids in delivery of a top-notch product to clients, experts say.

Focus on the tone at the top. The tone established by leadership is all-important, as it sets the bar for quality within the firm. Leaders need to send clear messages to their staff detailing what “quality” means in-house and do this as early as possible within the audit process. Karen Kerber, CPA, a partner at KerberRose, said it is critical for leaders to “walk the walk” and demonstrate by their actions what quality means as well.

Draft a strong quality-control document. Quality-control definitions should be detailed in a robust document, which can keep your firm centered and your employees on the same page. This document also can help your firm abide by both professional industry standards and policies established in-house, Kerber said.

Outline your risks. Firms need to be able to accurately assess their risks and include them in the audit quality-control system. For instance, the time to perform an engagement could be greater than expected, or the engagement could require some technical knowledge that the firm does not have, said Ahava Goldman, CPA, CGMA, senior technical manager—Audit & Attest Standards at the AICPA. “We expect our clients to have control over financial reporting and over their operations,” Goldman said. “In the same way, CPA firms have to have control over their operations—and that’s what a system of quality control is.”

Detail policies about client acceptance. “Your firm’s reputation is only as good as your least reputable client,” Goldman said. Thus it’s important to assess which clients to take on and which ones to avoid. Your firm should determine whether it has the expertise, the proper staff, and the time to accept an engagement.

Look to external resources for guidance. Small firms in particular sometimes need outside help before taking on certain clients—such as those outside their usual area of expertise—and in ensuring their audit quality-control system is strong. Firms can use several external resources, including valuation firms, required peer reviewers, AICPA Private Companies Practice Section toolkits, and even retiring Baby Boomers willing to perform audit quality control on a part-time basis.

Take time to reassess. “Firms have to recognize that public accounting serves the public trust, and they have to be committed to doing quality work,” Goldman said. Having a good audit quality-control system takes regular review. It’s important to breathe, step back, and figure out what your firm is doing right, how you can improve, and how policies and procedures need to be tweaked to provide and maintain good quality control.

This checklist is adapted from the article “Concerned About Your Audit Quality-Control System?” CPA Insider, Nov. 23, 2015.

—By Cheryl Meyer (meyerwrites@gmail.com), a freelance writer based in California.