Audit Quality and ISQM
There are no major imminent changes to the ISAs Ireland for auditors of SME entities in Ireland during this reporting season, there is a lot for auditors to think about in terms of audit quality. Recent reports from the CAI indicate that audit quality is still a burning topic. These topics were among those touched upon during the recent online Audit Conference organised by the Chartered Accountants Ireland.
Positive Conformation Requests Now Mandatory
Be aware of ISA 505 ‘External Confirmations’ which effectively bans negative confirmation requests. This became emendatory for accounting periods commencing on/after 15 December 2024, which in reality means audits for the years ending 31 December 2025.
A negative confirmation request is ‘a request that the confirming party respond directly to the auditor only if the confirming party disagrees with the information provided in the request.’ In most cases, in our experience, negative confirmations are hardly ever used in practice.
Positive external confirmation requests are defined as ‘a request that the confirming party respond directly to the auditor indicating whether the confirming party agrees or disagrees with the information in the request or providing the requested information.’
The most common of these would be debtor circularisation’s.
Obtaining Audit Evidence ISA 500
All firms need to constantly improve the documentation around obtaining audit evidence. The main areas for focus in this regard include:
Analytical Procedures ISA 520
The use of analytical procedures often brings significant benefits when used as a substantive audit procedure. Among the benefits are:
- They can provide strong audit evidence and
- They can assist the auditor gain a better understanding of the audited entity.
It is not uncommon that analytical procedures (especially at the planning stage of the audit) are not completed to a sufficiently high standard and not in the predictive way that is required. For example, simple comparisons between years do not provide sufficiently high-quality audit evidence. The comparisons need to be accompanied by commentary that is well informed about the client’s industry along with links to external news and industry insight reports and data that is sourced independently of the client entity.
Sampling ISA 530
The Financial Reporting Council removed sample size caps some years ago and this development has caused auditors no little stress. It’s always possible to justify sample size selection by professional judgement but this is often poorly documented.
It’s also important to ensure that all elements of the client’s target population have an equal opportunity of being selected across the financial period under review.
Our audit file review service is available either on-site or remotely where we will provide you with a written report benchmarking your audit file against the appropriate standards. You will receive a gap analysis of where your firm stands on a particular assignment within clear direction as to appropriate action to consider for improvement.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit each firm’s unique requirements.
Publications and AML webinar:
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- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
