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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Quality management (firm and engagement level)

A national audit regulator inspects Corbett & Associates and reports significant deficiencies in the audit evidence for revenue on three listed-company files. Under ISQM 1, what should the firm do next as part of its monitoring and remediation process?

The firm should investigate the root causes of the inspection findings, evaluate how they affect its system of quality management, and implement remedial actions. Treating them as isolated to three files, or only replacing partners, ignores possible systemic weaknesses that ISQM 1 monitoring and remediation requires the firm to address.

  1. ATreat the findings as relating only to those three engagements and take no further action at firm level
  2. BInvestigate the root causes of the deficiencies, evaluate their effect on the system of quality management and take remedial actionCorrect
  3. CReplace the engagement partners on the three files and consider the matter closed
  4. DDisclose the findings in the next audit reports of all clients

Explanation

ISQM 1 requires the firm to evaluate findings, investigate root causes, assess whether they are severe or pervasive for the system and design remedial actions. Limiting the response to the individual files misses systemic causes. Audit reports of clients are not the channel for firm-level deficiencies.

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