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

Brightwell LLP performs an annual monitoring review. The reviewers found that on three of ten sampled audits, the engagement partner did not document consultation on a difficult accounting matter, although the firm's policy requires it. Under ISQM 1, what must the firm do first with this finding?

The firm should first evaluate whether the findings amount to deficiencies, then investigate their root causes and assess their severity and pervasiveness. Only then can it design proportionate remedial actions. Waiting for another cycle or relying on regulator criticism would delay the response ISQM 1 requires.

  1. AEvaluate the severity and pervasiveness of the finding to determine whether it is a deficiency, and investigate the root causesCorrect
  2. BTreat it as a deficiency only if a regulator has criticised the audits
  3. CWait for the next annual cycle to see whether the pattern repeats before acting
  4. DRemove the three engagement partners from all audit work immediately

Explanation

ISQM 1 requires the firm to evaluate findings to decide whether they are deficiencies, and then investigate root causes and assess severity and pervasiveness. Waiting a year or acting only on regulator criticism delays remediation. Automatic removal of partners is not required and is not a proportionate first step.

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