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

During a firm-wide review, Orchid LLP finds that several audit files were signed off with unresolved deficiencies in documenting going concern work. Under ISQM 1, what should the firm do first in its monitoring and remediation process?

The firm should evaluate the findings to decide whether they are system deficiencies, investigate root causes, assess severity and pervasiveness, and then design remedial actions. ISQM 1 requires this structured monitoring and remediation process rather than dismissals, waiting for regulators, or merely informing clients.

  1. AEvaluate the findings to determine whether they are deficiencies in the system, investigate the root causes, and design remedial actionsCorrect
  2. BDismiss the engagement partners responsible without further analysis
  3. CWait for the regulator's next inspection before taking any action
  4. DReport the findings only to the clients concerned and take no internal action

Explanation

ISQM 1 requires the firm to evaluate findings, identify deficiencies, investigate root causes, and evaluate severity and pervasiveness, then design and implement remedial actions. Immediate dismissal skips root cause analysis, and waiting for a regulator or limiting disclosure to clients does not satisfy the monitoring and remediation process.

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