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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Other current issues

Harbour & Wells, an audit firm, is implementing ISQM 1. The managing partner says the firm will simply keep its existing quality control policies and add a yearly checklist. Which feature of ISQM 1 does this approach most clearly fail to reflect?

ISQM 1 requires a firm to design its system of quality management by setting quality objectives, identifying and assessing quality risks specific to the firm, and designing responses to them. Keeping old policies with a yearly checklist does not meet this risk-based approach.

  1. AThe requirement to design a system of quality management that is based on identifying and responding to the firm's own quality risksCorrect
  2. BThe requirement that every audit engagement is subject to an engagement quality review
  3. CThe requirement that the firm must publish its quality objectives to audited entities
  4. DThe requirement that only the managing partner may evaluate the system of quality management

Explanation

ISQM 1 requires a risk-based approach: the firm sets quality objectives, identifies and assesses quality risks, and designs responses. A fixed checklist on legacy policies ignores this. An engagement quality review is required only for specified engagements, publication to clients is not required, and the evaluation is by the individual with ultimate responsibility, not solely the managing partner.

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