Skip to content

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

Harlow & Finch, an audit firm, is redesigning its system of quality management under ISQM 1. The managing partner says the firm will simply adopt a fixed checklist of procedures used by a larger firm, without considering its own clients or services. Which feature of ISQM 1 does this approach contradict?

The approach contradicts ISQM 1's risk-based design. A firm must set quality objectives, identify and assess quality risks specific to its own clients, services and circumstances, and design responses to those risks. Copying another firm's fixed checklist does not do this, so it fails the standard.

  1. AThe requirement to design the system using a risk-based approach, identifying quality objectives and the quality risks specific to the firmCorrect
  2. BThe requirement that every firm must appoint an external body to inspect its system annually
  3. CThe requirement that quality management applies only to listed entity audits
  4. DThe requirement that engagement quality reviews are performed on all audit engagements

Explanation

ISQM 1 requires the firm to establish quality objectives, identify and assess quality risks to achieving them, and design responses to address those risks. A copied checklist ignores the firm's own circumstances. The other options misstate ISQM 1: there is no annual external inspection requirement, it covers all engagements, and EQRs are required only for specified engagements.

Did you get it right without looking?

One question tells you little. A timed set on Quality management (firm and engagement level) shows your real accuracy, how long you take and where you lose marks.

Practise Quality management (firm and engagement level)Free diagnostic mock

More Quality management (firm and engagement level) questions