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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional and ethical developments

Keswick Audit LLP has identified, through its monitoring activities under ISQM 1, a deficiency: several engagement files lacked evidence that the partner reviewed going concern assessments. What should the firm do next?

The firm should evaluate the severity and pervasiveness of the deficiency, investigate its root causes, and then design and implement remedial actions. ISQM 1 expects a structured response to monitoring findings, not waiting for regulators, punishing individuals or changing methodology without understanding the cause.

  1. ATake no action unless a regulator also reports the same issue
  2. BEvaluate the severity and pervasiveness of the deficiency, investigate the root causes, and design and implement remedial actionsCorrect
  3. CDismiss the team members who prepared those files
  4. DReplace the audit methodology across all clients immediately without assessing the cause

Explanation

ISQM 1 requires the firm to evaluate identified deficiencies for severity and pervasiveness, investigate root causes, and design and implement remedial actions that respond to those causes. Waiting for a regulator is reactive, dismissal is punitive and ignores root cause, and a blanket methodology change is not proportionate to the analysis required.

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