ACCA Strategic Professional · Advanced Audit and Assurance (International) · Other current issues
Roscoe Partners has a policy that audit partners are assessed and rewarded mainly on fee growth and new client wins. An inspection finds several partners cut review time to protect margins. Which ISQM 1 component is most directly undermined, and what is the appropriate response?
The weakness lies in governance and leadership, where ISQM 1 expects a culture that values quality and clear accountability. Rewarding partners mainly for fee growth encourages cutting review time. The firm should realign performance assessment and remuneration to quality and assign responsibility for quality to leadership.
- AInformation and communication; the firm should send more emails to staff about quality
- BGovernance and leadership; the firm should revise its culture and performance and remuneration processes so quality is prioritised, and assign accountability for qualityCorrect
- CResources; the firm should simply recruit more partners
- DMonitoring and remediation; the firm should stop all inspections to avoid conflict with partners
Explanation
Governance and leadership covers a culture that demonstrates commitment to quality, leadership responsibility and accountability, and organisational structure and resource allocation. Incentives that reward commercial results over quality conflict with this. The response is to realign performance evaluation and remuneration to quality. Recruiting or more emails do not tackle the incentive problem, and stopping inspections worsens it.
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