ISQM 1 Audit Risk Assessment - Quality via Culture

ISQM 1 Audit Risk Assessment -Quality via Culture

ISQM 1 Audit Risk Assessment Part 3

How the Firm Demonstrate a Commitment to Quality through its Culture?

Embedding a commitment to quality throughout the firm may be achieved through the following actions :

1. Tone at the top

ISQM 1 deals with the tone at the top through the various requirements across ISQM 1 addressing leadership:

• The requirements that specify the responsibilities that need to be assigned, and who these need to be assigned to;

• Leadership’s responsibility for understanding ISQM 1;

• Leadership’s responsibility and accountability for quality;

• Leadership’s responsibility for evaluating and concluding on the effectiveness of the SOQM; and

• Leadership’s performance evaluations.

Examples of other actions leadership may take in addition to addressing the requirements above

• Establishing trust through consistent, regular and open communication.

• Providing transparency within the firm about actions to address quality, and the effectiveness of those actions.

2. Commitment to quality by all personnel

ISQM 1 deals with the actions and behavior of personnel and their commitment to quality through the following quality objectives:

• Reinforcing the responsibility of all personnel for quality relating to the performance of engagements or activities within the SOQM, and their expected behavior; and

• As part of resources, personnel being expected to demonstrate a commitment to quality through their actions and behaviors, develop and maintain the appropriate competence to perform their roles, and being held accountable or recognized through timely evaluations, compensation, promotion and other incentives.

Examples of other actions that the firm may take to address personnel’s commitment to quality

• Establishing a code of conduct.

• Defining how quality will be measured and incorporating quality-related measures in personnel evaluations, with associated effects on compensation and promotion.

• Establishing developmental opportunities for personnel that reinforce quality.

3. Embedding quality in the firm’s strategic decisions and actions.

Quality management is not a separate function of the firm. To be effective, a culture that demonstrates a commitment to quality needs to be integrated with the firm’s strategy, operational activities and business processes.

ISQM 1 includes a quality objective addressing the firm’s strategic decisions and actions, including the firm’s financial and operational priorities, that need to recognize quality.

Strategic decisions and actions may include the firm’s business strategy, financial goals, how resources are managed, growth of the firm’s market share, industry specialization or new service offerings.

Example of how to embed quality into the firm’s strategic decisions and actions

• Defining the purpose and values of the firm, and ensuring that these recognize quality.

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