FOCUS ON DATA CULTURE
quality management: RISK ASSESSMENT By Ross H. Roye, CPA
T
he Quality Management Standards affect every firm with an audit or accounting practice, not just firms that have a peer review. Every firm performing engagements in accordance with the SASs, SSARSs and SSAEs must adopt the standards. Te old Quality Control Standards will remain in effect for your firm until your firm has adopted the Quality Management Standards. Early adoption is permitted, but you have to adopt the entire suite of standards. You need to read the standard.
Download the standard and print it for reference as you read this article. Tis article will be more technical due to the space restraints in this edition of the FOCUS. Your firm’s system of quality management is meant to operate continually and in an iterative manner. Te system must be responsive to changes in the nature and circumstances of your firm as a whole and at the engagement level. Tose who have ultimate responsibility for the firm’s system are required to have an understanding of the SQMS to understand the objectives of the SQMS and to apply the requirements properly. Your system needs to address these eight components listed below and may need to address more:
14 CPAFOCUS July/August 2023
Te firm’s risk assessment process i. Governance and leadership ii. Relevant ethical requirements
iii. Acceptance and continuance of client relationships and specific engagements
iv. Engagement performance v. Resources vi. Information and communication
vii. Te monitoring and remediation process
viii.SQMS 1, par. 8, requires a risk-based approach in designing, implementing and operating your system in an interconnected and coordinated manner to proactively manage quality of engagements you performed.
As you go through the risk assessment process, you may find relationships between components. One example given in the standard is certain aspects of relevant ethical requirements are relevant to accepting and continuing client relationships and specific engagements. Definition can be found in par. 17.
Please review the definitions for reasonable assurance, quality objectives and quality risk before you continue. SQMS 1, par. 18: “Te firm should comply with each requirement of this SQMS unless the requirement is not
ROSS H. ROYE, CPA, is a shareholder of Gray, Blodgett & Company, PLLC, and has been with the firm since 2006. He currently serves as the chair of the OSCPA Peer Review Committee. Roye has previously served on the OSCPA board of directors as an at-large director, as well as the Society’s New CPA, Financial Literacy and the Accounting Careers Committees. He was honored as an OSCPA Trailblazer in 2012. Roye is a Past President of the OSCPA’s Norman Chapter and was selected as the Chapter’s Distinguished CPA in 2014.
The path to
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