Designing & Implementing Responses The nature, timing, and extent of responses should be based on the reasons for the assessments given to the quality risks. Your firm’s current quality control policies and procedures are a good place to start when designing and implementing responses. Based on the identified quality risks, map your current controls or, as SQMS No. 1 calls them, “responses to quality risks.” Modify the policies and procedures as necessary to appropriately respond to the identified quality risks. Perform a gap analysis to identify quality risks without appropriate responses and responses without corresponding quality risks. Then, evaluate whether all quality objectives are appropriately addressed and determine whether all specified responses from paragraph 35 in SQMS No. 1 have been included. Based on the gap analysis, create new policies or procedures to address quality risks, as needed, and consider eliminating any policies or procedures that are not effective. TIPS, TRAPS & INSIGHTS BY COMPONENT Most of the necessary components are not new to your firm’s system of quality control, but when your firm transitions to a system of quality management, you will need to consider new and more robust requirements during implementation. Governance & Leadership The governance and leadership component, commonly referred to as the “tone at the top,” is not a new element of firm quality control, but the new quality management standards have more robust requirements. There is a focus on the firm’s environment and culture that supports quality, including an expectation that leadership will demonstrate a commitment to quality and that the firm will deploy resources consistent with its commitment to quality. Engage with your firm’s staff and discuss the following: How does your firm assign individuals to engagement teams? Does your firm have a tracking mechanism to ensure personnel, including partners, have the competence and capacity, including time, to complete their assigned roles? When making strategic decisions, how does the firm account for audit and accounting quality? Does your firm clearly inform all personnel of their responsibilities to the system of quality management? Relevant Ethical Requirements Under this updated component, the firm is required to specify an individual who is responsible for ensuring compliance with independence requirements. This individual will need the right knowledge, skill, ability, capacity, and authority to address these issues—not just be a senior person in the firm. Joe Lynch, CPA, managing director at Johnson Global Accountancy and AICPA Quality Management Implementation Task Force member, suggests firms consider these questions as they explore how to adapt current processes: How is your firm dealing with relevant ethical requirements now, and will you need to make changes to comply with the quality management standards? Do you have a system in place for personnel to report any violations? Do you have someone in your organization who is an expert on applicable independence and ethics rules and can take on this role? If your firm hasn’t started the transition from a system of quality control to a system of quality management, you’re late to the game, but you still can finish on time. CONTINUED FROM PAGE 17
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