Findings

Low audit quality work performed on engagements is one of the root causes of practice review failure. Low or poor audit quality work is associated with sub-standard work performed by auditors resulting in non-compliance with auditing and accounting standards and legal requirements. This may be due to a weak or lack of understanding of the client’s business or international auditing and accounting standards.

Inadequate implementation of the elements of ISQC 1, which pertains to the internal control system in the firm, is also another cause in practice review failure. Sole-proprietorships mistakenly assume that ISQC 1 is not applicable to them due to their size and therefore have not set up proper policies and procedures to strengthen their internal control and governance of their practices.

The lack of documentation in the audit working papers of a majority of audit firms continues to be an issue which have not been properly addressed by practitioners. While standard audit programmes are in use by audit firms to achieve consistency in their work, the practitioners have not ensured that audit tick marks in the boxes of the audit programmes are sufficiently and appropriately supported by working papers to evidence work done. Inevitably, there is no cross-referencing between the audit programmes and the audit working papers. This is an example of the weaknesses of practitioners who maintain that they do not know how to implement ISQC 1 in their firm.

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To improve the audit quality of audit firms which failed practice review for the first time and therefore will be reviewed for a second time in a follow-up review, the MIA has designed remedial programmes that covers audit of key areas and ISQC1 which are aimed at enhancing audit quality of practitioners at all levels.