Mandatory audit course

The mandatory Audit Course is a one day course, split into two separate sessions:-

•  Keeping your Audit File on the Right Track
   Keeping your Audit Firm on the Right Track 

Full details and booking arrangements for 2012 courses can be found in the Business Courses section of the ICAS website. 

Important Development in the Audit Monitoring Regime

Back in 2009, our regulator, the Professional Oversight Board ("the POB" - part of the Financial Reporting Council), conducted an analysis of monitoring outcomes across all of the Recognised Supervisory Bodies in the UK. The POB concluded from its analysis that the level of audit compliance in the UK should improve and tasked each RSB with analysing its own monitoring statistics and with producing a detailed action plan to improve compliance. Whilst the POB is satisfied that the current monitoring of ICAS is sufficiently robust, the POB wanted all UK bodies to focus on preventative measures i.e. how to ensure that firms improve in compliance before the monitoring visit and not as a result of a "wake up call" after a poor monitoring visit.

In our response to the POB we replied that ICAS did not fully agree with all of the POB conclusions regarding compliance, in that the majority of firms either have no follow up required after a monitoring visit or the follow up is restricted to a particular area of non-compliance (please refer to our previous publication Audit News 46A for more information on our five year monitoring statistics).

Only in a small number of cases are there more serious systemic issues requiring more widespread follow up or the imposition of serious conditions and restrictions of a firm's audit registration.

Nevertheless ICAS agreed that more could be done to improve audit compliance.

Having analysed all monitoring visits that resulted in follow up action, ICAS identified the following "themes": 

• a number of firms over the last three years are still failing to get to grips with some key elements of the ISAs on a practical basis, despite attendance at appropriate courses.
   
• a number of firms have over-relied on their audit procedures without necessarily understanding the requirements of the ISAs - through a lack of training and reading;
   
• there is a significant correlation between ISA failings and an ineffective Audit Compliance Review process i.e. most of the poorer visits reported ineffective Audit Compliance Review (ACR) processes;
   

• a significant number of the more serious reports result from inconsistent standards across the practice, including: 

  • different standards between RIs;
  • cutting corners, with small audits being treated differently from more sizeable audits; on cost grounds;
  • specialist audits being of a poorer standard from standard trading companies, due to a lack of tailoring of audit programmes and procedures;
    with these inconsistency of standards not being prevented by or even "policed" effectively by the Audit Compliance Partner (ACP), due to a lack of centralised quality control policies and procedures; 
   
• in the poorest of visits, cases of accounts preparation work not being converted into documented audit evidence;
   
• ethics issues of a straight forward nature (e.g. accounting services and long association) not being appropriately safeguarded due to a lack of knowledge of the requirements of the APB Ethical Standard requirements by those responsible for audit ethical compliance;
   
• poor "tone at the top" i.e. a lack of importance placed on audit quality; and
   

• in the very worst reports, there is usually some form of upheaval in the practice that exacerbated the poor performance, such as:

• partnership fall out;
• sole practitioner ill-health or family ill-health/bereavement;
• recent merger/acquisition of practice;
• key partners leaving;
• staffing/resourcing issues, 

which, whilst not always avoidable, could be mitigated against.

Given the themes arising above, it is clear that the effectiveness of the Audit Compliance Principal, the Audit Compliance Review process and the firm's internal quality control policies and procedures lie at the heart of audit compliance. It is also clear that the best "preventative" measure is education and training.

The Institute's Audit Registration Committee and Regulation & Compliance Board have therefore approved an action plan that requires every Audit Compliance Principal to periodically attend a mandatory audit course run by ICAS. In order to keep costs down: 

As the main aim is "prevention", this course applies to all Audit Compliance Principals and not just those with poor visit outcomes.

The aim of the course is to cover all audit compliance responsibilities, explain key regulatory issues and changes, and cover common compliance failings/ issues.

There are many audit courses available in the market place. However, this course is different in that it is presented by staff from the Institute's Audit Monitoring team. It is based on the monitoring team's significant experience gained from monitoring visits- in other words, straight from the "horse's mouth". This course also involves representatives from the Institute's Practice Review Service (PRS) who have significant experience of advising audit firms and conducting support services such as cold file review services. This also provides a valuable opportunity for firms to ask questions of the monitoring team and PRS and should help firms to prepare for future monitoring visits. The course is also aimed at fostering closer relationships between ICAS and the Audit Compliance Principals to ensure that Audit Compliance Principals are more fully supported in their roles.

As this course may also appeal to other audit principals and staff (especially for topics such as common ISA failings, the clarified ISAs, ethical issues), the course is also open to other audit professionals to attend at the standard ICAS course rate. It is also hoped that if Audit Compliance Principals find this course useful that they may choose to attend more frequently or that, in time, there could be other "spin off" training developed from this. The course clearly provides an opportunity for firms to provide ideas and feedback regarding future measures. It is early days and ICAS will carefully monitor the feedback from attendees to decide whether this approach works.

The course is run in a number of geographical locations throughout the UK. Attendance at this course will be monitored to ensure that Audit Compliance Principals meet the requirements. Audit Compliance Principals are advised not to wait until the latest time possible to attend this course, especially with the volume of clarified ISA changes just around the corner.

ICAS has also issued a detailed " Audit Compliance Principal " helpsheet aimed at further supporting Audit Compliance Principals in discharging their responsibilities.

Audit Compliance Principals are, of course, still advised to read each issue of Audit News as this is still the main delivery method for updating firms on technical and regulatory changes.

Whilst attending a course might sound like a pain, we do hope you understand that ICAS has not only been required to take preventative measures by its regulator but that the measures are aimed at "education and support" rather than at extending the monitoring process. By limiting the mandatory nature of the course to Audit Compliance Principals, rather than say Responsible Individuals, we have also tried to minimise the level of disruption to firms.