Quality reviews: Don’t fear them, embrace them
For some practitioners, the prospect of a formal quality review can seem intimidating, but in reality, the process is specifically designed to improve the health of a practice and to better protect clients.
Megan Breen | March 2020
As a public practitioner, chances are that you have been through a quality review with CPA Australia. Although a mandatory obligation, it is also an opportunity to review your files and check compliance with current professional standards, which are regularly updated.
Every year, the top 10 common breaches for both audit and non-audit engagement are listed on CPA Australia’s website. These can range from not having an adequate audit plan to not providing a letter of engagement for clients.
Documenting policies and procedures to ensure good quality management systems and managing risk and reward is important for growing your business. Ensuring compliance with APES 320 (quality control manual) and APES 325 (risk management framework) provides valuable services to your client. In 2019, CPA Australia developed two essential tools for members to use in growing their business.
The APES 320 tool helps you develop a quality control manual. Documenting your policy and procedures improves efficiency and makes compliance easy. The APES 325 tool builds your risk management framework, identifying and mitigating risks to your business.
One of the most common breaches is the inadequate implementation of APES 305 Terms of Engagement, says quality reviewer and Melograna Business Services director Morena Melograna-Bernleitner FCPA.
“Letters of engagement are often missing,” Melograna-Bernleitner notes. “Members often have had long-standing relationships with clients and haven’t had the Terms of Engagement formalised. It’s an essential document to have in your files. It protects not only the member but also the client.”
Another common breach is when an accounting standard’s number has changed and documents haven’t been updated by the software provider, adds quality reviewer and Mogg Osborne principal Peter Mogg FCPA.
“If the [Australian Accounting] Standards Board changes the number of an accounting standard, which [it] did a few years ago when [it] changed APS 9 to APES 315, you need to make sure you update it in the financial compilation agreement generated by the software.
“Another breach a lot of people make is when they change offices,” Mogg continues. “They may forget to update their registered office consent register.”
Quality reviewer Mark Ault FCPA, principal at ARMOR Accountants Risk Management Operational Resources and also Aults Accounting & Tax, says practitioners are advised by CPA Australia via email when a professional standard changes, which provides the opportunity for them to update their records. The Accounting Professional and Ethical Standards Board (APESB) website is also a useful resource.
“A recent example is APES 325, which was updated to include documenting a practice’s succession plan,” Ault says. “While this has been discussed on numerous occasions, we are still finding it is sometimes omitted from documentation. Succession issues are very important for all practices, irrespective of their size.”
The APES 325 tool developed by CPA Australia is regularly updated to ensure it aligns with updates to the Standards. Using the tool to regularly update your risk management framework will ensure you are always compliant with the latest standard.
It is also important to identify accurate processes in your quality control manual, which reviewers will be able to see evidence of, Ault emphasises.
“Sometimes, there are inconsistencies on the day-to-day approach for work papers, compared to how the manual stipulates they should be prepared.
“If your manual says you have checklists on file, then as a reviewer we are looking to see if the checklists are within the client files [and] we are going to ask for them.”
For those undergoing a review for the first time, the process might seem daunting, Melograna-Bernleitner concedes. However, she also says that reviewers are there to provide guidance to give members a chance to look at their practice.
“Most practitioners are busy working in the practice, rather than on it and thinking about what they are missing or lacking,” she says. “The QA [question and answer] process allows you to go away and think about your quality control and see if there is anything you need to assess or redo.”
“For example, when you started out you may not have had staff and now you do. You would have to think about the requirements around human resources and make sure you have complied with the standards around this.”
There is a lot of information on the CPA website on how to prepare for a review, Mogg notes.
“There are online tools and a video that walks you through the process. I always tell the people I review that it is an educative process – the reviewers don't know everything and the members don't know everything, but between the two of us, hopefully, at the end of the review, we've got a better quality control system in place than at the start.”
How to prepare for your review
Morena Melograna-Bernleitner FCPA: I always tell people not to be afraid. The process is constructive and is an educational opportunity – anything that is found can be fixed. We are there to help improve the quality of their files and make sure public practitioners reach the standards that CPA Australia expects.
Peter Mogg FCPA: Don’t panic. The reviewer's job is designed to educate people so that once they've gone through the review process, the health of their practice is in a better position and their clients are protected.
Mark Ault FCPA: Do your research and get in touch with your quality reviewer as soon as possible. The earlier you start the process the more opportunity you will have to be able to review your files and processes and ask any questions. Reviewers are happy to help and assist.