By: Joelex Cortes, CPA
The world has been changing a lot and it is a challenge that poses either a threat or opportunities in the present and future days to come. The business perspective is no exception. Since the financial statements are the product of business operations and business transactions evolve dynamically, then there is a real need for the quality of the assurance represented through the reports attached on these financial statements.
Reliance on the assurance reports of the business owners and its third party-users for business decision-making purposes is proof that the confidence level entrusted to CPAs is their way to achieve favorable business outcomes. To set this confidence unwavering, Quality Assurance Review (QAR) gives way to the accountability and responsibility enshrined in the assurance services provided.
QAR Inspection Program in the Philippines implementation was formalized by a resolution : “Revised Rules and Regulations for the Conduct by the Professional Regulatory Board of Accountancy of Oversight into the Quality of Audits of Financial Statements and Operations of CPA Practitioners” issued on December 4, 2015. In line with this, all the CPAs engaged in the public practice, whether a sole practitioner or professional partnership, are mandatory to go under QAR Inspection Program. The CPAs in public practice must have a system quality management which deals with a firm’s responsibilities to design, implement and operate a system of quality management for audits or reviews of financial statements, or other assurance or related services engagements. The bottom line is, producing a good quality report on the assurance services provided will be evaluated and determined through this QAR Inspection Program.
The systems of quality management must be in compliance with the International Standard on Quality Management (ISQM) and are required to be designed and implemented by December 15, 2022. Moreover, the evaluation of the system of quality management required by paragraphs 53–54 of the ISQM is required to be performed within one year following December 15, 2022. All CPAs in public practice must comply with each requirement of the ISQM unless the requirement is not applicable to the firm due to the nature and circumstances of the firm and its engagement. To state exceptions as per PSQM1 of the AASC adopted from par. A29 of IAASB-ISQM1 :
- The firm is a sole practitioner. For example, the requirements addressing the organizational structure and assigning roles, responsibilities and authority within the firm, direction, supervision and review and addressing differences of opinion may not be relevant.
- The firm only performs engagements that are related services engagements. For example, if the firm is not required to maintain independence for related services engagements, the requirement to obtain a documented confirmation of compliance with independence requirements from all personnel would not be relevant.
As the business world is navigating to more unprecedented transaction events and standards and interpretations alongside are also issued, the same applies also to the QAR procedures which evolves to meet the need of its objectives. Thus, the same will put a lot of pressure on CPAs to be relevant on recent business affairs, development and standard guidelines as to the applicability of assurances provided, its documentation dealing with its assurance quality processes reflecting on the final report.
Undeniably, the implementation of the Quality Assurance Review will entail costs and a lot of preparation for those firms in public practice. Unarguably, the successful implementation of the QAR will not only benefit the firm and its clients, but also the investors on considering capital influx in the country and at least not to say, the government in assisting for economic recovery and development to the welfare of its citizens . This QAR has an eye on long- term benefits that can pay-off the efforts that are to be done at present and be rewarded in the future.
To end, nothing is lost more than what this QAR can promise to play it forward toward a sustainable future. A fair question to put this writing on end, will the firms in public practice be able to keep up with the implementation requirements until December 15, 2022 target? This deadline is the ultimate inspiration of what we will still do at the present time to amp up the quality underneath the assurance services provided that is reflected on the assurance report issued. Not just the paper, but the quality as a whole.
Joelex is an Audit Senior In-charge of GPP CPAs,
handling various clients from BPOs, Pharmaceutical and other industries.