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Arrangements for achieving audit quality
We are in our third contract for external quality monitoring with the Quality Assurance Department (QAD) of the Institute of Chartered Accountants in England and Wales (ICAEW). QAD is the largest regulator of companies audit in the UK and the regulator of local government audit in England.
This has been an area of significant and ongoing investment through extending the number of accounts audits reviewed and introducing QAD review of our performance audit work.
In March 2024, we undertook a short stakeholder survey with audited bodies. This was designed to supplement the independent surveys we ran in 2023 which aimed at the general public and a range of other stakeholders. The overall messages are similar - our stakeholders value our independence, the quality of the work we do and our working relationships.
Cold reviews are reviews of whole audits to assess compliance with prescribed quality standards. They are carried out after the audit is finished.
We operate a rotational approach to cold reviews, ensuring that all audit managers are reviewed at least every three to four years. Similarly, each engagement director will normally be reviewed annually.
We aim to achieve representative coverage over time of audit sectors, audited bodies and complexity.
The QAD programme focused on accounts audits relating to the 2022-23 financial year and performance audit reports reported/completed in 2023 and early 2024.
We participate in a network of audit agencies from across the UK and Ireland. This includes an annual programme of peer review of some performance audit reports. We intend to use the results from these reviews as part of our work on updating our reporting templates and writing approach.
Themed reviews are unscored reviews of audit work which look at particular issues across several audits. All our themed reviews have been undertaken internally. These could focus on how effectively a new auditing standard has been applied in practice; an emerging issue being identified across the profession; or areas of interest or concern in Audit Wales. They are intended as learning exercises to identify if further training, guidance, or other support is needed.
Recent themed reviews have included evaluating a sample of audit of accounts files to understand how the revised approach for 2022-23 was being implemented. This informed the refresher training on the audit approach which was delivered in early 2024. The review identified some points which were consistent with cold reviews performed by QAD.
In 2023 we undertook a performance audit related themed review of information and data governance. This was an opportunity to understand current practice and identify key learning points. In 2024 we issued updated restricted folder guidance and an online training package to help auditors comply with data protection law.
Root Cause Analysis (RCA) is a collective term that describes a wide range of approaches, tools, and techniques used to identify the primary causes of outcomes.
Our aim is to build quality monitoring RCA activities into routine processes. To help determine our RCA approach and policy, we have:
Audit Wales’s policy is to undertake an RCA when external quality review scores an audit engagement as 3 or 4. In 2023 QAD scored one local audit as 3 (improvement required). We completed an RCA in January 2024. The RCA allowed the audit team (supported by an RCA facilitator) to reflect on the root causes of issues identified by the QAD review. This helped the audit team and AD&G to consider which issues were specific to the audit and which would be relevant to similar audits to develop appropriate actions. The process was undertaken in a supportive way, with a continuous improvement focus.”
EQRs are reviews of accounts audit files, or parts of audit files undertaken prior to the audit being completed. They are carried out by peer directors and may be required in several circumstances, such as where a new engagement lead is in place; where a qualified audit report is proposed; where the engagement lead requests a peer review of a technical or complex issue; or, where there was a quality issue in previous years. These reviews are not scored. Rather, they are carried out to focus on areas of risk and to allow any issues of concern to be resolved prior to the audit opinion being given.
The Audit Quality Committee was established in 2020 to strengthen our audit quality framework with a view to increasing the transparency of, and enhancing confidence in, those arrangements. The Committee – which meets quarterly in line with its work programme - is made up of:
The Committee’s specific objectives are to support us in ensuring that:
The Committee is specifically responsible for providing the Auditor General with assurance that appropriate resources are in place to support management, monitoring and improvement of audit quality in Audit Wales. This is achieved by the Executive Director of Corporate Services’ Independent Report, which forms part of this Audit Quality Report.
The Wales Audit Office Chair has agreed to act as a Board Quality Link to support the Board in developing a fuller understanding of our audit quality arrangements, of the challenges we face to achieving audit quality and to enhance the transparency of those arrangements.
We believe this role is an important component of our ambition to achieve continuous improvement in audit quality.
The current quality arrangements in place in Audit Wales reflect the strong emphasis that the Auditor General and his Executive Leadership Team place on the quality of work produced. As Chair of the Quality Committee, I have been hugely impressed with the level of commitment and dedication demonstrated by the staff in delivering high quality audit work. The high standard that Audit Wales holds itself to applies equally to both financial audit and performance audit and this is evidenced by the results reported to the Committee and recorded in this report.