1. Quality Management (Firm Level)
Karin French, Quality Control Task Force Chair
IAASB Meeting, New York
Agenda Item 5
June 21, 2018

2. Structure of the Standard
March 2018 Draft
Proposed new Structure
Governance and leadership
Quality risk assessment process
Information and communication
Relevant ethical requirements
Acceptance and continuance of client relationships and specific engagements
Resources
Engagement performance
Monitoring and remediation process
Firm’s risk assessment process

3. Structure of the Standard
Paragraph References for IAASB Discussion
Requirements: 6 – 6B
Question 2:
The IAASB is asked to share its views regarding:
(a) The proposed reordering of the components in proposed ISQC 1 (Revised).
(b) How the quality risk assessment and the components have been described in paragraphs 6–6B of Agenda Item 5–A, including whether the interconnectedness of the components is clear.

4. Question: Are Quality Risks Required for All Prescribed Reponses?
Option A: The firm is required to identify quality risks for all of the required responses (essentially “backfilling” the quality risks)
Establish quality objectives
QO A
QO B
QO C
Identify quality risks
QR A
QR B
QR C
QR D
QR E
QR F
Design and implement responses
Resp. B
Resp. A
Resp. D
Resp. C
Resp. E
Resp. F
Resp. G

5. Question: Are Quality Risks Required for All Prescribed Reponses?
Option B: The firm does not need to have a related quality risk for every required response, i.e., there are some responses that the firm merely implements)
Establish quality objectives
QO A
QO B
QO C
Identify quality risks
QR A
QR D
QR E
QR F
Design and implement responses
Resp. B
Resp. A
Resp. D
Resp. C
Resp. E
Resp. F
Resp. G

6. Examples of Quality Risks for Prescribed Reponses for Monitoring and Remediation
Prescribed Response
Example of a Related Quality Risk
The firm shall determine the nature, scope and frequency of the monitoring activities, including the appropriate combination of ongoing or periodic monitoring activities, taking into consideration:…
The scope of the firm’s monitoring activities are inadequate to support the evaluation of the design, implementation and operation of the components of the system of quality management
The firm shall design and implement monitoring activities to determine whether the responses designed by the firm that are required to be implemented at the engagement level have been implemented…
The nature of the firm’s monitoring activities are not designed in a manner that enables the firm to determine whether its responses have been implemented at the engagement level
The firm shall investigate the root cause(s) of the deficiencies, through performing procedures whose nature, timing and extent are based on the nature of the deficiencies and their possible severity.
The firm’s remedial actions do not appropriately address a deficiency.

7. The Firm’s Risk Assessment Process
Paragraph References for IAASB Discussion
Requirements: 18A – 19D
Question 3:
The IAASB is asked to share their views on the changes proposed in paragraphs 18A–19D of Agenda Item 5–A, including whether the IAASB:
(a) Agrees with the QCTF’s conclusion that the standard should be more explicit that the quality objectives are all-inclusive, and reduce the focus on the need for the firm to identify additional or more granular quality objectives.
(b) Is of the view that the firm is expected to identify quality risks for all prescribed responses, as explained in paragraph 21.

8. Monitoring and Remediation
Paragraph References for IAASB Discussion
Requirements: 44 – 58
Question 4:
Does the IAASB agree with the revisions to the monitoring and remediation component in paragraphs 44–58 of Agenda Item 5–A?
Question 5:
Do the proposed revisions to paragraph 57 of Agenda Item 5–A clarify the expectations of firm leadership in evaluating the SOQM, and are these expectations reasonable in the context of the responsibilities of firm leadership?

9. Introduction of ISQC 1 (Revised)
Paragraph References for IAASB Discussion
Requirements: 2A – 7
Question 1:
The IAASB is asked to share their views regarding:
The purpose statement in paragraph 2A of proposed ISQC 1 (Revised), including the appropriateness of referring to the spirit of professional standards.
The revisions to the introductory material addressing the role of professional judgment in the context of an SOQM (see paragraph 5 of Agenda Item 5–A).