Compliance is key in a post-pandemic world
Claire Abrahamse, Quality and Risk Management (QRM) Partner at Mazars South Africa
The impact of Covid-19 spanned many facets of the business world. The policies and controls that prevent an auditing firm from taking on the ‘wrong’ clients or kind of work fall under our Quality and Risk Management (QRM) function, and the pandemic was able to teach us many valuable lessons about compliance in this regard.
The world was very different in 2020. For every going concern assessment for the entities that we audited, we needed to consider how the pandemic and lockdown restrictions would impact our client’s operations – and ultimately, whether we agreed with what was disclosed in their annual financial statements.
With November being National Quality Month, it provides opportunity for us to reflect on some of the quality and compliance issues we observed over the past few years, taking these learnings with us into the future.
Transparency – this was a key issue during the pandemic. Everyone has varying risks that they are exposed to in their line of business and it became clear that in order to remain transparent, all stakeholders needed to be considered when disseminating any financial information.
Control issues attached to remote working – with lockdown, many employees experienced stress and mental health issues linked to the new remote working environment. We saw that if our resources are not well-equipped to deal with the constraints and stresses this environment facilitates, certain controls that safeguard processes are at risk of being neglected.
Importance of quality in the services that we deliver – in a professional services firm, our stamp of quality is driven by our system of quality management. There is a need for experienced technical teams that support our business in navigating all the uncertainties, without negatively impacting the quality of our output.
Using the correct digital resources –the rapid move to a remote business environment, informed many decisions around resourcing. In this fifth industrial revolution, end-to-end compliance software should be a prerequisite, which allows for the integration of other software.
Determine the underlying cause and implement appropriate action plans – for any identified issues: This is an important step in the ambition to continuously improve quality. The International Standard on Quality Management (ISQM 1 and 2) needs to be a key focus for all audit firms.
The importance of on-the-job experience
Very often a new trainee who has just completed their studies will have a different approach to that of a more senior engagement team member. We, therefore, must encourage our teams to draw on the expertise of the technical departments, ensuring that they are on the right path when researching matters that relate to client audits.
Ongoing education around regulatory updates and developments is a necessity for our engagement teams, but on-the-job experience is equally vital, particularly for audit trainees. During lockdown, this practical training took a knock – trainees could not visit clients and thus were unable to pick up critical business and social skills. Now that we’ve returned to the office, we need to continue to incorporate and re-emphasise this on-the-job experience.
The pandemic’s impact on our policies
Policies and legislation are generally more difficult themes to educate teams around due to their technical nature. Lockdown necessitated moving our training sessions to digital platforms, which had various pros and cons, but one advantage is that this allowed a wider audience to access information. In this post-pandemic world, we need to find a balance between online and face-to-face training formats, to leverage the best of both mediums.
During the pandemic, there was a fundamental shift across the audit profession; the release of the International Standard on Quality Management, made up of ISQM 1, ISQM 2 and ISA 220 (revised). This has changed the way audit firms are looking at quality, and we’ve moved from a control-based to a risk-based approach. By mid-December 2022, all audit firms will need to have implemented their new system of quality management accordingly.
We have not returned to a pre-Covid world, but rather find ourselves in a post-Covid world. In order to safeguard our processes, we need to take the lessons of the past few years onboard, while ensuring full compliance with the International Standard on Quality Management.