New Standards of Quality Management in Audit. The Risk-Based Approach

The article proves that auditing is a socially significant activity. Therefore, the auditor must ensure the validity of his opinion, which is achieved through ensuring the quality of audit procedures at all stages. Failure to ensure the quality of audit tasks is a reason to mislead users of financial statements of enterprises and auditorsʼ conclusions, does not warn users about financial problems and the possibility of bankruptcy, especially in socially significant companies. From December 2022 on the audit, quality control of audit services are waiting for radical changes in quality management. The article highlights the results of a study devoted to new requirements to quality management in auditing firms, resulting from the enforcement of the new standards: ISQM 1 “Quality Management”, ISQM 2 “Engagement Quality Reviews”, and the revised ISA 220 “Quality Management for an Audit of Financial Statements”. The design of a quality management system at firm level is considered in ISQM 1, including building up an organization system for management of audit quality, creating the essential conditions for performing audits. This standard will be enforced in place of the existing ISQC 1“Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements”. The new quality management system includes the following components: the risk assessment process of the audit firm; management and leadership, ethical requirements, acceptance, continuation of customer relationships and specific tasks; resource; performance of tasks; information and communication; monitoring and sanctions. ISQM 2 “Engagement Quality Reviews” specifies the requirements to reviewers of the quality of performed audit engagements. A quality reviewer is required to have knowledge and understanding of professional standards, current legal and normative acts, and understanding of firm’s policies or procedures used in the process of engagement performance; knowledge of the industry of a company to which audit services on engagement performance were provided; the professional experience in evaluations of scopes and complexity of the performed engagements, the professional qualification for quality evaluations of the engagement performance, including the firm’s obligation for providing this qualification. The abovementioned requirements cause the need in additional studies aimed at elaborating new schemes for actions and inclusion of engagements in job descriptions of quality reviewers.