How we achieve audit quality

Audit Quality Report 2024

Expectations of audit quality continue to increase.

High quality audit requires committed teams who take personal responsibility for achieving audit quality and who are supported in the right way. Our relentless focus on transparency, accountability and continuous improvement reaffirms our dedication to fostering trust and confidence in our audit services.

International quality management standards place great emphasis on integrating audit quality into our culture, strategy, operational activities, and all business processes.

We must create an environment that enables and supports teams to perform high quality audits. Therefore, we need to be proactive in responding to changes in the nature and circumstances of Audit Wales and our audits.

 

Our three lines of assurance model

We use a three lines of assurance model to demonstrate how we realise our commitment to audit quality.

The first line of assurance is formed by our staff and management who are individually and collectively responsible for achieving the standards of audit quality to which we aspire. They need to have the necessary knowledge, skills, and support to do this.

Selection of right team

Having the right staff with sufficient time to undertake audit work is critical to achieving audit quality. It is equally essential that staff adopt a questioning and sceptical approach and accept personal responsibility for the quality of their work.

Use of specialists

There will be occasions where aspects of our work involve highly specialist areas. In these instances, we engage with suitably qualified external experts to provide additional support for our work.

Supervision and review

For all accounts audit work, an engagement lead is responsible for the overall direction of that work. In performance audit, these responsibilities are usually carried out by the person assigned as second reviewer, a director or manager.

The second line of assurance is formed by the policies, tools, learning and development, guidance, and leadership we provide to our staff to support them in achieving those standards of audit quality.

Audit platform

We use bespoke Microsoft 365-based systems for all our accounts, grants, and performance audit work. Our platforms support consistency of audit approaches and provide inbuilt quality checks.

 
Guidance

An important component of achieving audit quality is establishing standardised approaches to carrying out our work.

 
Learning and development

We continue to invest heavily in learning and development to enhance the professional skills and knowledge of our staff.

 
Technical support

Our Audit Development and Guidance team (AD&G) provide expert guidance and advice on technical and professional issues and, with our HR team, support the learning and development of our audit teams.

 
Ethics

Through the Auditor General’s Code of Audit Practice, we adopt and apply the Ethical Standard issued by the Financial Reporting Council.Our Code of Audit Practice and our staff Code of Conduct reinforce the importance of independence and objectivity.

 
Culture

Our culture is one committed to continuous improvement and to supporting our staff to achieve that improvement, through learning and development and our performance management arrangements.

Leadership

The Executive Director Audit Services is responsible to the Auditor General for the quality of all our audit work, including that performed by Audit Wales staff and external contractors. She ensures that audit quality is at the forefront of what we do.

The third line of assurance is formed by those activities that provide independent assurance over the effectiveness of the first two lines of assurance and help to identify opportunities for continued improvement.

EQRs

Engagement Quality Reviews are reviews of accounts audit files, or parts of audit files undertaken prior to the audit being completed.

 
Cold reviews

We are currently 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).

 
 
Peer review

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.

 
 
External monitoring

We are currently 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).

 
 
Themed reviews

Themed reviews are unscored reviews of audit work which look at particular issues across several audits.

 
 
Root cause analysis

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.

 
Audit Quality Committee

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.

 

Implementation of International Standard on Quality Management (ISQM1)

ISQM 1 deals with a firm’s (including Audit Wales’) responsibilities to design, implement and operate a system of quality management for audits.

The ISQM 1 components, broadly reflect the elements of our three lines of assurance model.

ISQM 1 requires us to annually evaluate the effectiveness of the system of quality management. Our evaluation was informed by various activities, including risk assessment workshops, monitoring our risk registers, the outcomes of audit file quality reviews, root cause analysis exercises and consultation with AD&G on audit issues.

Our overall conclusion was that:

“The system of quality management provides the firm with reasonable assurance that the objectives of the system of quality management are being achieved.”

This conclusion was reported to the Audit Quality Committee and Executive Leadership Team in early 2024.

While our overall evaluation was that our SoQM provided ‘reasonable assurance’ that its objectives were being achieved, there were some areas where development was required, and actions are in progress. Principal amongst our finding is embedding the standard as ‘business as usual’ rather than being managed as a separate exercise.

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. Suzanne Jones, Director, Northern Ireland Audit Office and Chair of Audit Wales' Quality Committee

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