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Raising the quality of audit bar

FOUR months before the implementation of the three new auditing standards, certified public accountants (CPAs) in public practice are preoccupied in adapting to new quality framework standards. These include PSQM1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements; PSQM2, Engagement Quality Reviews; and PSA 220 (Revised), Quality Management for an Audit of Financial Statements.

The extant PSQC 1 is known for its checklist type of framework, with most of the quality manual content seemingly lifted from references found through a search engine. In contrast, PSQM 1 is more engaging due to the mention of processes that thoroughly evaluate the different aspects of a firm. It is also more flexible since the framework can be better suited to a firm's specific situation. However, shifting from the outgoing framework to a new one entails different tasks such as designating persons responsible for the System of Quality Management as well as its operational functions.

During a PSQM workshop of the Acpapp Academy, questions regarding the relevance of learning a PSQM framework were raised. Faculty members maintained that it was important to learn about and adopt the framework since it would allow firms to realize their capabilities as a collective and reevaluate existing operations.

In a world full of volatility, uncertainty, complexity and ambiguity, the response fostered by PSQM 1 allows certified public accountants to possess a different kind of VUCA: vision, understanding, certainty and agility. This was exemplified by a senior citizen from Cebu who participated in onsite activities in Makati with much enthusiasm.

However, there remains valid practical implementations such as the lack of human resources and competition with BPO companies. Implementation will also need sufficient financial resources for training, hiring of additional personnel and maybe office renovations. Another concern is the imminent implementing period since the standards are very new and need to be carefully studied.

PSQM 1, PSQM2 and PSA 220 (Revised) are auditing standards that will raise the audit quality bar. These standards have a holistic approach that level the playing field for all audit firms regardless of size. The best response is to embrace the systems of quality management because they will not only define our practice but also ultimately the future of our profession.

Cesar Faustino R. Ravalo Jr., CPA, DPPA, CRA is a member of the Association of Certified Public Accountants in Public Practice and currently the chairman of the Acpapp Academy. He is also a partner of PR Ramoso & Co., CPAs. The opinion of the writer does not reflect in any way those of these institutions.

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