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Presentation on audit

quality management
system - ASOSAI
research project by
R.N. Ghosh
SAI India
7
th
ASOSAI Research Project

AUDIT QUALITY
MANAGEMENT SYSTEM
(AQMS)
Background

The 7th ASOSAI Research Project
on Audit Quality Management
System approved in 33rd
Governing Board Meeting of the
ASOSAI held in Manila in October
2003.
Background

The objective of the project
was to provide specific
guidance to member SAIs in
establishing an audit quality
management system.
Background

7 members opted to be the
members of the research project
Bangladesh, China, India, Malaysia,
Pakistan, Philippines and Yemen,
with India chosen as the team
leader.


Background
The model for the 7th Research Project, to be
completed in 4 phases

The phase I of the project - compiling prevalent audit
quality management practices, both in private and
public sector auditing.

In phase II, Draft Audit quality management
guidelines - prepared based on the findings from
phase I.

Presentation of Interim Report to Governing Board at
in December 2004.
Background
During the phase III in 2005, audit quality
management guidelines were to be piloted
in a few SAIs,.

In phase IV during 2006, the lessons from
phase III are being reviewed & a final
document would be prepared & presented
to 36th Governing Board & the 10th
Assembly of ASOSAI in September 2006.

Board Actions 34
th
Governing
Board of ASOSAI in Dec 04
Approved the Draft Guidelines on
AQMS
Endorsed Phase III Strategies for
implementation of the project
Called upon Phase III implementing
SAIs to accord high priority to the
Project
Milestones for the Research Project
Interim review of the progress at 35
th

Meeting of the GB took place in
September 2005

Phase III of the Research Project
completed in December 2005
Methodology
The team carried out a wide search of
the best practices for audit quality
management in
SAIs
Private sector auditing firms
Publications of professional Institute

Compilation of best practices
documented separately
AQMS Guidelines
The team identified policies, practices and guidance
relating to the management processes that are present
in SAIs:

a) Leadership and Direction
b) Human Resource Management
c) Audit Performance
d) Client and Stakeholder Relations
e) Continuous Improvement

AUDIT QUALITY MANAGEMENT SYSTEM revolves around
these management processes
AQMS Guidelines
These policies, practices and guidance
are contained in the six chapters
which constitute these guidelines.

Compliance with the guidelines would
provide reasonable assurance that
the SAI conducts its audits to ensure
high quality & meet stakeholders
expectations.
AQMS Guidelines
The guidelines have been designed
for ensuring compliance with auditing
standards, in particular the INTOSAI
auditing standards, applicable
legislative requirements and the
office policies of the ASOSAI
members.


Need for Quality


Quality has been defined as the totality
of features and characteristics of a
product or service that bear on its ability
to satisfy stated or implied needs.


Audit Quality Management
In public audit, quality management
involves a system composed of an
organisation, the Supreme Audit Institution
(SAI), its people the auditors and the
audit process, all working together to
produce outputs that fulfill the
requirements of its stakeholders and the
general public.


AQMS
Each component of the Audit Quality
Management System (AQMS)
structure, people and process aims
towards customer satisfaction (in the
context of the SAI, its clients and
stakeholders), which is always the
bottom line of any organisation



Quality Management Principle
The quality management principle is the
conceptual underpinning of AQMS.

It is a comprehensive and fundamental
rule or belief for leading and managing an
organization, aimed at continually
improving performance over the long term
by focusing on the clients while addressing
the needs of all other stakeholders.
AQMS
It is essential to have in place quality
management, assurance and control
policies and procedures in audit
organizations
The SAI should ensure that these
policies and procedures are subject to
review mechanism

AQMS
SAIs Quality Management System should
be designed to provide reasonable
assurance in the light of the likelihood and
magnitude of potential risks, that it
conducts the audits, both regularity and
performance, in accordance with the
applicable legislative requirements, rules
and regulations, Standards, policy manuals,
guidelines and procedures.
Quality Continuum
Quality Control

The initial understanding of quality
control was compliance to
specifications and the quality
control task was to identify and
remove defects, achieved mainly
through some form of
measurement and inspection
activity.

Quality Control


Responsibility for quality was not
with line functionaries, but was
vested with separate staff
departments.



Quality Control
Quality a technical rather than a
managerial function.

The requirements applicable to the
day-to-day management of audit
assignments

Quality control is product-centric.

Quality Continuum
Quality Assurance

Quality Assurance is understood as
planned or systematic actions
necessary to provide adequate
confidence that a product or service
will satisfy given requirements for
quality
Quality Assurance

Policies, systems and procedures
established by SAIs to maintain a
high standard of audit activity.

Quality Assurance is process centric

Quality Continuum
Quality Management

Quality Management System (QMS) is
a broader concept which comprises
the organizational structure,
procedures, processes and resources
needed to implement quality
management.

Quality Management
It involves all processes in the operational
life cycle of a service that affect quality,
from initial identification of clients needs to
final satisfaction of requirements.

It is designed to provide confidence to
clients and stakeholders that requirements
for quality will be achieved in delivered
services.

Quality Continuum
Total Quality Management

Total Quality Management (TQM) is a
total, organization wide effort
through full involvement of the entire
workforce and a focus on continuous
improvement that organizations
use to achieve clients satisfaction.

Quality Continuum - Total Quality
Management

TQM is a comprehensive managerial
philosophy and is a system of
unyielding and continually improving
effort by everyone in an organization
to understand, meet and exceed the
expectations of clients at continually
lower cost.

Quality Continuum

These AQMS guidelines are based
primarily on quality management
system principles. However, they
contain several significant elements
of total quality management.
Quality Control in the Audit Process
Quality control is operational
techniques and activities during audit
processes of planning, execution and
reporting.
Quality control is a process in the
course of which an SAI intends to
fulfil quality requirements.
Quality Control Characteristics

Quality to be built into the audit process
rather than relying on post audits or
checklists

Responsibilities for each player in the
control process be clearly defined

An efficient control process be put into
place for effective implementation of
AQMS;

Quality Control Characteristics
Controls should be result focused;

Too many controls result in no control;

Practitioners of the AQMS should
participate in the continuous evolution
of the control framework.


Quality Control in the Audit Process


Quality control consists of all
measures and procedures carried
out within the audit process to
guarantee the quality of audit work
and of the resulting report.

Quality Control in the Audit Process
Quality control in the audit process
provides reasonable assurance
that:
the audit has examined significant
matters; and
that the results of the audit,
contained in the audit report, are an
accurate reflection of the true
conditions of the matters under
consideration.


Quality Control in the Audit Process
For AQMS, laying down quality control
policies, procedures and measures is
the first pre-requisite

Detailed guidelines and checklists
could be prepared by SAIs to ensure
quality control in planning, execution
and reporting of audit

Quality Management
Quality Management encompasses both
Quality Control and Quality Assurance

Quality Management goes beyond quality
control in audit processes to include
Leadership & Direction
Human Resource Management
Audit Performance
Client & Stakeholder Relations
Continuous Improvement

Audit Quality Management System
for ASOSAI member nations
Leadership and Direction
Human Resource Management
Audit Performance
Client & Stakeholder Relations
Continuous Improvement
Audit Quality Management
System
Leadership and Direction
Tone at-the-Top
Vision, Mission, Core Values and
Auditing standards
Strategic Direction & Planning
Strategic Audit Planning
Portfolio and Risk Management
Audit Quality Management
System
Human Resources
Resourcing and recruitment
Training and capacity building
Performance Management &
appraisal
Personnel Welfare & Benefits

Audit Quality Management
System
Audit Performance

Audit Planning
Staffing for the audit
IT Tools
Other Tools & Guidance
Audit Quality Management System
Audit Performance

Conducting the Audit

Consultation & Advice

Evidence & Documentation

Supervision and review

Reporting & Follow-up

Audit Quality Management
System
Client & Stakeholder Relations

Communicating Audit messages

Feedback from Clients and
Stakeholders

Relationship between legislative
Committees & SAI
Audit Quality Management
System
Continuous Improvement
Internal Audit
Internal Quality Assurance Review
Peer Review
Lessons learned
Other inputs to Continuous
Improvement
Monitoring progress and assessing
impact
Internal Audit & Internal Quality
Assurance Review
Internal Audit assesses whether
operating systems within SAI function
efficiently as per established policies &
procedures

Internal Quality Assurance Review
assesses whether individual
engagements are performed in terms of
applicable standards, policies &
guidance
Implementable Good Practices
Leadership and Direction

Establishment of Policy Unit for
managing Strategic Planning
Process

Audit Advisory Board

Implementable Good Practices
Human Resources
SAI may seek assistance from Experts
and Specialists

Certificate Course in Performance
Auditing with a University/academic
institute

Implementable Good Practices
Exchange placements for SAI
officials from other SAIs countries
as reciprocal arrangements

Accept staff from other agencies &
legislative secretariat for temporary
assignment


Implementable Good Practices-
Human Resources
SAI to prepare an individual
development plan

Naming & honouring the Auditor of
the year

High performers may be allowed to
opt for training courses,
domestically and internationally
Implementable Good Practices
Audit Performance
Electronic database of audited entity
profiles

Quality assurance at various stages of
the audit process
Implementable Good Practices
SAI to develop policy guidelines for
forensic audit

An IT specialist to be member of all
entities with ERP or other significant
computer systems


Implementable Good Practices
Audit Performance
Knowledge-management Group

Office INTRAnet site to have
important guidance, tools and other
specialised material for audit

Implementable Good Practices
Quality Reviewer for major financial and
performance audits

Consultation with specialists and experts

Multiple level review procedures for
major audits

Managerial Quality Assurance

Implementable Good Practices
Audit Performance
Performance Audit Management
Committee

Specialist to help in drafting

Report Design Group

Audit reports of different SAIs to be
discussed in presentation sessions
Implementable Good Practices
Client & Stakeholder Relations

Post-tabling report dissemination


Communicating the audit message to
the public use of plain language
Illustrative Good Practices
Survey of the Legislators & senior
Government functionaries

Database of recommendations

Following up each major performance
audit

Implementable Good Practices -
Client & Stakeholder Relations

More governance-centric themes to
be taken up for discussion

Time-limit for response to
committees recommendations

Illustrative Good Practices
Client & Stakeholder relations

Separate unit within SAI for liaison
with legislative committees

Long term secondments of SAI
functionaries to the legislative
secretariats

Implementable Good Practices

Managing other external relations

Mutually supportive & good relations
with Ministries & other agencies

Good relations with media

Implementable Good Practices
Effective & professional relations with
private sector auditors & other
professional associations

Good & mutually beneficent relations
with academic community

Implementable Good Practices
Continuous Improvement

Summary of internal quality
assurance reviews to be
disseminated

Internal self-evaluation of audits

Good relations with other SAIs &
international organisations