Presentation on audit quality management system ASOSAI research project by

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• Presentation on audit quality management system -
  ASOSAI research project by
• R.N. Ghosh
• SAI India

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7th ASOSAI Research Project

• AUDIT QUALITY
• MANAGEMENT SYSTEM
• (AQMS)

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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.

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Background

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

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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.

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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.

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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.

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Board Actions 34th 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

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Milestones for the Research Project

• Interim review of the progress at 35th Meeting of
  the GB took place in September 2005
• Phase III of the Research Project completed in
  December 2005

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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

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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

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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.

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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.

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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.

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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.

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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

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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.

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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

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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.

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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.

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Quality Control

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

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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.

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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

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Quality Assurance

• Policies systems and procedures established by
  SAIs to maintain a high standard of audit
  activity.
• Quality Assurance is process centric

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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.

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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.

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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.

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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.

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Quality Continuum

• These AQMS guidelines are based primarily on
  quality management system principles. However
  they contain several significant elements of
  total quality management.

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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.

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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

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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.

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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.

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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.

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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

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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

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Audit Quality Management System for ASOSAI member
nations

• Leadership and Direction
• Human Resource Management
• Audit Performance
• Client Stakeholder Relations
• Continuous Improvement

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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

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Audit Quality Management System

• Human Resources
• Resourcing and recruitment
• Training and capacity building
• Performance Management appraisal
• Personnel Welfare Benefits

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Audit Quality Management System

• Audit Performance
• Audit Planning
• Staffing for the audit
• IT Tools
• Other Tools Guidance

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Audit Quality Management System Audit
Performance

• Conducting the Audit
• Consultation Advice
• Evidence Documentation
• Supervision and review
• Reporting Follow-up

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Audit Quality Management System

• Client Stakeholder Relations
• Communicating Audit messages
• Feedback from Clients and Stakeholders
• Relationship between legislative Committees SAI

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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

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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

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Implementable Good Practices

• Leadership and Direction
• Establishment of Policy Unit for managing
  Strategic Planning Process
• Audit Advisory Board

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Implementable Good Practices

• Human Resources
• SAI may seek assistance from Experts and
  Specialists
• Certificate Course in Performance Auditing with a
  University/academic institute

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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

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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

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Implementable Good Practices

• Audit Performance
• Electronic database of audited entity profiles
• Quality assurance at various stages of the audit
  process

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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

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Implementable Good Practices Audit Performance

• Knowledge-management Group
• Office INTRAnet site to have important guidance
  tools and other specialised material for audit

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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

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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

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Implementable Good Practices Client
Stakeholder Relations

• Post-tabling report dissemination
• Communicating the audit message to the public
  use of plain language

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Illustrative Good Practices

• Survey of the Legislators senior Government
  functionaries
• Database of recommendations
• Following up each major performance audit

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Implementable Good Practices - Client
Stakeholder Relations

• More governance-centric themes to be taken up for
  discussion
• Time-limit for response to committees
  recommendations

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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

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Implementable Good Practices

• Managing other external relations
• Mutually supportive good relations with
  Ministries other agencies
• Good relations with media

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Implementable Good Practices

• Effective professional relations with private
  sector auditors other professional associations
• Good mutually beneficent relations with
  academic community

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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