Accounting firms in these modern times are subject to enormous pressure and risk. Pressure from clients to cut corners and even 'fudge' (misrepresent) statements made to statutory authorities, as well as the constant and increasing pressure to do more work for even less fees. The risk comes back to the accounting firm in the potential to get caught doing any of these things - willingly or even unknowingly - and the cost of same in terms of hard cost from having to pay penalties, as well as the damage to ones' professional reputation.
There are many forms of risk management in our professional world and they form an integral component of practice management. Many corporations today consider market risk, credit risk, operational risk and a myriad of other risks. Most of the risks that accountants find relevant to their practices are categorised as operational risks and include fraud, disaster recovery, regulatory, reputation and administrative risk.
Quality control is a system of policies and procedures that help ensure a firm is complying with professional standards and regulatory requirements. A sound understanding of risk management is a key foundation for an effective Quality Control system in a practice.
Consequently, a concise manual is the central ingredient in the effective quality control system, and describes in detail the policies and procedures associated with key risk areas of practice when conducting client work. The Quality Control Manual is not merely a set of well-constructed working papers, although these do form a part of the effective quality control system. More than this, the Quality Control Manual is essentially the instruction manual on dealing with clients (and staff) at every stage of the interaction with them.
Professional Standards and Requirements
The quality control requirements for public practice accounting firms in Australia are contained in the document APES 320 Quality Control for Firms (APES = Accounting Professional and Ethical Standards Board). This standard has mandatory professional status for all firms registered with the main accounting bodies, for all engagements conducted by these firms in Australia. In addition, the standard has the backing of law for all audits conducted by firms under part 2M of the Corporations Act 2001 (Commonwealth).
Recently, the laws surrounding the activities of Taxation Agents in Australia has changed, increasing the level of compliance obligations on agents, and consequently, the level of risk attached with completing client engagements. This is encapsulated in the legislated Code of Professional Conduct (sec.30-10, Tax Agent Services Act 2009).
Whilst not explicitly delineated in the Act, having a comprehensive manual and system will serve to fulfil the majority (if not all) of the requirements of the Code of Conduct, that registered Taxation Agents must now abide by.
Summary
In summary, the is the key control tool that describes what needs to be done and how to do it when performing client engagements, so as to set and maintain a high standard of professionalism and quality of work produced. More than that, the Quality Control Manual is the key tool to use in monitoring and reviewing the quality system itself.
With more than twenty years in the fields of accounting and finance, sales and marketing, and operational activity, Michael (MK) has an extensive understanding how businesses succeed in a holistic manner. He is also the Director of Insignia Consulting, accounting and business management consultants. Insignia Consulting has particular expertise, and specialises in The Quality Control Manual for Accounting Firms in Australia, with experience with QA Audits and developing customised manuals for public practice firms.
If you would like more information, please goto their page for the Quality Control Manual.
In addition, keep up to date with the latest accounting, tax (and some finance) news by visiting the Insignia Consulting Blog. There you will also find articles on the latest happenings and moves specifically relating to Quality Control in Accounting Firms.
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