CPAB oversees all firms that audit reporting issuers; we have experience in overseeing firms that vary in size and nature. They have found that the most relevant factor to consider in assessing the need for a quality management system is the nature of the engagements that a firm performs, and not the firm’s size, nature or circumstances. The exposure draft provides significant latitude to firms to opt out of the requirements due to their nature and circumstances (para 5), which they believe dilutes the proposed standards. They would strongly encourage the IAASB to reconsider its approach in this area.

They believe the IAASB could further enhance the exposure draft in a few key areas, by:

• Adopting a more proactive approach to achieving quality results in the design and implementation of responses to quality risks, with greater emphasis on preventative measures;
• Adding greater specificity to how the quality management system framework is defined so that it can be tested for operating effectiveness; and
• Identifying the potential for conflict within the firm structure and including further guidance to foster skepticism and an appropriately independent mindset at different levels and locations.

Review the comments on the CPAB’s website.