Jonathan J. Arnold, a Triple Chartered Accountant with extensive training and currently employed by KPMG in the Cayman Islands and the KPMG Islands Group (KIG), highlights the vital role of the System of Quality Management (SoQM) in fostering an environment that supports audit professionals to consistently deliver quality audit engagements around the Globe. With a successful career of over ten years, including two years in the evolving Audit sector known as System of Quality Management (SoQM), Jonathan has established a reputation as a SoQM Control Tester, effective communicator, and problem solver with great attention to detail and the ability to perform under pressure. His experience in project management, team leadership, and work organization, facilitating team goals is notable.
“SoQM is a recently introduced mechanism that fosters an Audit environment focussed on Quality,” Jonathan explains. “The SoQM framework prevents financial and operational priorities of a firm from taking precedence over quality, ensuring high-quality audit services via robust international collaboration,” he adds.
Jonathan says SoQM is a proactive and customized approach to managing quality firm-wide, focusing on achieving objectives by identifying and mitigating risks through a combination of control activities. Individuals in charge of SoQM control and operations must have the necessary appropriate experience, knowledge, time, influence, and authority.
In perspective audit firms must adopt a best-practices culture to provide reliable auditor reports consistently. “Challenges such as poor planning, inadequate risk assessment, insufficient resources, and limited audit evidence, as well as the risk of self-interest due to financial pressures on audit partners, could compromise auditor reports,” he explains.
The International Auditing and Assurance Standards Board (IAASB) quality standards help businesses meet this objective. In SoQM, recent standards include ISQM 1: Quality Management for Organizations that Conduct Financial Statement Audits or Reviews and ISQM 2: Quality Management for an Audit of Financial Statements in conjunction with ISA 220 (Revised).
A Consequential View
Recent headline-making audit failures have highlighted the public need for quality standards emphasizing professional scepticism and independence in audit teams, essential when evaluating client estimates and judgements. Audit teams must be capable and empowered to perform their functions unhindered. Jonathan says the standards are scalable and allow control operation processes to adapt to changes in technology and business practices. Effective communication with regulators and TCWG (those charged with governance) whilst monitoring internal and external businesses and networks is crucial.
The System of Quality Management (SoQM) framework has several critical components. These include the Risk Assessment Process, which evaluates potential risks before they affect audit integrity. The Acceptance and Continuance of client relationships ensures ongoing evaluation of client engagements. Ethical Requirements govern the professional conduct of auditors. Intellectual Resources pertain to the knowledge and expertise necessary for auditing, while Engagement Performance focuses on the quality and execution of audit tasks.
Further elements include Technological Resources, which cover the tools and systems used in auditing processes, and Human Resources, which involve management and development of audit capabilities. Information and effective communication are crucial for ensuring that all team members are informed and coordinated. Finally, the Monitoring and Remediation process helps identify and correct issues arising during audits, ensuring continuous improvement.
“We can assess the effectiveness of the SoQM framework through three possible conclusions,” Jonathan explains. An unqualified opinion indicates that the firm’s SoQM provides reasonable assurance of effectively meeting objectives. A qualified opinion relates to when auditors identify deficiencies that, while significant, do not undermine the overall system’s effectiveness. Lastly, an adverse opinion is issued when the SoQM does not provide reasonable assurance about meeting objectives, indicating significant shortcomings in the framework’s effectiveness.
Annual Evaluation
Standards require that, at least annually, those responsible for the SoQM ensure the fulfilment of system objectives. As a SoQM Control Tester, Jonathan works with a diverse team of professionals comprising various nationalities, to maintain a robust SoQM environment at multiple offshore KPMG Member Firms. His primary role is to ensure the effective and timely operation of controls under each component, backed by adequate evidence and an assessment of competent operation.
Jonathan emphasizes the importance of teamwork and building strong relationships with all stakeholders and colleagues. Effective communication requires intelligence, foresight, and sensitivity. The ultimate responsibility for SoQM implementation lies with the CEO or, if appropriate, the managing board of partners. The SoQM framework helps solidify and maintain the global reputation and trust of auditors and the accounting profession.
The System of Quality Management is a critical framework that ensures audit reliance and integrity across the accounting industry. The SoQM principles resonate with Jonathan and drive his passion for his career. “SoQM emphasizes continuous improvement and adherence to international standards, playing a pivotal role in shaping a more reliable and robust auditing landscape. I am excited to be a part of this effort to affirm the audit profession as a source of good in this world,” Jonathan says.