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The objective of this Lesson is to identify potential quality risks. The quality risks that may arise are based on the nature and circumstances of your Firm and the engagements performed.
Quality risks are identified by considering the “conditions, events, circumstances, actions or inactions” (CECAI) related to the Firm and its engagements that could adversely affect the achievement of the quality objective. That is, what are the potential challenges the Firm may have in meeting the objective of the SQM which is that partners and staff fulfill their responsibilities and reports issued are appropriate.
This is the most important exercise of the pre-workshop activities as it focuses on the risks of the Firm which in turn helps drive the right risk responses. The value of this exercise is also that it may identify other areas of focus within the Firm. Taking time to identify risks is of value to the Firm and helps the process be much more than just a compliance exercise.
CSQM 1 sets out the areas in which “conditions, events, circumstances, actions or inactions” a Firm is required to understand as follows:
| Complexity and operating characteristics of the Firm | Understand and consider such matters as the size of the Firm, Firm structure, locations and how activities and processes are handled. |
| Strategic and operational decisions and actions, business processes and business model of the Firm | Understand and consider such matters as strategic goals, growth/succession planning, how decisions about operational and financial matters are made, how resources are managed, industry specialization or new service offerings. |
| Characteristics and management style of leadership | Understand and consider such matters as the composition of Firm leadership, distribution of authority, how partners operate within the Firm and how leadership motivates and encourages personnel. |
| Resources of the Firm, including the resources provided by service providers | Understand and consider such matters as the background and makeup of personnel, overall staff composition, use of technology, use of other resources, availability and allocation of financial resources and the use of service providers. |
| Law, regulation, professional standards and the environment in which the Firm operates | Understand and consider such matters as regulations relevant to the Firm, professional standards, other standards or regulations affecting engagements, and social factors. |
| Types of engagements performed and the reports to be issued | Understand and consider such matters as to the types of engagements the Firm performs and the subject matter of engagements and specialized service offerings. |
| Types of entities for which engagements are to be undertaken | Understand and consider such matters as size and complexity of clients, industries in which they operate and nature of their businesses. |
| Nature and extent of the network requirements and network services, if applicable | Understand and consider such matters as the participation in a network of Firms and the related requirements and services. |
Action Required
Complete the Preliminary Risk Identification Worksheet for your Firm to identify where potential quality risks may exist. This is a brainstorming exercise that can be done either in conjunction with other partners at your Firm or on your own, depending on the size of your Firm.
The estimated time to complete this exercise will be anywhere from ½ hour to 1 hour depending on the size of your Firm and the individuals involved.
Bring the completed Worksheet with you to the in-person workshop. At the in-person workshop, we will finalize the risk identification and then move to the risk assessment phase using the SQMT.
Next up . . . the final Section in the pre-workshop. Bringing it all together and final preparation for your in-person workshop
Kirsten uses her knowledge and expertise built from over 30 years of experience in public practice. She is recognized for her technical knowledge and practice style along with her drive, passion and leadership. She is innovative with a results-oriented approach. READ MORE
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