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Monitoring of Assurance quality: internal
We recognise that quality in the assurance services we deliver to clients is critical to maintaining the confidence of investors and other stakeholders in the integrity of our work. It is a key element of our assurance strategy.
Responsibility for appropriate quality management lies with the leadership of PricewaterhouseCoopers AG. This includes the design and operation of an effective System of Quality Management (SoQM) that is responsive to our specific risks to delivering quality audit engagements, using the network’s QMSE framework.
The overall quality objective under the QMSE framework is to have the necessary capabilities in our firm and to deploy our people to consistently use our methodologies, processes and technology in the delivery of assurance services in an effective and efficient manner to fulfil the valid expectations of our clients and other stakeholders.
Our firm’s monitoring includes an ongoing assessment aimed at evaluating whether the policies and procedures which constitute our SoQM are designed appropriately and operating effectively to provide reasonable assurance that our audit, non-audit assurance and related services engagements are performed in compliance with laws, regulations and professional standards (also referred to as our ongoing monitoring). This includes the use of Real Time Assurance.
Daniel Ketterer
Quality & Regulatory Partner
PwC Switzerland
Transparency Report 2023
We have developed a real-time quality assurance (RTA) programme designed to provide preventative monitoring that helps coach and support engagement teams get the ‘right work’ completed in real time, during the audit.
Our RTA programme consists of quality review procedures and tools used to assess engagements during the performance phase. Such procedures include reviews of selected engagements and/or focused audit areas.Our RTA programme is supported by experienced practice professionals and the use of technology tools to standardise analysis to support the selection of engagements and focus areas. This programme supports our audit quality initiatives by providing additional coaching to engagement teams and allows the identification of shareable practices.
In addition to the ongoing monitoring noted above, our monitoring also encompasses periodic assessment of our SoQM which includes the review of completed engagements (Engagement Quality Reviews – EQR), as well as periodic monitoring of our SoQM by an objective team within our firm. The results of these procedures, together with our ongoing monitoring, form the basis of the continuous improvement of our SoQM. EQRs are performed under a network-wide inspection programme based on professional standards and PwC audit methodology.
During the 2023 EQR programme cycle, 38 audit (2022: 41) and 9 non-audit (2022: 11) engagement files were selected and reviewed.
Overall, the results of the 2023 Swiss quality review confirmed that the firm runs effective internal quality controls when managing its audit engagements, and that the firm’s quality control system for the assurance practice has been suitably designed.
We analyse instances where our audit quality objectives were not fully achieved and consider their potential causes, and take timely and responsive action to address them.
In addition, we continue to make improvements to our audit approach, training and other relevant factors.
EQRs are risk-focused reviews of completed engagements covering, on a periodic basis, individuals in our firm who are authorised to sign audit, non-audit assurance or related services reports. The review assesses whether an engagement was performed in compliance with PwC Audit guidance, applicable professional standards and other applicable engagement-related policies and procedures. Based on a rotation schedule, engagement leaders are subject to an EQR within a three to five-year cycle.
Reviews are led by experienced assurance partners, supported by objective teams of partners, directors, senior managers and other specialists. EQR reviewers may be sourced from other PwC firms if needed to provide appropriate expertise or objectivity. Review teams receive training to support them in fulfilling their responsibilities and utilise a range of checklists and tools developed at the network level when conducting their review inspection. The network inspection team supports review teams by monitoring the consistent application of guidance on classification of engagement findings and engagement assessments across the network.
Additionally, the PwC Network undertakes periodic reviews to evaluate certain elements of PwC firms’ systems of quality management. The Network also looks at the PwC firm leadership’s own assessment of the effectiveness of their system of quality management and their determination of whether the overall quality objective has been achieved.
The inspection results are reported to our firm’s leadership who are responsible for analysing the results of the inspections along with the findings identified from all sources of information and implementing remedial actions as necessary. In situations where adverse quality matters on engagements are identified, based on the nature and circumstances of the issues, the responsible partner or our firm’s Assurance leadership personnel may be subject to additional mentoring, training or further sanctions in accordance with our firm’s Recognition and Accountability Framework.
Assurance partners of our firm, who are responsible for group audits involving cross-border work, receive information on the results of the network inspection programme, designed for their use in assessing the scope of audit work they determine needs to be performed and their reliance on work performed by PwC firms in connection with their audit of a client’s consolidated financial statements.
We perform analyses to identify potential factors contributing to our firm’s audit quality so that we can take actions to continuously improve. Our primary objectives when conducting such analyses are to understand what our findings tell us about our SoQM and to identify how our firm can provide the best possible environment for our engagement teams to deliver a quality audit. We look at quality findings from all sources including our own ongoing monitoring of our SoQM as well as Network inspection of our SoQM, audits both with and without deficiencies, whether identified through our own internal inspections process or through external inspections, and other inputs such as our Global People Survey and financial statement restatements, to help identify possible distinctions and learning opportunities.
For individual audits, an objective team of reviewers identifies potential factors contributing to the overall quality of the audit. We consider factors relevant to technical knowledge, supervision and review, professional scepticism, engagement resources and training, among other things. Potential causal factors are identified by evaluating engagement information, performing interviews and reviewing selected audit working papers to understand the factors that may have contributed to audit quality.
In addition, the data compiled for audits both with and without engagement-level findings is compared and contrasted to identify whether certain factors appear to correlate to audit quality. Examples of this data include the hours incurred on the audit, whether key engagement team members are in the same geography as the client, the number of years that key engagement team members have been on the engagement, the number of other audits that engagement leaders are involved in and whether the engagement was subject to a pre-issuance review under our RTA programme, among other data points.
Our goal is to understand how quality audits may differ from those with engagement-level findings and to use these learnings to continuously improve all of our audits. We evaluate the results of these analyses to identify enhancements that may be useful to implement across the practice. We believe these analyses contribute significantly to the continuing effectiveness of our quality management. Our RCA is supported by several resources with the appropriate skills and time, with roles and responsibilities clearly defined, and the involvement and support of our assurance leadership team.
Monitoring of Assurance quality: external
PricewaterhouseCoopers AG is subject to regulatory oversight by the Swiss Federal Audit Oversight Authority (FAOA), which annually reviews the quality control processes of PricewaterhouseCoopers AG and individual engagements to ensure high-quality audits in the public interest.
In autumn 2022, PwC’s Swiss firm was subject to an inspection by the FAOA. This inspection was focused on the following areas:
- firm review (i.e. review of registration conditions and several firm-wide processes)
- audit engagements: the regular, annual review included seven financial audit files and three regulatory audit files
For the 2022 inspection, none of the comments included in the FAOA’s final reports issued in May 2023 represented an issue that impairs PricewaterhouseCoopers AG’s ability to provide companies with audits conducted in accordance with professional standards.
Beginning of May 2023 the FAOA conducted the next annual inspection in connection with which an inspection report has not been issued yet.
PricewaterhouseCoopers AG is also subject to regulatory oversight by the PCAOB, which generally conducts inspections of our firm every three years, jointly with the FAOA. The PCAOB’s inspection focuses on those portions of the firm’s accounting and auditing practices that relate to US public companies and the firm’s system of quality controls. The most recent inspection conducted by the PCAOB started in May 2023 and covered the period of May 2022 until April 2023. This PCAOB inspection is not concluded yet and therefore no inspection report has been issued so far.
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