Periodic inspections are the main tool which the AOA uses to assess audit quality.
Inspections of recognized auditors will occur generally every three years. More frequent inspections may occur as part of remedial action taken by the AOA to address significant audit quality deficiencies.
The size of inspection teams will vary, but all will include relevant industry experts. The Institute of Chartered Accountants in England and Wales (“ICAEW”) has been contracted to assist the AOA with inspections. However, all inspections will be conducted under the direction of the AOA’s Managing Director and the AOA will control all aspects of timing, selecting firms and files for inspection, and reporting.
The AOA has sole discretion with regard to what, if any, sanctions or other remedial actions are required as a result of inspection findings.
Details of the inspection process can be found here [inspection process]
Section 400 of the Rules deals with inspections; section 600 with disciplinary actions. Information about and a copy of the Rules can be found here: [Rules].
An order for an investigation may be issued by the AOA when it considers that a violation event may have occurred. A violation event is defined in the Rules:
“Violation Event” means (i) an act or practice, or omission to act, in violation of the Rules or professional standards that may have an adverse effect on the provision of audit services, (ii) a failure to supervise appropriately a person with a view to preventing violations of the Rules or professional standards, and such person has committed an act or omitted to act in violation of the Rules or professional standards that may have an adverse effect on the provision of audit services, (iii) a failure to cooperate with the terms of an Inspection or Investigation; or (iv) a failure to comply with the terms of any requirement, restriction or sanction imposed by the Authority.
A copy of the investigation order will be provided to the recognized auditor, who will also be advised in writing of the AOA’s reasons for issuing the order.
The Rules set out the options available to a recognized auditor in receipt of an investigation order, which include making representations to the AOA and petitioning for a review of the decision to issue an order.
Section 500 of the Rules deals with investigations; section 600 with disciplinary actions. Information about and a copy of the Rules can be found here: [Rules].
