The value and benefits of implementing the International Standard on Quality Management (ISQM 1)
In December 2020, the International Auditing and Assurance Standards Board released a new standard for the quality management of audits. The new International Standard on Quality Management, known as ISQM 1, replaces the former International Quality Control Standard 1 (ISQC 1). ISQM 1 aims to encourage audit institutions to design a system of quality management that is tailored to the nature and circumstances of the institution and engagements it performs. Over the last two years, the SAI of South Africa has been busy implementing this new quality management standard to ensure that the SAI can be held to the highest standards of ethics and proactive quality management. In this blog, Solly Segooa, the Chief Risk Officer at SAI South Africa, shares his experience of the value and benefits of implementing the new quality management standard.
“In the public sector, we all play a critical role in the accountability ecosystem, a key emphasis of SAI South Africa’s new #CultureShift2030 strategy. As public sector auditors, we are acutely aware
of the distinction between responsibility and accountability. Ideally, we want officials who are responsible for making decisions to also be accountable for those decisions. Whereas ISQC1 merely required SAIs to assign responsibility for the system of quality control, ISQM 1 now requires us assign ultimate responsibility and accountability. These enhancements, together with the focus on commitment to culture, action, and behaviour, paint a clear picture that ISQM is a standard that promotes leadership by example. Naturally, we all have an important part to play here. Although leadership establishes the tone at the top, ISQM 1 stresses that clear and consistent actions at all levels within the SAI collectively contribute to the overall culture and commitment to quality.
The role of leadership is critical to a system of quality management as it establishes the environment in which the ISQM operates. At the SAI of South Africa, we have been privileged to experience the benefits of strong leadership support at the highest level while we have been implementing ISQM 1. This was particularly demonstrated during the initial risk assessment process. With the leadership’s support, we were able to focus closely on areas where we had not yet reduced the risks to quality objectives an acceptable low level. As a SAI, we derived great value from this initial risk assessment and the recalibration process, in particular the robust engagement by the SAI of South Africa’s leadership team. Through ongoing monitoring and remediation of the system, we can continue to identify and address any deficiencies, which lends itself to continuous capacity building thereby creating a responsive and adaptable system of quality management.
A project of this nature was not without challenges. However, we derived benefit from these challenges as they created opportunities such as:
- enhancing our strategic thinking abilities across all our 17 process owners
- adapting changes and challenges through regular engagement with representatives from the executive committee and other relevant structures
- upskilling audit professionals to manage the implementation project and corporate secretariat
- building the ability to manage vast deliverables across multiple process owners; and
- designing and implementing enhanced governance processes.
Through our gap analysis process, we demonstrate the high level of sophistication in our system of quality control that allowed us to enhance several existing processes. We were also able to reconcile known inefficiencies, such as the lack of an integrated audit software, into our risk assessment process and to ensure that as a SAI we respond appropriately.
SAI South Africa’s work to be ready for implementation in December
Our journey officially kicked off on 1 October 2021 when we officially launched the implementation project. It has been one of the most complex and time-sensitive projects for an institution that is large and unique in so many respects when compared to large audit firms in South Africa. A project of this nature, in an institution of this size, required good project management, methodical approaches and most importantly, leadership and teamwork. Given the interconnected nature of ISQM and how the components within the system of quality management operate, it is only fitting that teamwork finds expression in our implementation efforts.
This standard demanded us to think differently and more frequently as we navigated through each of the steps in our implementation journey. It also called on us to spend sufficient time benchmarking and brainstorming. In hindsight, it is exactly the essence of what this standard requires from a system of quality management: to reflect on whether the system is working as intended proactively and consistently.
How can ISQM implementation strengthen a SAIs capacity development actions?
While implementing ISQM 1 at SAI South Africa these last two years, we found that the design, implementation, and operation of a system of quality management can really assist in capacity development. The risk-based approach to designing the quality management lends itself well to a focus on capacity-building. Quality objectives such as resources and information & communication underpin the entire system of quality management. As an example, we had to think carefully, based on risk, about the human, technological and intellectual resources, which are critical components that enable SAI South Africa to deliver on its mandate.
Looking back across the whole implementation process, I am particularly encouraged by the many capacity-building benefits. It has been valuable to home in on the key areas which we need to strengthen to guarantee the quality of our work. I highly recommend implementing ISQM 1 as an altogether worthwhile exercise for other supreme audit institutions”.