Issue 53 | January-March 2021 4 STANDARDS TOPICS COVERED IN THIS ISSUE • Standards: o Membership Changes. o Suite of Quality Management Standards: ISQC 1 Replaced by ISQM 1, the New ISQM 2, Significant Revisions to ISA 220, Changes in Substance, Implications for Practice in South Africa, Effective Dates and Implementation Guidance. o Revised Illustrative Banks Act Regulatory Auditor’s Reports. o Guidance on Performing Audits where the AGSA has Opted not to Perform the Audit (Revised March 2021). o The IAASB Issues an Exposure Draft on Conforming and Consequential Amendments to the IAASB’s Other Standards as a Result of the New and Revised Quality Management Standards. o IAASB Projects in Progress. • Ethics: o Final Amendments to Subsection 115 of the IRBA Code of Professional Conduct for Registered Auditors (Revised November 2018): Electronic Signatures. o Revisions to the IRBA Code to Promote the Role and Mindset Expected of Registered Auditors. o Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the IRBA Code. o IRBA, IESBA and IAASB Jointly issue Staff Guidance on Navigating the Heightened Risks of Fraud and Other Illicit Activities During the COVID-19 Pandemic. o IESBA Projects in Progress. COMMITTEE FOR AUDITING STANDARDS (CFAS) Membership Changes We bid farewell to Marius du Toit, who has served as CFAS Deputy Chairman for the past five years. He was a representative of the Financial Sector Conduct Authority. We thank him for his commitment and dedication to standard setting, and wish him well on his retirement. We welcome Stephanie Ronander, currently a CFAS member, as the new Deputy Chairman. She is a partner at Deloitte. Suite of Quality Management Standards: ISQC 1 Replaced by ISQM 1, the New ISQM 2, Significant Revisions to ISA 220, Changes in Substance, Implications for Practice in South Africa, Effective Dates and Implementation Guidance In support of the IRBA’s focus on improving audit quality and restoring confidence in the profession, the Board has adopted the suite of Quality Management (QM) standards. This followed the issue of the standards by the International Auditing and Assurance Standards Board (IAASB) on 17 December 2020. These QM standards aim to promote a proactive, scalable and effective approach to quality management. With an improved focus on the effectiveness of how firms and engagement partners manage quality, these standards are more robust and mark a significant evolution of the current quality control standards. They also address the management of quality by all firms and on all engagements. Further, this suite of QM standards will drive greater confidence and trust; and they have also been modernised to take into account emerging trends and technology. The three QM standards issued by the IAASB are: • International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements (ISQM 1); • ISQM 2, Engagement Quality Reviews (ISQM 2); and • International Standard on Auditing (ISA) 220 (Revised), Quality Management for an Audit of Financial Statements (ISA 220 (Revised)). Subsequently, in March 2021 the IRBA approved the three QM standards for adoption, issue and prescription, for use by registered auditors in South Africa. Scope of the QM Standards ISQM 1 deals with the firm’s responsibilities: • To design, implement and operate a system of quality management for audits or reviews of financial statements, or other assurance or related services engagements; and • To establish policies or procedures addressing engagements that are required to be subject to engagement quality reviews. ISQM 2 deals with: • The appointment and eligibility of the engagement quality reviewer; and • The engagement quality reviewer’s responsibilities relating to the performance and documentation of an engagement quality review. ISA 220 (Revised) deals with: • The specific responsibilities of the auditor regarding quality management at the engagement level for an audit of financial statements, and the related responsibilities of the engagement partner. Changes in Substance These QM standards have raised the bar for quality management. They will also strengthen and modernise the audit firm’s approach to quality management. Through the standards, the IAASB is addressing an evolving and increasingly complex audit ecosystem, including growing stakeholder expectations and a need for quality management systems that are proactive and adaptable.