JICPA publishes results of extraordinary quality control reviews
JICPA published, on March 31, 2016, the results of extraordinary quality control reviews conducted following a corporate scandal of a certain listed company to all 156 firms registered under the listed company audit firms registry.
These reviews were conducted to examine whether the registered firms have attained appropriate structure to address specific issues and considerations that need to be attended to during audit, as communicated in the Chairman and President Statement issued on January 27, 2016, and provide instructions, as necessary, for further enhancement to uphold public trust in CPA audits.
Although the reviews did not find firms with critical issues which may require a formal improvement mandate from JICPA, during the reviews of audit working papers of 59 engagements of top 11 firms, there were some suggestions in areas such as audits of accounting estimates, identification and analysis of risks during risk assessment, risks of management override of internal controls, appropriate discharge of professional skepticism and engagement quality control reviews. They will be addressed by each firm for further improvements in future.
Given the gravity of the impact that the recent series of corporate scandals may have on the public trust in capital markets and confidence in audit, JICPA is determined to take immediate actions on the items proposed in the recommendation issued previously by the Advisory Council on the Systems of Accounting and Auditing under Financial Services Agency of Japan. As part of the effort to enhance self-regulatory functions, JICPA is currently undertaking measures to enhance its quality control review structure and procedures, and to make training courses for fraud case studies mandatory for all members, in addition to other necessary initiatives to improve the auditing system for further ensuring public trust in capital markets.