Would your accounting practice survive a quality review audit?

In New Zealand, Chartered Accountants Australia and New Zealand (CA ANZ) conducts quality and practice reviews to help their members in public practice maintain a consistently high quality of service to their clients that complies with relevant professional, technical and legislative requirements and also for CA ANZ to meet its own obligations under legislation.

The requirements for establishing a quality management system differ, according to whether a practice performs audit or assurance engagements or performs only non-assurance services. For assurance and related services engagements, the requirements are set out in PES 3 (Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance Engagements), PES 4 (Engagement Quality Reviews) and ISA 220 (NZ) Quality Management for an Audit of Financial Statements. For all other engagements the requirements are set out in PS-1 (Quality Management).

Wolters Kluwer provides solutions to support non-assurance practices in establishing and maintaining their quality management systems.

What practice review offers accountants

A practice review assesses compliance by a member firm with the NZICA Code of Ethics systems of quality management (SoQM), professional standards, and legal and regulatory requirements. Typically:

• all members undertaking audit, assurance and regulated insolvency engagements are reviewed on a cyclical basis and all other members on a risk basis. For new Certificate of Public Practice holders establishing their own practices, CA ANZ aims to conduct a practice review within 18 months of them commencing practice.
• CA ANZ contacts the firm to outline any actions the firm should take in advance
• an experienced reviewer visits the member's practice, examines the practice's quality management systems and reviews a sample of engagement files.
• the reviewer discusses their findings with the member, prior to submitting a final report to the quality and practice review team.

Where practices are found to be non-compliant, possible outcomes may include the firm undertaking specified actions within a required timeframe, with follow up to assess whether the improvements have been made. Some cases may be referred to the Practice Review Advisory Group for advice on whether further regulatory action or a referral to the Professional Conduct Committee is appropriate.

Practice review offers an experienced practitioner’s insights into the accounting practice as it is, as well as how it could be. If it’s diverted by where the firm’s documentation is not in line with current regulatory standards, the accountant misses out on the reviewer’s deeper assessment of the firm’s potential for growth and also conversely its vulnerability to risk and insolvency. For maximum benefit, the practitioner needs a strategy to incorporate updates of compliant documentation, tailor them for the firm, make it top of mind for the team, and ensure updated policies are implemented so key activities translate policy into action.

It’s a cyclical rather than a one-time process. Practitioners need to be able to delegate key functions, monitor performance and outcomes, and keep awareness and expertise embedded throughout the team across recruitment and retention challenges.

Challenges and solutions

Each year, CA ANZ publishes its NZ Practice Review Report outlining key findings and highlighting changes to relevant professional and ethical standards. The report for 2024 found most public practitioners reviewed perform high quality work, substantially compliant with applicable standards, although it noted an increase in both follow-up and unsatisfactory outcomes. The report sets out key areas of focus.

This guide reflects on how these key areas can challenge firms delivering compilation, financial reporting, accounting and tax services, along with a range of solutions Wolters Kluwer provides to help address these.