The Institute of Chartered Accountants of India (ICAI) recently launched the Audit Quality Maturity Model (AQMM) with the aim of enhancing the quality of audits and improving transparency.
Why in News?
- The Institute of Chartered Accountants of India (ICAI) has mandated the firms to undertake audit quality maturity evaluation through AQMM w.e.f. 1st of April 2023.
- The mandate covers the firms auditing (a) A listed entity; (b) Bank other than a co-operative bank (except multi-state co-operative bank); or (c) an Insurance Company.
- Those firms which are conducting only branch audits are excluded from this mandate.
About Audit Quality Maturity Model (AQMM):
- It is a tool for the self-evaluation of audit firms & sole proprietors towards technologically driven mechanisms to increase operational efficiency.
- AQMM is an amalgamation of a well-researched set of Audit Quality Indicators (AQIs).
- It is a cross-functional evaluation model covering key areas of not only audit engagements but also audit practice at the firm level.
- It includes operations of the firm, viz. revenue budgeting and pricing, audit practice manual, budgeting of engagements, timesheet, use of technology adoption, quality control for engagements, Human Resource Management including resource planning and monitoring, performance evaluation and compensation, physical and IT infrastructure.
- The AQMM model is structured into 3 sections with a total score of 600 points,
- Practice Management (Operation);
- Human Resource Management;
- Practice Management -Strategic/Functional;
- Based on the score(s) obtained under each of the sections, the firm shall arrive at a level ranging from Level 1 to 4.
- While Level 1 depicts that the firm is very nascent, Level 4 indicates that the firm has made significant adoption of standards and procedures.
Key facts about Institute of Chartered Accountants of India (ICAI):
- It is a statutory body established by an Act of Parliament, viz. The Chartered Accountants Act, 1949.
- Mandate: Regulating the profession of Chartered Accountancy in the country; Formulation of Accounting Standards; and Prescription of Standard Auditing Procedures.
- It functions under the administrative control of the Ministry of Corporate Affairs, Government of India.
- The affairs of the ICAI are managed by a Council which comprises of 40 members, of whom 32 are elected by the Chartered Accountants and the remaining 8 are nominated by the Central Government.
Q1) What is auditing?
Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following a documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation.