Document ID: chunk:federal_register_of_legislation:F2023C01118:body:0:p58
Version: federal_register_of_legislation:F2023C01118
Segment Type: other
Provision Reference: 
Character Range: 170183–173341

and timely information about the system of quality management, and responding appropriately to identified deficiencies.

Changes in the System of Quality Management (Ref: Para. 37(d))

A145.      Changes in the system of quality management may include:

           * Changes to address an identified deficiency in the system of quality management.

           * Changes to the quality objectives, quality risks or responses as a result of changes in the nature and circumstances of the firm and its engagements.

    When changes occur, previous monitoring activities undertaken by the firm may no longer provide the firm with information to support the evaluation of the system of quality management and, therefore, the firm's monitoring activities may include monitoring of those areas of change.

Previous Monitoring Activities (Ref: Para. 37(e))

A146.      The results of the firm's previous monitoring activities may indicate areas of the system where a deficiency may arise, particularly areas where there is a history of identified deficiencies.

A147.      Previous monitoring activities undertaken by the firm may no longer provide the firm with information to support the evaluation of the system, including on areas of the system of quality management that have not changed, particularly when time has elapsed since the monitoring activities were undertaken.

Other Relevant Information (Ref: Para. 37(f))

A148.      In addition to the sources of information indicated in paragraph 37(f), other relevant information may include:

           * Information communicated by the firm's network in accordance with paragraphs 50(c) and 51(b) about the firm's system of quality management, including the network requirements or network services that the firm has included in its system of quality management.

           * Information communicated by a service provider about the resources the firm uses in its system of quality management.

           * Information from regulators about the entities for whom the firm performs engagements, which is made available to the firm, such as information from a securities regulator about an entity for whom the firm performs engagements (e.g., irregularities in the entity's financial report).

A149.      The results of external inspections or other relevant information, both internal and external, may indicate that previous monitoring activities undertaken by the firm failed to identify a deficiency in the system of quality management. This information may affect the firm's consideration of the nature, timing and extent of the monitoring activities.

A150.      External inspections are not a substitute for the firm's internal monitoring activities. Nevertheless, the results of external inspections inform the nature, timing and extent of the monitoring activities.

Engagement Inspections (Ref: Para. 38)
A151.      Examples of matters in paragraph 37 that may be considered by the firm in selecting completed engagements for inspection

           * In relation to the conditions, events, circumstances, actions or inactions giving rise to the quality risks:

                   + The types of