Document ID: chunk:federal_register_of_legislation:F2023C01118:body:0:p31
Version: federal_register_of_legislation:F2023C01118
Segment Type: other
Provision Reference: 
Character Range: 90946–95926

risk, which is based on the firm's consideration of whether there is a reasonable possibility of the risk occurring, and individually, or in combination with other risks, adversely affecting the achievement of one or more quality objectives.
Examples of the firm's understanding of the conditions, events, circumstances, actions or inactions that may adversely affect the achievement of the quality objectives                                                                                                  Examples of quality risks that may arise

                     The strategic and operational decisions and actions, business processes and business model of the firm: The firm's overall financial goals are overly dependent on the extent of services provided by the firm not within the scope of this ASQM.                       In the context of governance and leadership, this may give rise to a number of quality risks such as:

                                                                                                                                                                                                                                                                                              Resources are allocated or assigned in a manner that prioritizes the services not within the scope of this ASQM and may negatively affect the quality of engagements within the scope of this ASQM.

                                                                                                                                                                                                                                                                                              Decisions about financial and operational priorities do not fully or adequately consider the importance of quality in the performance of engagements within the scope of this ASQM.

                     The characteristics and management style of leadership: The firm is a smaller firm with a few engagement partners with shared authority.                                                                                                                                In the context of governance and leadership, this may give rise to a number of quality risks such as:

                                                                                                                                                                                                                                                                                              Leadership's responsibilities and accountability for quality are not clearly defined and assigned.

                                                                                                                                                                                                                                                                                              The actions and behaviours of leadership that do not promote quality are not questioned.

                     The complexity and operating characteristics of the firm: The firm has recently completed a merger with another firm.                                                                                                                              In the context of resources, this may give rise to a number of quality risks including:

                                                                                                                                                                                                                                                                                              Technological resources used by the two merged firms may be incompatible.

                                                                                                                                                                                                                                                                                              Engagement teams may use intellectual resources developed by a firm prior to the merger, which are no longer consistent with the new methodology being used by the new merged firm.

A47.         Given the evolving nature of the system of quality management, the responses designed and implemented by the firm may give rise to conditions, events, circumstances, actions or inactions that result in further quality risks. For example, the firm may implement a resource (e.g., a technological resource) to address a quality risk, and quality risks may arise from the use of such resource.

A48.         The degree to which a risk, individually, or in combination with other risks may adversely affect the achievement of a quality objective(s) may vary based on the conditions, events, circumstances, actions or inactions giving rise to the risk, taking into account, for example:

           * How the condition, event, circumstance,