The CAC was responsible for the quality assurance (QA) review system in Croatia from 2010–2017, under the supervision of the Audit Public Oversight Committee. During this time, the CAC established a QA system that fulfilled the requirements of SMO 1 and developed processes to ensure that compliance was maintained.
In 2010, the CAC completed the first initial assessment reviews (IAR) of all audit firms in the CAC Registry. This exercise was based on an initial assessment questionnaire (IAQ) which the CAC sent to all audit firms to get an overview of size, range of activities and to assess the quality of the firms. From 2011, the CAC began with six-year plans and detailed annual monitoring plans for each year. In selection of the audit firms for QA reviews, the CAC used a combination of cycle-based and risk-based approaches.
At the end of June 2017, the CAC finished with its sixth annual QA plan and with the second three-year QA review cycle of audit firms which perform audits of PIEs as well as the first six-year review cycle of audit firms for non-PIEs. During these six years, the CAC QA team had carried out 428 QA reviews (approx. 70 QA reviews per one year). Of that total number, about 149 were QA reviews of audit firms with PIEs.
The overall results of each inspection year were published in the CAC’s annual reports and are publicly available on CAC’s website.
In addition, the CAC had established ongoing processes to review the effectiveness of the implementation of the QA review system. In its SMO Action Plan update, the CAC reports that, during the six-year period of active QA work, it conducted a detailed analysis of the strengths and weaknesses of the current QA system in order to enhance its QA methodology.
In 2017, the Audit Act was amended to transpose the requirements of the EU Audit Reform and the MoF took over the responsibility of the QA review system, effective on January 1, 2018. CAC reports that it took an active role in collaborating with the MoF by providing proposals for an adequate QA system that meets SMO 1 requirements as well as the EU reform. CAC based its proposal from the lessons learned from its experience implementing the QA system in Croatia as well as from best practices from other PAOs in the EU. As of this time, the MoF’s QA system is still in transition and is expected to be operational before the end of 2019. The CAC assessed the MoF’s QA system against the requirements of SMO 1 and it aligns against a majority of the requirements.
For its members, CAC currently develops and presents training modules on QA topics including ISQC 1 and ISA.
Staff commend and acknowledge CAC’s best efforts in implementing a QA review system in accordance with SMO 1 requirements from 2010–2017. Staff recognize that while CAC does not have direct responsibility for the QA review system under the amended Audit Act, it has accumulated a wealth of knowledge and expertise that can benefit the MoF as it operationalizes the new system for Croatia. As there are identified gaps in the MoF’s QA system, the CAC is to consider what actions it can take to promote the elimination of the gaps to the MoF. The CAC is encouraged to continue providing IFAC updates on the progress of its dialogue and cooperation with the MoF in ensuring the QA system continues to align with SMO 1 and to advocate that the CAC plays a role in the reviews of non-PIE audits.
Importantly, CAC is also encouraged to continue to monitor and support the implementation of ISQM1 among members when it becomes effective as of December 15, 2022. Resources on the quality management standards are available on the IAASB website.
Current
Status: Review & Improve