Quality Control
Full Compliance with ISQC 1
PricewaterhouseCoopers Japan LLC considers quality to comprise of six elements: leadership; ethics and independence; acceptance and continuance of client relationships and specific engagements; human resources and education; engagement performance and support structures; and monitoring. These quality components are necessary to meet the demands and expectations of all stakeholders, including securities markets, and also conform to ISQC 1* standards. To secure the desired level of quality, PricewaterhouseCoopers Japan LLC’s quality control system is based on the following three lines of defence: 1) Establishing and executing internal control systems for quality control; 2) Examining the effectiveness of internal controls; and 3) Monitoring by an independent review committee to guarantee transparency.
Through these measures, PricewaterhouseCoopers Japan LLC aims to apply a framework comparable to the internal controls for financial reporting required under Section 404 of the U.S. Sarbanes-Oxley Act to the establishment and implementation of internal controls for quality control of an audit firm.
*ISQC 1: International Standard on Quality Control No. 1, "Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information"
Auditing Quality Control - PwC Audit
As part of its mission, PricewaterhouseCoopers Japan LLC considers auditing quality as its highest priority. The firm and all of its partners and employees recognise that the honesty and sense of responsibility employed by the on-site auditing team forms the foundation of its quality control efforts.
- To ensure that PricewaterhouseCoopers Japan LLC’s auditing operations meet international quality standards the firm has applied the "PwC Audit" approach developed by PricewaterhouseCoopers to all aspects of its operations.
- To continually improve the quality of audit engagement, PricewaterhouseCoopers Japan LLC has implemented a Continuing Improvement Review (CIR) programme, consisting of regular quality reviews of auditing operations, identification of problem areas, analysis of results, improvements to auditing methodologies and tools, and learning and education.
- PricewaterhouseCoopers Japan LLC has adopted a five-year partner rotation rule for all audits, in line with the requirements of the U.S. Securities and Exchange Commission (SEC). Partners other than lead engagement partners are bound to a seven-year rotation.
- To guarantee a full understanding of a client company’s business and conduct more accurate and comprehensive audits, PricewaterhouseCoopers Japan LLC gives due consideration to the nature of the business and the risks involved when assigning staff. The firm has developed a mandatory learning and education programme covering business ethics, accounting, auditing and other fundamentals, which all staff who provide auditing services are required to complete.
- To improve the effectiveness of auditing services, significant business events and management decisions are examined in real-time and based on the results of this analysis a decision is made on the company’s auditing. This is termed real-time auditing. In addition, as part of the review process PricewaterhouseCoopers Japan LLC has adopted a real-time review system, whereby significant matters from the real-time audits are in-turn reviewed in real-time by a Quality Review Partner (QRP). This is maintained throughout the entire process, from the audit planning stage, through the execution and assessment to the completion stage.
- The matters subject to review are specified in advance, and require the views of the technical support division (accounting consultation). The QRP monitors the conduct of this consultation.
Our efforts for achieving high-quality audits
PricewaterhouseCoopers Japan LLC's quality management
PricewaterhouseCoopers Japan LLC conducts high-quality audits to meet the expectations of a rapidly changing digital society.
To conduct these high-quality audits, we use the PwC network's quality management process, which integrates quality management with business processes. We use this process to structure our internal organisations, assign personnel and provide audit services by using the appropriate methodologies, processes and technologies at the appropriate time. The purpose of our quality assurance systems is to meet the expectations of our stakeholders, including our audit clients and capital markets. To achieve this purpose, we have set forth 15 quality objectives.
We consider the pursuit of quality to be our most important area of strategic priority. Our leadership team works to promote the maintenance and construction of our System of Quality Management, as well as the use of applicable frameworks.
Through awareness of risks related to our 15 quality objectives and through active discussion regarding the quality activities we use to address these risks, we aim to maintain and construct a genuinely effective System of Quality Management.
We monitor the preparation and operating statuses of our quality management activities year-round, and once a year, we evaluate the degree to which the goals of our quality management systems have been achieved.
Based on the results of this evaluation, our leadership team performs a causal analysis and determines any corrective measures to be taken. Then we clarify the parties responsible for each measure, and make the necessary improvements.
