Trust requires quality

The leader of Quality and Risk Management (QRM) has the overall responsibility for the quality in our deliveries and all BDO’s deliveries shall be of a high quality. For the audit business, it is vital that the users of our auditor’s reports and other statements and confirmations believe that they have been issued on an appropriate basis, and that we clearly draw attention to any, in our material misstatement in the accounts or other information on which we issue an opinion.

Partner/Leader of QRM i BDO AS

A condition for quality in the deliveries is first and foremost that we have adequate capacity in the form of partners and staff to execute the deliveries, and that they have the relevant competence for each individual engagement. In order to ensure quality in the deliveries, all work is reviewed by at least one other person than the one who has carried out the work. On most engagements, where several staff are involved, there is more than one level of quality control before we issue our audit report.

We have established procedures to prevent errors and to ensure that we do not make similar errors again. Our internal quality control and our training and introductory training programmes are important elements in this part of the work. The sections «Competence development» and «Quality in BDO» below have more information on this.

On 1 January 2021, a new Audit and Auditors Act came into effect in Norway that contributes to harmonise the regulation of the audit in Europe. Through the introduction of this act, some distinctively Norwegian regulation were removed and new regulations that our colleagues in other European countries have had for some years were introduced. We have adapted the new regulation by measures like changing our procedures for assessing independence, acceptance and continuance of clients and considering the non-audit services we deliver to our public-interest clients.

The new Audit and Auditors Act requires that we have a system of quality control. The audit firms already have, however, such a system in the standard on quality control (ISQC1). The new act implies that the audit firms must adhere to the regulation on risk management and internal control. As BDO AS is also licensed as an external accounting firm, we have already been subject to this regulation for many years and complied with its requirements.

As a consequence of increasingly more requirements to the acceptance and continuance of clients, BDO has set up a central department to assist with all establishments of client relationships. The KYC team’s services include assessments of independence and other ethical requirements and controls within the money laundering legislation and data protection rules. Even though the KYC team to a large extent makes the work of the client teams easier, the auditor in charge of the engagement still has the overall responsibility for the assessments and the conclusions of them.

After the last firm inspection by the Financial Supervisory Authority of Norway (Finanstilsynet), we have changed our practice for risk classification of clients. As a consequence, a large number of clients have been moved to a higher risk level. We have also implemented procedures and introduced support systems to ensure that the required client assessments are performed before new engagements are accepted.

In BDO, we have monthly QRM committee meetings to discuss issues of an overall importance for the risk to which BDO is exposed. The Managing Partner, the leaders of the four service areas and the QRM partner are permanent members. Other internal experts attend depending on the subjects to be discussed.

BDO has decided to establish a compliance team as a separate unit, exclusively engaged in ensuring that everybody in BDO complies with acts, regulations and internal guidelines and that the internal control is functioning as expected. The compliance team will be part of QRM and report to the QRM leader on a regular basis. Periodically and systematically, the compliance team will also report to the Managing Partner and the BDO board.

BDO in Norway is subject to quality controls from BDO Global. After the last control, we have made our classification of uncovered errors and deficiencies at the internal quality control in 2021 more rigorous.

In 2020 and 2021, BDO Global has focused on audit quality and compliance with ethical rules, including independence, and intensified the sanctioning of deviations. BDO Norway has not been sanctioned by BDO Global.

Even though we spend much effort in quality controls and preventing errors, deliveries will in some instances not be of the desired quality. We have various ways to follow up and sanction uncovered errors and deficiencies, depending on the underlying causes. Sanctions carried out in 2021 include follow-up controls and instructions to prepare action plans after the internal quality control, replacement of the engagement partner and financial sanctioning.