AQMs: Audit Quality Milestones
EQCR: Engagement Quality Control Reviewer
ROMMs: Risks of material misstatement
PCAOB: US Public Company Accounting Oversight Board
ABL: Audit Business Leader
EP: Engagement Partner
TQ: EMS tailoring question
FPIs: Foreign private issuers (outside the United States of America)
Quick Reference Card (QRC)—DTTL Audit Quality Milestones
Public Interest Entities (PIEs) and PCAOB FPIs effective for year-ends on or after 15 December 2017
AQM 1 AQM 2 AQM 3 AQM 4 AQM 5 AQM 6
Engagement continuance and Engagement team Perform and review planning Audit status check-in Perform interim testing Complete and review interim
independence meeting and audit plan testing
What is the milestone? Completion of engagement Conduct engagement Perform planning activities. Review of planning by EP and EQCR. Reassess key audit decisions Complete interim testing Complete and review (including EQCR)
continuance and independence team planning and risk and resource requirements. and discuss engagement fieldwork planned before year-end.
requirements. assessment meeting. status and resourcing with
Complete other preliminary EP and EQCR.
engagement activities.
What do I have to do to Document assessment and Document engagement Document determination of materiality and performance materiality Issue group referral Complete tests of design Complete and review all procedures
meet the milestone? conclusions on: team meeting minutes (including components, if applicable). Evidence materiality consultation, instructions to component and implementation of planned to be completed before client
• Client continuance and including meeting date and if applicable. auditors. relevant manual, automated year-end.
engagement risk classification attendees. File scoping memo from specialist(s) to confirm agreed scope. Reassess key audit decisions and general IT controls Reassess and update the audit
• Partner rotation If specialist(s) do not attend and update audit project (relevant controls) except project plan for progress to date and
Complete risk assessment procedures to identify ROMMs, via but not those that only occur after
• Compliance with Independence engagement team meeting, plan and budget for impacts of interim findings and client
limited to: the ‘year-end’ date.
requirements. conduct separate planning progress to date and impact events. Update budget accordingly.
meeting(s) to discuss • Preliminary analytical procedures of interim findings and client Perform testing of planned Revised audit plan to be reviewed and
Issue signed engagement letter.
scoping and timing of work. • Discussion with engagements teams events. Revised audit plan operating effectiveness approved by the EP.
Document a comprehensive and budget to be reviewed of relevant controls and Document evidence of the discussion
• Inquiry of management and those charged with governance
audit project plan and and approved by the EP. substantive procedures that of significant project plan changes
• Preliminary identification of significant accounting estimates. can be executed as of an
budget including timing Document evidence of the with the engagement team and client.
of EQCR review, work of Perform process walkthroughs and test design and implementation of discussion of significant interim date.
Communicate any resource needs
specialists and review relevant manual, automated and general IT controls (relevant controls) to project plan changes with Reassess and document the to the NPPD (or designee) or, as
of component auditor the extent necessary to enable the identifications of ROMMs. the engagement team and independence requirements appropriate, ABL, if needed.
clearances, as applicable. Document planned procedures to test the operating effectiveness of client. related to client affiliates.
Review audit documentation
relevant controls as well as substantive procedures for ROMMs identified. Finalise audit consultations Document meeting minutes prepared by specialists before
Document group audit scoping decisions and approach to evaluating and relating to planning matters, between EP and EQCR year-end.
oversight of component auditors. if applicable. confirming completion
of planning, status of
EQCR to review documentation supporting planned approach for
interim procedures and
significant risks, key judgements and specialists and group audit scoping.
consideration of the project
Complete audit planning memorandum. plan and resource needs.
What must I do in EMS to EMS subphase signoff: EMS subphase signoff: EMS subphase signoff: Response to TQ by EP: Response to TQ by EP: Response to TQ by EP:
document the completion EP and EQCR Preparer EP • TQ MS4 14100 • TQ MS5 14100 • TQ MS6 14100
of the milestone? • 11100 Assess Engagement Risk • 13500 Hold engagement • 13300 Assess Risks and Plan Audit Responses Management the Management the Management the
• 11200 Acceptance and Continuance team discussions • 13600 Understand the component auditors engagement subphase engagement subphase engagement subphase
EP and EQCR
Response to TQs: • 13100 Determine Materiality
• 11100 Assess Engagement Risk • 13900 Audit Planning Memorandum
• 13400 Assign Engagement Teams
(EP rotation) File documentation: (EMS database):
• 11200 Acceptance and Continuance • Engagement team identification and documentation of controls for
(compliance with independence Significant Risks
requirements and conclusion • Materiality and Performance Materiality specified for current period
regarding acceptance and
continuance procedures)
When do I need to complete
Refer overleaf for details of applicable AQM timing for your engagement.
the milestone by?
About AQMs PIEs progress against the milestones based on activity within all your
AQMs are designed to drive the earlier timing and sequencing of active engagements. By clicking on any engagement name in the
Large Medium Small
audit planning and interim activities and to assist engagement teams summary view, you can view the detailed milestones status for the
to focus attention on doing the right audit activities at the right time, Total budgeted Between specific engagement file.
Greater Less than
driving project management. Compliance with AQMs will improve engagement hours* 2000 and
than 6000 2000
audit quality and increase the operational excellence of audits, which 6000 The audit quality office and/or NPPD will utilize Diagnostics to identify
is instrumental in contributing towards a successful transformation *includes the standalone PIE and component auditors engagement hours whether engagement teams and partners have met the AQMs.
of the audit business. (if a group audit). Outliers identified will be followed up with engagement teams. A
health check will be performed on a sample of engagements post
This QRC is a simplified source of reference for engagement teams Regardless of size, all PCAOB FPI engagements must be classified as AQM 3 and AQM 6 to verify the accuracy and completeness of the
to utilize when applying the AQMs to relevant PIE and PCAOB FPI ‘PCAOB/PIE–Large’. documentation within live engagement files.
engagements providing details of what the milestones are, what
must be completed to meet the milestones, what to do in EMS Complete the 00000 EMS engagement profile subphase including PCAOB FPIs
to document the completion of the milestones and when the the new AQM TQ to identify the engagement as either PCAOB/ Further guidance on the specific details of key AQM activities and
milestones need to be completed. Compliance with AQMs must PIE–Large, PIE–Medium or PIE–Small. The AQM TQ activates after expected documentation for audits of PCAOB FPIs is available to
be monitored by the engagement team. Regular monitoring of responding to the first TQ in the 00000 subphase as either a engagement teams. Refer to Resources section below.
AQM compliance will be performed by the audit quality office and/or “complete audit file” or “primary audit file”. The response(s) identifies
NPPD and reported to DTTL. the applicable AQM timing program for the engagement file. The Non-PIEs
classification of the engagement and applicable AQM timing must be The AQMs support enhanced project management for all
AQM applicability and timing discussed with the engagement partner. The monitoring of the AQMs engagements. Whist the AQMs are mandated only for relevant PIE
AQMs are mandated for all relevant PIE and PCAOB FPI engagements is dependent on the information in this subphase and therefore it is and PCAOB FPI engagements, if engagement teams elect to follow
with year ends on or after 15 December 2017. All PIEs are ‘relevant’ critical that engagement teams respond accurately. the AQM dates and activities set out this in guidance for non-PIE
except for very small, non-complex PIEs approved for exemption by engagements, the timing applicable should be based on the size of
the NPPD. The milestone completion dates for each category are detailed the non-PIE. There is an option within the specific AQM question
below and are incorporated into Diagnostics 4.2 which will in the 00000 EMS engagement profile subphase to identify the
The AQM timing is scaled across 3 categories; PCAOB/ PIEs-Large, drive the automated monitoring of the milestones via the EMS engagement as Non-PIE Large, Non-PIE Medium or Non-PIE Small.
PIEs–Medium and PIEs-Small. Quality Dashboards.
Resources
How to get started Milestone completion dates—months Frequently Asked Questions
Step 1: Utilize the quick reference card before clients year-end DTTL Member Firm PCAOB Foreign Private Issuers Audit
Use the table overleaf to obtain details of what the six milestones PCAOB/ PIEs - Medium PIEs - Small Quality Milestones
are, what is required to meet the milestones and what to document PIEs - Large
in EMS to indicate the completion of the milestones. The EMS 1 7.5 4 2.5
signoffs specified in the table, representing that the milestone
2 6 3.5 2
Milestone
has been completed, must only be actioned when all the activities
associated with the milestone(s) are complete. 3 4.5 2.5 1
4 2 1.5 0.5
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company
Step 2: Identify the relevant category for your engagement 5 1 1 YE limited by guarantee (“DTTL”), its network of member firms, and their related entities.
Using the criteria below, determine the appropriate classification 6 YE YE YE DTTL and each of its member firms are legally separate and independent entities. DTTL
for the relevant PIE engagement as either PIE-Large, PIE-Medium (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.
YE: year-end deloitte.com/about to learn more about our global network of member firms.
or PIE–Small.
This communication is for internal distribution and use only among personnel of Deloitte
Step 3: Monitor AQMs
Touche Tohmatsu Limited, its member rms, and their related entities (collectively, the
Engagement teams must regularly monitor milestone progress at the “Deloitte Network”). None of the Deloitte Network shall be responsible for any loss
engagement level. The EMS Audit Quality Milestones report (included whatsoever sustained by any person who relies on this communication.
on the EMS Quality Dashboard) shows engagement portfolio
© 2017. For information, contact Deloitte Touche Tohmatsu Limited.
