Communication by the Firm to those charged with Governance of listed entities in relation with the conclusion of the Quality Management System 2023

 

THE FIRM’S SYSTEM OF QUALITY MANAGEMENT

 

Overview of the SoQM

The Firm is committed to maintaining high standards of audit quality to consistently deliver quality engagements that meet stakeholders’ expectations and serve the public interest. The Firm sets a culture where audit quality is at the centre of the Firm’s strategy and priorities, where all partners and staff are responsible and are held accountable for performing quality engagements and upholding professional ethics, values, and attitudes.

To support consistent engagement quality, the Firm has invested significant time and resources to establish and operate a system of quality management (‘SoQM’) that complies with International Standard on Quality Management 1 (‘ISQM 1) and achieves the objectives that:

• The Firm and its personnel fulfil their responsibilities in accordance with professional standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and
• Engagement reports issued by the Firm or engagement partners are appropriate in the circumstances.

The Firm has adopted all of the quality objectives and specified responses as set out in ISQM 1 for all of the eight components covered by our SoQM. The eight components are:

• The Firm’s risk assessment process
• Governance and leadership
• Relevant ethical requirements
• Acceptance and continuance of client relationships and specific engagements
• Engagement performance
• Resources
• Information and communication
• The Firm’s monitoring and remediation process

These components operate in the Firm’s SOQM in an iterative and integrated manner. Other requirements of ISQM 1 comprise the roles and responsibilities for the SoQM, leadership’s overall evaluation of the system, network requirements or network services and documentation.

To support the achievement of the Firm’s overall quality objectives, in establishing and continuously improving the Firm’s SoQM, the Firm has carried out the following for each of the components of its SoQM:
 

 

The Firm identifies emerging developments and changes in the circumstances of the Firm or its engagements and adapts its system of quality management to respond to such changes.

Robust monitoring and remediation are an important component of the Firm’s SoQM to ensure that the Firm continuously seeks to improve its quality processes. The monitoring performed may identify deficiencies in the Firm’s SoQM. Deficiencies may exist where:

• A quality objective required to achieve the objectives of the system of quality management is not established;
• A quality risk, or combination of quality risks is not identified or properly assessed;
• A response, or combination of responses, does not reduce to an acceptably low level the likelihood of a related quality risk occurring because the response is not properly designed, implemented, or operating effectively; or
• Another aspect of the SoQM is absent, or not properly designed, implemented, or operating effectively, such that a requirement of ISQM 1 has not been addressed.

A fundamental part of an effective monitoring and remediation process is to perform root cause analysis (‘RCA’) on the identified deficiencies to understand why deficiencies arose and to be able to design an effective remediation plan to prevent deficiencies from occurring again in the future. On at least an annual basis the Firm evaluates whether these deficiencies have a severe and/or pervasive impact on the achievement of the quality objectives in the Firm’s SoQM.

 

Evaluating the SoQM

The Firm’s annual evaluation of the SoQM considers information gathered about the design, implementation, and operation of the system of quality management from monitoring activities performed over the period up to the evaluation date.

The monitoring activities include testing the operating effectiveness of responses, reviewing findings from internal and external inspections of engagements, and considering other relevant information obtained about the SoQM.

The firm uses professional judgment to evaluate the results of these monitoring activities to determine whether findings, individually or in aggregate, are assessed to be deficiencies in the SoQM. for all deficiencies identified, the root cause is investigated and the severity and pervasiveness of the deficiency on the SoQM, individually and in aggregate with other identified deficiencies, is evaluated.

 

Statement on the firm's evaluation of the SoQM

We conducted our assessment in accordance with ISQM 1 and concluded that the firm's SoQM provides reasonable assurance that the SoQM objectives are being achieved as of September 30, 2023.

Reasonable assurance is obtained when the SoQM reduces to an acceptably low level the risk that the objectives of the SoQM are not achieved. Reasonable assurance is not an absolute level of assurance, because there are inherent limitations of a SoQM.

For all identified deficiencies, the firm designs and implements remedial actions to address identified deficiencies that are responsive to the results of the root cause analysis and remedial progress is monitored.

 

Atte:

C.P.C. y C.F. Gabriel Llamas Monjardín
Partner-Director BDO México (Castillo Miranda y Compañía, S.C.)

Mexico City 

January 15, 2024