Canadian Public Accountability Board publishes good-practice guidance on root cause analysis to strengthen audit quality

The Canadian Public Accountability Board (CPAB) published a Smaller Firm Series paper on performing effective root cause analyses, summarising good practices it has observed and providing illustrative scenarios to help audit firms design targeted remediation that improves audit quality. The publication links root cause analysis to the Canadian Standard on Quality Management (CSQM) 1 requirement for firms to identify, understand and evaluate the root cause or causes of deficiencies so they can assess severity and pervasiveness and implement appropriate remedial actions. CPAB notes that some firm analyses focus on a single contributing factor rather than the underlying drivers, and sets out an approach that tests and re-evaluates multiple causal factors, including through a “stand-back” step, thematic review of recurring events by leadership, and an action plan supported by monitoring metrics. Observed practices include using independent and suitably trained reviewers, completing analysis on a timely basis ideally within 30 to 90 days of identifying an audit quality event, gathering evidence through varied methods such as tailored interviews across the engagement team and data analysis of time and workload, and documenting the work performed and how conclusions were reached. The scenarios illustrate how findings can translate into changes to acceptance and continuance procedures, resourcing tools, training and guidance, governance and partner performance indicators, and more frequent quality management testing.