Quality is at the top of every firm’s agenda, no matter what your area of practice. In my six-person firm, we performed both tax and A&A engagements and worked to ensure all client work exhibited quality. When addressing quality, I believe that it all comes back to processes. Your processes are the benchmarks against which you can measure your efforts. In a small firm, that may simply mean having consistent practices and procedures so you’re always measuring your work by a stable standard. Consistent processes foster uniformity and lead to efficiencies that ultimately enhance quality.
A firm may be performing one engagement based on the procedures used last year and another based on a completely different set of procedures used on another engagement the year before. Staff members have to learn each approach and remember how to apply separate procedures. This inefficiency drains away time you could be using to produce your best work, which makes it a threat to quality. Or consider a more serious scenario: Due to inconsistences in how work is handled, a failure to comply with standards in one engagement may not be noticed because there aren’t sufficient procedures in place to catch it. Creating a process roadmap for your firm can be a valuable tool to avoid the previous situations and you can use the PCPS Firm inMotion e-Toolkit, including its section on Firm Structure and Strategy to get started.
Six Elements of Quality Control
If you’re not sure where to start tightening your quality program, the AICPA Tax Section’s newly updated Tax Practice Quality Control Guide cites AICPA Statement on Quality Control Standards (SQCS) No. 8, A Firm’s System of Quality Control (Redrafted), for firms of any size. The guide suggests that firms’ policies and procedures regarding quality address each of the following elements:
- Leadership responsibilities. The tone at the top and management’s focus on quality inspire a drive for excellence at all levels. This includes setting a quality culture and establishing processes and procedures aimed at ensuring quality. The PCPS Invigorate the Focus on Quality toolkit includes a Tone at the Top resource available to PCPS members and can help you get started.
- Relevant ethical requirements. The goal here should be to achieve reasonable assurance that the firm and its people uphold their professional responsibilities in accordance with all relevant professional, statutory, and regulatory requirements.
- Acceptance and continuance of client relationships and specific engagements. The guide notes the importance of minimizing the likelihood of working with clients who lack integrity. In addition, taking on clients who don’t suit the firm’s strengths—or that require more energy than necessary—can be a drag on resources and hinder quality improvement. Consider using the PCPS Client Evaluation Tool to evaluate current clients and to target and address any potential problems.
- Human resources. Getting the right people and training them to do their best work is critical. That includes hiring qualified staff, ensuring staff have the competence, capability and commitment to do quality work and periodically evaluating their performance. Use the Quality Toolkit’s Professionals Training PowerPoint Template to educate staff on your quality control procedures to keep them informed of your firm’s professional standards. Staff performance evaluation suggestions from the AICPA Tax Section include having established performance criteria based on your firm’s strategic objectives and offering feedback.
- Engagement performance. Among the considerations in proper planning are evaluating risk factors, providing appropriate supervision, ensuring compliance with firm and external standards, communicating results to clients as appropriate, documenting results, designating individuals to serve as authorities, addressing differences of opinion and maintaining confidentiality, integrity and accessibility of tax documents.
- Monitoring. Documenting compliance, defining, evaluating and properly overseeing the quality control system and addressing client complaints are recommended objectives.
The Tax Section also has a scalable template for firms of all sizes to use in fashioning their own tax practice quality control document.
The Impact on the Bottom Line
In addition to the efficiencies that consistent quality processes will provide, there’s another valuable benefit: maintaining a reputation for quality in the community will help solidify relationships with current clients and attract new business opportunities. When you consider the strategic importance of quality—and its direct relationship to profitability—you have a powerful incentive to invigorate your focus on it.
Carl Peterson, CPA, CGMA is the Association’s Vice President of Small Firm Interests. Have questions for Carl? Contact him directly at firstname.lastname@example.org or 651-252-4618. And mark your calendars for Carl’s next Small Firm Update Webcast, which will be held on December 7 from 2 to 3 ET.