Audit Quality Practices
Quality control procedures we formally implement for our Independent Private Sector Audits (IPSAs) include audit team member qualification requirements and IPSA-specific training, audit documentation requirements, audit documentation/report reviews. The US generally-accepted government auditing standards (GAGAS) for Performance Audits require 24 hours of continuing education (CE) every two years for auditors and 80 hours of CE every two years for audit leaders. Our existing professional certifications require 40 hours of CE every two years, the management of which will be more formalized as The Auditing Roundtable and BEAC has now been fully integrated into the Institute of Internal Auditors (IIA). We are in the process of increasing our CE hours for team leaders.
Another critical component of our practice is ensuring auditor independence. We have company-wide structural controls and an auditor-level control to prevent impairment. At a company level, we recuse ourselves from conducting IPSAs for clients to whom we act as an advisor or consultant related to the IPSA subject matter. In our view, it is easier to draw this bright line between audit clients and advisory clients than it is to create safeguards attempting to manage impairment where both services are provided to the same client. We also endeavor to identify situations where client companies may be competitors, then (with approval) disclosing our existing and/or potential business relationship to each in order to vet competitive conflicts of interest. We have not employed any former employees of conflict minerals clients; therefore there is no possibility of inappropriate pressure or interference in an IPSA audit team. Finally, because our conflict minerals client base is wide and diverse, we are not dependent on income from any single client – whether an IPSA client or consulting/advisory client. At the individual auditor level, we employ an extensive written auditor independence checklist that requires review and signoff by another Elm Principal.
External Peer Review and Report
One of the requirements for audit organizations being qualified to conduct GAGAS Performance Audits is to obtain an external peer review at least once every three years to provide a “reasonable basis” for determining whether the firm’s quality control systems are “suitably designed” and whether the firm is complying with its systems. Under GAGAS Section 3.97, “The first peer review for an audit organization not already subject to a peer review requirement covers a review period ending no later than 3 years from the date an audit organization begins its first audit in accordance with GAGAS”. We have not previously been subject to peer review under GAGAS; therefore our first peer review is due no later than December 12, 2017 (December 12, 2014 is the date we began our first IPSA). More than two years before then, we reached out to a handful of well known Yellow Book experts to identify an appropriate firm to conduct a review of a firm of our size and circumstances. Our search for a qualified and appropriate reviewer is in progress. Once the Peer Review is completed, we will post the results to our website in accordance with GAGAS Section 3.105.
Relevant Audit Experience, Expertise and Technical Knowledge
Elm Sustainability Principals have:
- HSE and management systems auditing experience and expertise extending well over 25 years each
- Each completed more than 500 audit engagements in all team capacities
- Conducted numerous HSE auditor training sessions for both the public and client-specific audiences, with hundreds of trainees
- Held professional HSE auditor certifications (BEAC) since the inception of that certification program in 1997
- Served, or currently serve, on the Board of Directors (including as President) of The Auditing Roundtable and Chair of the Board of Environmental Auditor Certifications (BEAC) over the past 10 years
- Played a leadership role in the recent acquisition of The Auditing Roundtable and BEAC by the Institute of Internal Auditors (IIA) and the on-going integration activities
- Conducted the three initial tantalum smelter audits under EICC’s Conflict Free Smelter (CFS) program in 2010
- Served in advisory roles in numerous conflict minerals studies conducted by third parties
- Participated in and/or led numerous expert panels on auditing practices, including the US Securities and Exchange Commission’s Conflict Minerals Roundtable in 2011
- Led the development of The Auditing Roundtable’s IPSA Performance Audit Guidance for non-CPAs
- Conducted a total of four IPSAs filed with the SEC for CY2014 and CY2015, along with numerous auditability reviews of CMRs in accordance with the Performance Audit standards.