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1. Introduction Scope Responsibilities regarding quality control procedures for an audit Responsibilities of the engagement quality control reviewer System of Quality Control and Role of Engagement Teams Quality control systems, policies and procedures are the responsibility of the audit firm, so that its assured that: The firm and its personnel comply with professional standards and laws Reports issued are appropriate
This ISA assumes ISQC1 (or equvilant laws) compliance Engagement Team (ET): a. b. c. Implement QCPs that are applicable to audit engagements Provide the firm with relevant information to enable functioning of firms system of QC relating to independence Are entitled to rely on the firms systems unless information provided by the firm or other parties suggests otherwise. e.g. Capabilities and competence through recruitment Maintenance of client relationship through Acceptance and Continuance (A&C) Independence through accumulation and communication of relevant independence confirmation Objective:
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To implement QCPs at the engagement level that provide with reasonable assurance that: (a) The audit complies with professional standards and laws; and (b) The auditors report issued is appropriate in the circumstances. 4. 4.1 REQUIREMENTS LEADERSHIP RESPONSIBILITIES FOR QUALITY ON AUDITS
Engagement Partner (EP) should take responsibility for the overall quality on each audit engagement to which that partner is assigned. EP sets an example regarding audit quality to other members of ET through all stages of audit e.g. through actions and through appropriate messages which emphasis: a. b. 4.2 Importance of: Performing work that complies with professional standards and regulatory and legal requirements; Complying with the firms QC policies and procedures; Issuing auditors reports that are appropriate in the circumstances The engagement teams ability to raise concerns without fear of reprisals The fact that quality is essential in performing audit engagements. RELEVANT ETHICAL REQUIREMENTS
EP should consider whether members of ET have complied with ethical requirements i.e. integrity, objectivity, professional competence and due care, confidentiality, professional behavior.
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EP may identify a threat regarding audit engagement that safeguards may not be able to eliminate or reduce the threats. In such case EP consults within the firm to determine appropriate action which may include: Eliminating the activity or interest that creates the threat, or Withdrawing from the engagement.
4.3 ACCEPTANCE AND CONTINUANCE OF CLIENT RELATIONSHIP AND AUDIT ENGAGEMENTS EP should be satisfied that: Appropriate procedures regarding A&C of client relationship and specific audit engagement have been followed, and Conclusions reached are appropriate
EP may or may not initiate decision making process for A&C, however, EP ensures whether the most recent decision remains appropriate. A & C include considering: Integrity of principal owners, key management and TCWG of the entity Whether the ET is competent to perform the audit engagement and has necessary time and resources Whether the firm and the ET can comply with ethical requirements Significant matters that have arisen during the current or previous audit engagement, and their implications for continuing the relationship
Where the EP obtains information that would have caused the firm to decline the audit engagement if that information had been available earlier then EP should communicate promptly to the firm so that EP and firm can take appropriate action. 4.4 ASSIGNMENT OF ET Perform the audit engagement in accordance with standards and regulatory requirements; and Enable an auditors report that is appropriate in the circumstances. Understanding, practical experience of engagements of similar nature and complexity through appropriate training and participation Understanding of professional standards and legal & regulatory requirements
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EP should be satisfied that ET collectively has the appropriate capabilities, competence and time to:
Appropriate capabilities and competence expected of whole ET, include the following:
Reviews EP is responsible for reviews being carried out according to policies. Review responsibilities are determined on the basis that more experienced team members (including EP) review work performed by less experience team member. Reviewers consider whether: a) Work performed is in accordance with professional standards, legal and regulatory requirements b) Significant matters have been raised for consideration c) Appropriate consultations have taken place and resulting conclusions have been documented and implemented d) There is need to revise nature, timing and extent of work performed e) Work performed supports the conclusions reached and appropriately documented f) Evidence obtained is sufficient and appropriate g) Objective of engagement procedures have been achieved
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Consultation EP should: a. b. c. d. Be responsible for ET undertaking appropriate consultations Be satisfied that members of ET have undertaken appropriate consultation both within ET and between the ET and others at appropriate level within or outside the firm Be satisfied that nature and scope of consultations and conclusions are agreed with party consulted Determine that conclusions have been implemented
Effective consultation within or outside the firm requires that those consulted are given all relevant facts. Those consulted should have appropriate knowledge, seniority and experience. It may be appropriate for ET to consult outside the firm e.g. where firm lacks appropriate internal resources. They may take advantage of advisory services provided by other firms, professional and regulatory bodies or commercial organisations. Engagement QC Review For audits of FS of listed entities, the EP should: Determine that QC reviewer has been appointed Discuss significant matters arising during engagement and those identified by engagement QC review with engagement QC reviewer Not date the auditors report until the completion of QC review (it should be done before audit report is dated, may be documented later as per ISA 230)
Where at start of engagement, QC review is not considered necessary, EP is alert for changes in circumstances that require such review. QC review should indicate and objective evaluation of:
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Such review does not reduce responsibilities of EP. QC review for audits of FS of listed entities include considering the following: ETs evaluation of firms independence Significant risks identified during the engagement and responses to those risk including assessment of risk of fraud Judgments made to materiality and significant risks Whether appropriate consultations has taken place Significance and disposition of corrected and uncorrected misstatements Matters to be communicated to management and TCWG and other parties Whether audit documentation selected for review reflects the work performed and supports the conclusions Appropriateness of the report issued
Differences of opinion Where differences of opinion arise: within the ET with those consulted and between EP and the engagement quality control reviewer (if any), The ET should follow the firms policies and procedures for dealing with and resolving differences of opinion. 4.6 MONITORING EP considers the results of monitoring process (as per ISQC 1) as evidenced in the latest information circulated by the firm and other network firms. The EP considers: Whether deficiencies noted in information may affect the audit engagements and Whether the measures the firm took to rectify the situation are sufficient in the context audit.
A deficiency in the firms system of QC does not indicate that a particular audit engagement was not performed in accordance with professional standards and regulatory and legal requirements or that the auditors report was not appropriate. 4.7 DOCUMENTATION
The auditor shall document: (a) Ethical Issues identified and how they were resolved. (b) Independence requirements \ (c) Acceptance and continuance (d) The nature and scope of, and conclusions resulting from, consultations
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