4) Quality Control

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Mind Map on 4) Quality Control, created by littlepaz_2001 on 09/02/2013.

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littlepaz_2001
Created by littlepaz_2001 about 6 years ago
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4) Quality Control
1 PRINCIPLES AND PURPOSE
1.1 Audit quality is about delivering an APPROPRIATE professional OPINION supported by the necessary EVIDENCE and JUDGEMENTS.
1.1.1 Good leadership
1.1.2 Experienced judgement
1.1.3 Technical competence
1.1.4 Ethical Values
1.1.5 Appropriate client relationships
1.1.6 Proper working practices
1.1.7 Effective quality control & monitoring review processes
2 ISQC 1 - QUALITY CONTROL AT A FIRM LEVEL
2.1 Purpose of ISQC1
2.1.1 The objective of the firm is to establish & maintain a system of quality control to provide it with reasonable assurance that:-
2.1.1.1 The firm & its personnel comply with professional standards & applicable legal & regulatory requirements
2.1.1.2 Reports issued by the firm or engagement partners are appropriate in the circumstances
2.1.1.3 All quality control [policies should be DOCUMENTED & COMMUNICATED to the firms personnel
2.1.1.4 FIRM & LEADERSHIP RESPONSIBILITIES FOR QUALITY WITHIN THE FIRM
2.1.1.4.1 Appropriate training is provided to ensure there is complete understanding of the objectives & procedures under ISQC 1
2.1.1.4.1.1 Firm implements policies such that the INTERNAL CULTURE of the firm is one where QUALITY is considered to be ESSENTIAL
2.1.1.4.1.1.1 The entire business strategy of the audit firm should be driven by the need for quality in its operations.
2.1.1.5 HUMAN RESOURCES
2.1.1.5.1 Policies & procedures on ensuring excellence in its staff, to provide the firm with 'reasonable assurance' that it has sufficient personnel with the CAPABILITIES, COMPETENCE & COMMITMENT TO ETHICAL PRINCIPLES necessary to perform its engagements
2.1.1.5.1.1 The firm is responsible for the ongoing excellence of its staff, through continuing professional development, education, work experience & coaching by more experienced staff.
2.1.1.6 ASSIGNMENT OF ENGAGEMENT TEAMS
2.1.1.6.1 The firm should have policies and procedures in place to ensure that:-
2.1.1.6.1.1 1) Key members of client staff & those charged with governance are aware of the identity of the audit engagement partner
2.1.1.6.1.1.1 2) The engagement partner has appropriate capabilities, competence, authority & time to perform their role
2.1.1.6.1.1.1.1 3) The engagement partner is aware of his responsibilities as engagement partner.
2.1.1.6.1.1.1.1.1 The engagement partner should ensure that he assigns staff of sufficient capabilities, competence & time to individual assignments so that he will be able to issue an appropriate report
2.1.1.7 ENGAGEMENT PERFORMANCE
2.1.1.7.1 Firms often produce a MANUAL OF STANDARD ENGAGEMENT PROCEDURES to give to all staff so that they know the standards they are working towards
2.1.1.7.1.1 Ensuring good engagement performance involves a number of issues:-
2.1.1.7.1.1.1 Direction
2.1.1.7.1.1.2 Supervision
2.1.1.7.1.1.3 Review
2.1.1.7.1.1.4 Consultation
2.1.1.7.1.1.5 Resolution of disputes
2.1.1.7.1.2 When there are differences of opinion on an engagement team, a report should not be issued until the dispute has been resolved.
2.1.1.7.1.2.1 The firm must also have standards as to what constitutes a suitable quality control review.
2.1.1.7.1.2.1.1 PEER REVIEW:- Review of an audit file carried out by another partner in the assurance firm.
2.1.1.7.1.2.1.2 HOT REVIEW:- A peer review carried out before the audit report is signed.
2.1.1.7.1.2.1.3 COLD REVIEW:- A peer review carried out after the audit report is signed.
2.1.1.8 MONITORING
2.1.1.8.1 Firms must have policies in place to ensure that their quality control procedures are:-
2.1.1.8.1.1 Relevant
2.1.1.8.1.2 Adequate
2.1.1.8.1.3 Operating effectively
2.1.1.8.1.4 Complied with
2.1.1.8.1.5 They must monitor their system of quality control. Should be reported on to the management of the firm on an annual basis
2.1.1.8.1.5.1 ONGOING EVALUATION of the system of quality control.
2.1.1.8.1.5.2 PERIODIC INSPECTION of a selection of completed engagements.
2.1.1.8.1.5.3 Evaluate the effect of any DEFICIENCIES found.
2.1.1.8.1.5.3.1 More concerned with SYSTEMATIC or REPETITIVE deficiencies that require corrective action
3 ISA 220 QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS
3.1 The objective of the auditor is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that:-
3.1.1 1) The audit complies with professional standards and applicable legal & regulatory requirements
3.1.2 2) The auditor's report issued is appropriate in the circumstances
3.2 LEADERSHIP RESPONSIBILITIES
3.2.1 The engagement partner is required to set an example with regard to the importance of quality
3.2.1.1 ETHICAL REQUIREMENTS
3.2.1.1.1 The engagement partner shall remain alert, through observation and making enquiries as necessary, for evidence of non-compliance with relevant ethical requirements by members of the engagement team.
3.2.1.1.1.1 The engagement partner shall form a conclusion on compliance with independence requirements that apply to the audit engagement.
3.2.1.1.1.1.1 The auditor shall include in the audit documentation conclusions on compliance with independence requirements that apply to the audit engagement, and any relevant discussions with the firm that support these conclusions
3.2.1.1.1.1.1.1 The partner is required to ensure that the requirements of ISQC1 in respect of accepting and continuing with the audit are followed.
3.2.1.1.1.1.1.1.1 He must document conclusions reached about accepting and continuing the audit.
3.2.1.1.1.1.1.1.1.1 He must ensure that the team is appropriately qualified and experienced as a unit
3.2.1.1.1.1.1.1.1.1.1 He is required by other auditing standards to hold a meeting with the audit team to discuss the audit, and the risks associated with the audit.
3.2.1.1.1.1.1.1.1.1.1.1 The audit is supervised overall by the engagement partner, but more practical supervision is given within the audit team.
3.2.1.1.1.1.1.1.1.1.1.1.1 Before the audit report is issued, the engagement partner must be sure that sufficient & appropriate audit evidence has been obtained to support the audit opinion.
3.2.1.1.1.1.1.1.1.1.1.1.1.1 The partner need not review all audit documentation but may do so, he should review critical areas of judgement, significant risks and other important matters
3.2.1.1.1.1.1.1.1.1.1.1.1.1.1 The partner is also responsible for ensuring that if difficult or contentious matters arise the team takes appropriate consultation on the matter and that such matters & conclusions are properly recorded.
3.2.1.1.1.1.1.1.1.1.1.1.1.1.1.1 The engagement partner is responsible for appointing a reviewer if one is required.
3.2.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1 Responsible for discussing significant matters arising with the reviewer and for not issuing the audit report until the quality control review has been completed.
3.2.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1 Required to consider the results of monitoring of the firm's quality control systems & consider whether they have any impact on the specific audit he is conducting.

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