Audit Method: Quality Review

ISA 220, deals with quality control for an audit of financial statements. Engagement teams have a responsibility to implement quality control procedures that are applicable to the audit engagement and that are within the context of the firm’s system of quality control. The objective of the auditor is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that:

• The audit complies with professional standards and applicable legal and regulatory requirements; and
• The auditor’s report issued is appropriate in the circumstances.

ISQC 1, deals with the firm’s responsibilities to establish and maintain its system of quality control for audit engagements. The system of quality control includes policies and procedures that address each of the following elements:

• Leadership responsibilities for quality within the firm;
• Relevant ethical requirements;
• Acceptance and continuance of client relationships and specific engagements;
• Human resources;
• Engagement performance; and
• Monitoring.

For audits of financial statements of listed entities, and those other audit engagements, if any, for which the firm has determined that an engagement quality control review is required, the engagement partner shall:

• Determine that an engagement quality control reviewer has been appointed;
• Discuss significant matters arising during the audit engagement, including those identified during the engagement quality control review, with the engagement quality control reviewer; and
• Not date the auditor’s report until the completion of the engagement quality control review.

Practice

The engagement partner shall take responsibility for the overall quality on each audit engagement to which that partner is assigned. The engagement partner should ensure that

• Appropriate procedures regarding the acceptance and continuance of client relationships and audit engagements have been followed;
• All ethical requirements are met;
• Independence criterion is met;
• Assignment of team members is appropriate;
• Overall direction, supervision and monitoring of the audit engagement is carried out.