ISA 220 QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS


 

An auditor deals with specific responsibilities regarding quality control procedures for an audit of financial statements. Quality control systems, policies and procedures are established by the audit firm prior to the audit. These policies and procedures are compulsory to abide by all audit engagement teams and engagement quality control reviewer.

ISA 220 defines the objective and requirements for an audit of financial statements quality control.

Summary of ISA 220  QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS

(Effective for audits of financial statements for periods beginning on or after December 15, 2009)

Objective

The objective of the auditor is to implement quality control procedures at the engagement level to be sure that:

·        The audit complies with professional standards and applicable legal and regulatory requirements; and

·        The auditor’s report issued is appropriate in the circumstances.

Requirements

Leadership Responsibilities for Quality on Audits

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

Relevant Ethical Requirements

The engagement partner shall form a conclusion on compliance with independence requirements that apply to the audit engagement. In doing so, the engagement partner shall:

1.      Obtain relevant information, to identify and evaluate threats to independence.

2.      Evaluate information on identified breaches,

3.      Evaluate whether the identified threats are at an acceptable level; and

4.    Take appropriate action to address the threats that are not at an acceptable level by eliminating the circumstances that create the threats.

Acceptance and Continuance of Client Relationships and Audit Engagements

The engagement partner shall be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and audit engagements have been followed and conclusions reached in this regard are appropriate.

Assignment of Engagement Teams

The engagement partner shall be satisfied that the engagement team, and any auditor’s experts who are not part of the engagement team, collectively have the appropriate competence and capabilities.

Engagement Performance

The engagement partner shall take responsibility for the direction, supervision, performance, reviews, and consultation of the audit engagement.

 Engagement Quality Control Review

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:

1.      Determine that an engagement quality control reviewer has been appointed.

2.      Discuss significant matters arising during the audit engagement.

3.   Not date the auditor’s report until the completion of the engagement quality control review.


Engagement quality control reviewer –a partner, other person in the firm, suitably qualified external person with sufficient and appropriate experience and authority to objectively evaluate the significant judgments the engagement team made and the conclusions it reached in formulating the auditor’s report.

 The engagement quality control reviewer shall perform following things:

·        To discuss of significant matters with the engagement partner.

·        To review of the financial statements and the proposed auditor’s report.

·        To review of selected audit documentation relating to the significant judgments the engagement team made.

·        To evaluation of the conclusions reached in formulating the auditor’s report and consideration of whether the proposed auditor’s report is appropriate.


For audits of financial statements of listed entities, the engagement quality control reviewer shall also consider the following:

·        The engagement team’s evaluation of the firm’s independence in relation to the audit engagement.

·      Whether appropriate consultation has taken place on matters involving differences of opinion and the conclusions arising from those consultations.

 Monitoring

The engagement partner shall consider the results of the firm’s quality control monitoring process fixed in the latest information circulated by the firm and whether deficiencies detected may affect the audit engagement.

Documentation

The auditor shall include in the audit documentation:

  •  Conclusions on compliance with independence requirements that apply to the audit engagement and
  • Conclusions reached regarding the acceptance and continuance of client relationships and audit engagements.
  • The nature and scope of, and conclusions resulting from, consultations undertaken during the course of the audit engagement.

The engagement quality control reviewer shall document:

  • The procedures required by the firm’s policies on engagement quality control review have been performed.
  • The engagement quality control review has been completed on or before the date of the auditor’s report.
  • The significant judgments the engagement team made and the conclusions it reached were appropriate.

Comments

Post a Comment

Popular posts from this blog

Why do auditors use assertions?

Image
  Assertions are representations by management that are embodied in the financial statements and used by the auditor to consider the different types of potential misstatements that may occur. Assertions may fall into the following categories: Assertions about classes of transactions and events, and related disclosures, for the period under audit : ·         Occurrence —transactions and events that have been recorded or disclosed have occurred, and such transactions and events are related to the company. ·         Completeness —all transactions and events that should have been recorded have been recorded, and all related disclosures that should have been included in the financial statements have been included.   ·         Accuracy —amounts and other data relating to recorded transactions and events have been recorded appropriately, and related disclosures have been appropriately measured and described. ·         Cutoff— transactions and events have been recorded in the correct a
Read more

Audit report

Image
  Audit report is a document  obtained as a result of  an audit of financial statements and attached to the financial statements. This report is needed to convey the opinion expressed by the auditors to the shareholders (or other parties as required by the engagement) on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.  Matters to be considered when forming the audit opinion on the financial statements To form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting fram ework the auditor shall consider the following matters: ·        Whether sufficient appropriate audit evidence has been obtained. ·        Whether uncorrected misstatements are material, individually or in aggregate. ·       The qualitative aspects of the entity’s accounting practice, including indicators of possible bias in management’s judgments.
Read more