Elements of a QC system

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This follows on from the previous section

Firm Level Quality Control

The objective of the firm is to establish and maintain a system of quality control to provide it with reasonable assurance that:
(a) The firm and its personnel comply with professional standards and applicable legal and regulatory requirements; and
(b) Reports issued by the firm or engagement partners are appropriate in the circumstances

  1. Leadership

    • An internal culture focused on quality is key

    • This means training, appraisal & mission statements.

    • Commercial considerations never override quality

    • Pay & Benefits must reflect commitment to quality.

    • Resources must be available to support quality

  2. Human Resources

    • All staff to have the capabilities & competence to ensure quality.

    • Appraisals and development regularly

  3. Engagement Issues - Planning

    • Discuss known risks with the client and document

    • Staff suitably qualified and experienced, have knowledge of the client

    • Contentious areas must be consulted on in a cost effective way

    • A timetable for suitable reviews

    • Ensure independence and any issues addressed

    • Time pressure

      All audits should be planned to ensure that adequate time
      can be spent to obtain sufficient appropriate audit evidence to support the audit opinion.

  4. Engagement Issues - Supervision

    • Staff supervised and assessed to control the work flow.

    • Any problems tackled immediately and consultation on any deviations from the original plan.

  5. Engagement Issues - Review

    • Review has the purpose of identifying previously unrecognised problems and examining them along with the rest of the work carried out.

    • Is the amount of evidence gathered sufficient or is further work required?

    • Quality control can be achieved during the review stage by:
      1) Learn lessons from mistakes made
      2) Appraisal staff immediately after assignments to praise &/or constructively criticise

  6. Monitoring

    • Ensure new developments in standards and regulations are implemented

    • Ensure CPD is kept up to date.

    • Any breaches to monitoring system dealt with

  7. Ethical Requirements

    • Have procedures to comply with ethical requirements eg. independence

    • Emphasise through leadership, education/training, monitoring and dealing with non-compliance

    • Have procedures to identify independence threats eg. prompt notification by employees

    • Ensure that firm is notified of breaches of ethical requirements promptly

Types Of Review

  • Hot Reviews

    A ‘hot’ review is carried out before the audit report is signed.

    Performed by a suitably independent reviewer such as a senior manager (not part of the management team).

    Listed company engagements must have a hot review as well as those of public interest or with significant risks.

    it reviews the quality of the judgements made such as:

    • Is the firm independent?

    • Are risk assessment judgements justified?

    • Use of work outside the audit team.

    • Have misstatements been correctly dealt with?

    • Do working papers support the conclusions reached?

    • Is the final engagement report justified in the circumstances?

  • Cold Reviews

    • A ‘cold’ review is a review carried out after the audit report is signed.

    • It will be designed to identify problems in procedures and poor practice.

    • The cold review should make recommendations for improvements.

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