ACCA AAA ^INT Syllabus C. Practice Management - Elements of a QC system - Notes ^{3 / 6}

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

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3. Human Resources

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

   • Appraisals and development regularly

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5. 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.

6. 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.

7. 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

8. Monitoring

   • Ensure new developments in standards and regulations are implemented

   • Ensure CPD is kept up to date.

   • Any breaches to monitoring system dealt with

9. 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.