Module 13: Documentation and Quality control Flashcards
6 key elements of FRCs thematic review on audit quality procedures
- Leadership responsibilities for audit quality procedures - policies and procedures in place in all firms
- Reviews of audit work by more senior members of the audit team - firm’s quality control procedures not yet sufficiently robust
- Inclusion of specialists and experts in the audit team - work needs to be scoped appropriately and sufficiently evidenced
- Consultation on accounting or audit matters - consultation was documented and concluded in line with requirements
- Evaluation of the overall presentation of the financial statements - all had technical review process to ensure FS quality
- Other initiatives to improve audit quality - Independent quality review not sufficiently documented. Compliance monitoring schemes varied considerably. Service delivery centres (SDC) usage increasing => audit firms need to ensure audit quality is maintained and improved as outsourcing increases
External monitoring - inter-firm reviews
Where teams from other audit firms will inspect audit files to ensure audit quality procedures are complied with.
Other external monitoring requirements:
ICAS
FRC’s professional oversight team
FRCS’s audit quality review committee and audit quality review team
FRC’s conduct committee
ICAS
Select firms for visiting on a risk basis with all firms visited at least once every 6 years
Inspections of larger firms carried out annually
FRC’s professional oversight team
Monitoring of ICAS’s firm monitoring process
Monitoring ICAS’s regulatory activities including education, training, CPD, standards, ethical matters, registration
FRC’s Audit Quality Review Committee and Audit Quality Review Team
AQRC helps ensure the consistency and quality of the FRC’s audit monitoring work
Inspection of audits of significant PIEs conducted by the AQRT
FRC’s Conduct Committee
Investigation of complaints related to audits of PIEs
Underlying themes for the poorer quality files reviewed by ICAS included:
- over reliance on the accounts preparation process
- specialist audit procedures not untiled in full
- inadequate approach to FRS 102 audit work
Permanent file
- information of long-term/continuing interest which is reviewed and updated regularly
Examples of information to include in the permanent file
- background information
- AoA
- engagement letter
- organisation chart
ISA (UK) 230 requirements
Auditor needs to demonstrate
- sufficient appropriate audit evidence collected to support opinion
- compliance with standards, legal and regulatory requirements
Documented on paper, electronic or other media
ISA 230 requirements to allow experienced auditor with no previous connection to client to understand:
- NET of audit procedures
- results and audit evidence obtained
- significant judgements and conclusions
Audit engagement file
- WPs relevant to a particular year’s audit
- must be indexed and cross-referenced
- ISA (UK) 230 requirements: characteristics, preparer and reviewer, sig matters, inconsistency with conclusions, departures from ISAs
- some ISAs contain specific documentation (ISA 240)
- Audit engagement file must be completed on a timely basis (60 days from date of auditor’s report)
Quality control
Quality control at the engagement level provides assurance that standards have been complied with and that the audit opinion is appropriate
Engagement partner:
- has overall responsibility for quality
- sets an example to the engagement team
- ensures ethical requirements complied with by the team
- ensures independence achieved
- ensures engagement team has the approp capabilities, competence and time
- ensures engagement approp directed, supervised, undertaken and reviewed
- ensures consultation taken on difficult or contentious matters
- ensures differences of opinion are resolved
