CH5 quality management

Question 1

Why quality?

Answer 1

• Reputation
• Sued
• Public interest

Question 2

Systems to ensure quality: external

Answer 2

1. Listed company audit files periodically reviewed by Audit Inspection Unit (FRC Exec Committee)
2. Regulatory reviews of non-listed audits are periodically reviewed by ICAEW
3. Failure can result in disciplinary action - fines, suspension from carrying out audits

Question 3

Systems to ensure quality: internal

Answer 3

ISQM1: raises areas of quality for a firm to consider at FIRM LEVEL.

Includes mandatory responses to quality considerations

Auditors are also required to implement performance related quality measures on individual audits according to ISA 220.

Question 4

ISQM1: 8 elements of system of quality management

Answer 4

1. Risk assessment
2. Governance and leadership
3. Ethical requirements
4. Continuance and acceptance
5. Engagement and performance
6. Resources
7. Information and communication
8. Monitoring and remediation processes

Question 5

Is a hot review mandatory for listed companies?
Any other circumstances where a hot review might be mandatory? According to what?

Answer 5

Yes

High risk audits/where objectivity might be compromised

ISQM 2

Question 6

Is a cold review a mandatory requirement? According to what?

Answer 6

Yes - mandatory requirement of ISQM 1

Question 7

UK corporate governance code requirements: Audit committee: general oversight of auditor: what are their responsibilities?

Answer 7

1. Recommending appointment
2. Recommending reappointment/removal
3. Approving fees (reliance)
4. Agreeing terms of engagement
5. Putting audit out to tender every 10 years
6. Annually assessing the independence, objectivity and effectiveness of the external audit process and reporting to s/hs once they have done so.