ISQM 1 Flashcards
Eligibility of engagement quality reviewers
• Cannot be a member of the engagement team.
• Must have the competence and capabilities, including sufficient time, and
the appropriate authority to perform the EQR.
• Must comply with relevant ethical requirements and laws and regulations.
How long the cooling-off period for engagement partner before the can assume the role of EQR for the same client?
Two years
Post issuance reviews
Purpose
To assess whether the firm’s policies and procedures
were implemented during an engagement and to
identify any deficiencies therein
Post issuance review
When
After an engagement has been completed
Post issuance review
What considered
Working papers should demonstrate that:
• Sufficient appropriate evidence has been
obtained
• All matters were resolved before issuing the
auditor’s report.
All working papers should be:
• On file
• Completed
• Signed as completed
• Evidenced as reviewed.
Asses the quality of the audit
Have ____ been followed?
ISAs
if not, sufficient and appropriate evidence will not have been obtained and an inappropriate report may be issued.
Asses the quality of the audit
Has the work been allocated to the __________
appropriate level of staff
Areas judgmental or subjective (goodwill, WIP, impairments, fv, revenue recognition, material estimates) should be audited by senior members with appropriate experience and professional judgment.
Juniors may exercise less professional scepticism than someone more senior.
Asses the quality of the audit
Has the audit been ____ pressured?
If rushed > insufficient work performed > inappropriate conclusion
Asses the quality of the audit
Has the appropriate type _________
audit evidence.
Asses the quality of the audit
Performed accordance to the a__ p___?
audit plan
Asses the quality of the audit
Has the audit been properly s_______?
supervised
- ensure issues are identified on a timely basis
- the competence of the team is continually assessed
- audit on track to be completed on schedule
(ex. supervisor is too busy, absent, not visited)
Asses the quality of the audit
Has the audit been properly r_______?
reviewed
take place shortly after the work has been completed, not several weeks later. (too late, then no time to solve)
performed by senior than the person who performed the work
The analytical procedures is not being audited as it was written ‘not applicable - new client’
Analytical procedures should have been performed at the planning stage, to assist in understanding the business and identifying areas of potential risk (ISA 315)
The audit plan is not being signed and reviewed by audit supervisor
the impact on audit?
The audit may not be carried out effectively and efficiently as the audit work has been commenced before the audit plan been reviewed by the audit supervisor
Audit senior - NCA (18% of TA)
Trainees - TR (57% of TA)
The senior performed work on NCA which is less material than TR which has been assigned to trainees.
NCA lower risk than TR (see the diff between current and previous years).
The audit is being inadequately supervised as work has been delegated inappropriately.
Supervisor is not competence.
FS ends on 31 March.
Request for TR balances confirmation on 1 July. (circularisation method)
Inappropriate as it is three months after the financial position date.
sending confirmation for more recent balances can be more effective rather than year-end balances (if there are time constraints).
FS ends on 31 March.
Request for TR balances confirmation on 1 July.
are there other audit procedures to do?
After-Date Cash Testing for TR
checking if customers paid their outstanding invoices after the year-end, confirm the receivables were real and collectible.
FS ends on 31 March.
Request for TR balances confirmation on 1 July.
what is the supervisor responsible in this matter?
The audit supervision is weak.
Trainees may not fully understand audit procedures and follow instructions mechanically without critical thinking (not realizing that an alternative might be more appropriate)
Clerk keeps $2,500 cash to meet sundry expenses. The audit program shows that counting it is ‘outstanding’
Trainees had been sent to count it but returned as it was not convenient to the clerk.
what does outstanding in that context mean?
Outstanding - the cash is not verified yet.
$2,500 is immaterial but still expect auditor to count (cash is high risk asset)
The briefing by the senior is inadequate - trainees not understand the count should be done as soon as possible to reduce the risk of manipulation.
Senior decided to postpone the audit procedures.
Can be postponed if it is appropriate to do so but the details should have been recorded to support the senior’s decision to change the time of a planned procedure
Trainees audit inventory (consumable supplies) which is % (material).
Trainees decided to do the ‘roll-back’ test as they have not been appointed as auditor during the year-end physical count.
Although material, low risk since it is not for trade. Appropriate for trainees to audit it.
But roll-back test is appropriately inefficient. (in-depth testing on a relatively low risk area)
This provides evidence of
- audit inadequately planned
- lack of knowledge and understanding of client’s business
Client drafted its first ‘Report to Society’ which contains health, safety and environmental performance
Senior ‘to be dealt when all other info in the company’s annual report is available’
Leaving it until the end of audit, could cause problems.
if the audit firm is actually required to provide assurance on the report, there may not be sufficient time to perform the work required to be able to issue the report by the required deadline
