Quality Control Standards

Question 1

Objective

Answer 1

The objective of the auditor is to implement quality control procedures at the
engagement level that provide the auditor with reasonable assurance that
1. The audit complies with professional standards and applicable legal and regulatory
requirements; and
2. The auditor’s report is appropriate in the circumstances.

Question 2

Define Engagement Quality Control Review

Answer 2

process designed to provide an objective
evaluation, before the report is released, of the significant judgments the engagement team
made and the conclusions it reached in formulating the auditor’s report

Question 3

Name the 6 Elements of SQCS (HERMAL)

Answer 3

1. Leadership Responsibilities
2. Relevant Ethical Requirements
3. Acceptance and continuance of client relationships and engagements
4. Human resources
5. Engagement performance
6. Monitoring

Question 4

When does SAS and ISA require the quality control review to be completed

Answer 4

SAS - Before engagement partner releases the report.

ISA - before engagement partner dates the report

Question 5

Define Leadership Responsiblites

Answer 5

Leadership responsibilities for quality - Policies and procedures should promote an internal culture that emphasizes a commitment to quality (sometimes called the “tone at the top”). For an individual audit engagement, the engagement partner should take responsibility for overall audit quality, although performance of certain procedures may, of course, be delegated to other members of the engagement team.

Question 6

Define Relevant ethical requirements

Answer 6

Relevant ethical requirements - Policies and procedures should address the independence of personnel as necessary (should obtain written confirmation of compliance with independence requirements from all appropriate personnel at least annually).

Question 7

Define Monitoring

Answer 7

Monitoring - Policies and procedures should provide an ongoing assessment of the adequacy of the design and the operating effectiveness of the system of quality control. Controls that are effective at one point in time, may deteriorate over time owing to neglect or changed circumstances. It is important that the controls are properly monitored so that timely adjustments can be made as necessary to keep the quality control policies and procedures working effectively over time.

Question 8

Define Engagement Performance

Answer 8

Engagement Performance - policies and procedures should focus on compliance with all applicable firm and professional standards and applicable regulatory requirements, and encourage personnel to consult as necessary with professional (or other) literature or other human resources within or outside of the firm for appropriate guidance.

Question 9

Definite Human Resouces

Answer 9

Human Resources - Policies and procedures should address important personnel issues (including initial hiring, assignments to engagements, professional development and continuing professional education, and promotion decisions).

Question 10

Define Acceptance and Continuance of client-relationships and engagements

Answer 10

Acceptance and continuance of client-relationships and engagements - Policies and procedures should carefully assess the risks associated with each engagement (including issues related to management integrity) and the firm should only undertake engagements that can be completed with professional competence.