Quality Management Flashcards
What are the new standards regarding quality management that the IAA SB has published recently
ISQM 1 quality management for firms that perform audit or abuse of financial statements or other assurance or related service engagements
ISQM 2 engagement quality reviews
ISA 220 quality management for an audit of financial statements
What does ISQM 1 Quality management for firms that perform audits or reviews of financial statements or other assurance or related service engagements deal with
Deals with a firms responsibility to establish a system of quality management to support quality engagements
What does the ISQM 2 engagement quality deal with
Applies to all engagements for which such a review is required in accordance with ISQM one
What does ISA 220 quality management for audit of financial statements deal with
Deals with the responsibilities for quality management at the engagement level for an audit of financial statements
What must firms do in accordance with ISQM 1
The firm must design implementing operator system of quality management to provide it with reasonable assurance that
The firm and its personnel comply with professional standards and applicable legal and regulatory requirements
Report issued by the Firm or engagement partners are appropriate in the circumstances
What are the eight components that make up the ISQM1
Firms risk assessment process
Governance and leadership
Relevant ethical requirements
Acceptance and continuance of client relationships and specific engagements
Engagement performance
Resources
Information and communication
Monitoring and remediation process
Elaborate more on “Firms risk assessment process”
The firm must have a risk assessment process to:
Establish quality objectives
Identify and assess quality risks
Design and implement responses to address quality risks
Elaborate on “governance and leadership”
The firm must establish policies and procedure designed to promote an internal culture that recognises the quality is essential in performing engagements
Elaborate more on “relevance ethical requirements”
Throughout the orders engagements the engagement party shall remain alert through observation and making enquiries as necessary for evidence of non-compliance with relevant ethical requirements by members of the engagement team
Elaborate on “acceptance and continuance of client relationships and specific engagements”
The firm must ensure that decisions are appropriate based on:
The nature and circumstances of the engagement and integrity in ethical values of the clients
The firms ability to perform the engagement in accordance with professional standards and legal and regulatory requirements
The financial operational priorities of the firm must not lead to inappropriate decision
Elaborate on “engagement performance”
Overall responsibility for the quality rests with the engagement partner who must have sufficient and appropriate involvement throughout the engagement the nature timing and extensive direct and supervision of engagement teams and review of their work must be appropriate
Elaborate on “resources”
Three categories of resources are needed to operate the system of quality management and performance engagements:
Human
Technological
Intellectual
Elaborate on “information and communication”
Affirm should have an information system that supports the system of quality. Communication channels need to facilitate the exchange of information within the firm and with external parties including those charged with governance
Elaborate on “monitoring and remediation process”
Monitoring activities must provide a basis for the identification of deficiencies. Remedial actions to address identify deficiencies need to be responsive to the results of a “root cause analysis”
What is an engagement quality review
Public interest audit such as audit of limited companies should undergo an engagement quality with you. Here an Independent review (normally another partner) will be appointed to perform an objective evaluation of the significant judgements made by the engagement team and they reached a conclusion in formulating the audit report
