Week 4 Flashcards
PES 3 - Quality Management Objectives
- The firm’s risk assessment process
- Governance and leadership
- Relevant ethical requirements
- Acceptance/continuance of client relationships/engagement
- Engagement performance
- Resources
- Information and communication
- Monitoring and remediation process
documentation of the quality management system importance.
Documentation provides evidence that the firm complies with this PES, as well as law, regulation or relevant ethical requirements. It may also be useful for training personnel and engagement teams, ensuring the retention of organisational knowledge and providing a history of the basis for decisions made by the firm about its system of quality management.
Documentation ensures the quality management system is communicated and applied consistently across the firm (
The Firm’s Risk Assessment Process
The firm shall design and implement a risk assessment process to establish quality objectives, identify and assess quality risks and design and implement responses to address the quality risks including policies and procedures for identifying, evaluating risks to compliance with the ethical requirements and reporting any breaches.
Process to identify, assess and respond to risks to audit quality
Governance and Leadership
The firm shall establish the following quality objectives that address the firm’s governance and leadership, which establishes the environment that supports the system of quality management e.g., a culture that serves the public interest, the importance of ethics, leadership is responsible and accountable.
Establish on environment that supports a commitment to quality (culture, code of ethics)
Relevant Ethical Requirements
The firm shall establish the following quality objectives that address the fulfillment of responsibilities in accordance with relevant ethical requirements, including those related to independence.
Understanding and fulfilling the ethical requirements including independence.
Acceptance and Continuance of Client Relationships and Specific Engagements
The firm shall establish the following quality objectives that address the acceptance and continuance of client relationships and specific engagements – judgements are appropriate.
Appropriate judgement about accepting accounting the relationship with the client including ethical issues.
Engagement Performance
The firm shall establish the following quality objectives that address the performance of quality engagement, e.g. understand and fulfil their responsibilities, exercise appropriate professional judgement, assemble engagement documentation on a timely basis
Understanding their duties and fulfillment of duties in performing audit. Eg supervising staff, audit documentation, evidence that you have added.
Resources
The firm shall establish the following quality objectives that address appropriately obtaining, developing, using, maintaining, allocating and assigning resources in a timely manner to enable the design, implementation and operation of the system of quality management. Includes hiring and developing personnel with the appropriate competence and capabilities.
Developing human resources, technological, intellectual resources to make sure the audit is at acceptable quality. The resources you are using to undertake the audit.
Information and Communication
The firm shall establish the following quality objectives that address obtaining, generating or using information regarding the system of quality management, and communicating information within the firm and to external parties on a timely basis to enable the design, implementation and operation of the system of quality management.
Having relevant and reliable information supports and communicate within internal and external parties.
Monitoring and Remediation Process
The firm shall establish a monitoring and remediation process to: (Ref: Para. A138)
(a) Provide relevant, reliable and timely information about the design, implementation and operation of the system of quality management.
(b) Take appropriate actions to respond to identified deficiencies such that deficiencies are remediated on a timely basis.
Of the quality management system on a timely basis, working properly
Developing competence in staff
- Professional education
- Continuing professional development
- Training
- Work experience
- Coaching of less experienced engagement team members
- Training programs focused on developing the competence of personnel and continuing professional development.
What are the auditor’s responsibilities under common law?
To perform the audit as per the engagement letter, comply with auditing standards, and conduct the audit with due care and skill.
What must be proven for an auditor to be liable for negligence?
A duty of care was owed, the audit was negligently performed, the plaintiff suffered a loss due to this negligence, and the loss is quantifiable.
What are the key principles established in Kingston Cotton Mill Co. (1896)?
Auditors must act as a “watchdog” with reasonable skill and care, relying on their own checks rather than solely on client representations
What did London and General Bank (1895) highlight about an auditor’s duty?
An auditor must be honest, independent, and take reasonable care and skill but is not required to give advice to directors or shareholders.
