ADVANCE AUDIT AND ASSURANCE

BSC IN ACCOUNTING (EVENING GROUP 2)

NAME: HAMMAH FREDERICK

INDEX NUMBER: 10273835

LEVEL: 400

Quality Control for an Audit of Financials

ISA 220 & ISQC 1
QUALITY CONTROL ARRANGEMENTS FOR INDIVIDUAL ENGAGEMENTS ISA
220

The objective of the auditor as set out in ISA 220 Quality control for an audit of financial
statements is to implement quality control procedures at the engagement level to provide
reasonable assurance that: the audit complies with professional standards and applicable legal
and regulatory regulations, and the audit report issued is appropriate.

This means that quality control procedures should be implemented that are applicable to the
individual audit engagement. ISA 220 places the responsibility for key quality control matters on
the engagement partner. The engagement partner has responsibility for the overall quality of the
audit and is required to put procedures in place to ensure that: ethical standards are complied
with and appropriate action taken if there is evidence to the contrary

INDEPENDENCE

 Identifying circumstances and relationships that might give rise to threats to

independence
 Assessing the impact of breaches of the firm’s independence policies and procedures and
whether such breaches create a threat to independence
 Taking suitable action to eliminate identified threats or to withdraw from the engagement
if appropriate
 Procedures are in place to deal with the acceptance of new engagements and the
continuance of existing engagements

DOCUMENTATION

•Conclusions in respect of new and continuing engagements

•The nature and scope of conclusions from consultations undertaken.

•Considers whether audit documentation selected for review reflects the work performed and the
conclusions reached.
•The review was completed on or before the date of the audit report

•He is not aware of any unresolved matters that would cause him to believe that the significant
judgements made by the audit team and the conclusions they reached were inappropriate

QUALITY CONTROL ARRANGEMENTS AT THE OVERALL FIRM LEVEL

Quality control policies and procedures at a firm level are set out in ISQC 1 Quality control for
firms that perform audits and reviews of financial statements, and other assurance and related
services engagements.

The objective of the firm as set out in ISQC 1 mirrors that of the auditor in ISA 220. The
objective of the firm is to establish and maintain a system of quality control to provide it with
reasonable assurance that:

The firm and its personnel comply with professional standards and applicable legal and
regulatory regulations, and Reports issued by the firm are appropriate.

The quality control procedures that are applied within an audit firm will reflect the nature and
size of the audit practice. However, personnel within the firm who are responsible for
establishing and maintaining quality control procedures must have an understanding of the entire
text of ISCQ 1. As the firm must meet the requirements of ISQC 1, it should have a system in
place which addresses each of the following elements:

 Leadership responsibilities for quality

 Ethical requirements
 Acceptance and continuance of engagements
 Human resources
 Engagement performance
 Monitoring
 Documentation
THE REQUIREMENT OF 1SQC 1

LEADERSHIP RESPONSIBILITIES FOR QUALITY

ISQC 1 requires the firm to establish policies and procedures designed to promote an internal
culture recognizing that quality is essential. Ultimate responsibility for quality control policies
and procedures should rest with the firm’s CEO (or equivalent) or managing board of partners
(or equivalent). Any person who has operational responsibility for quality control should have
appropriate experience and ability and the necessary authority.

ETHICAL REQUIREMENT

ISQC 1 requires the firm to establish policies and procedures to provide it with reasonable
assurance that the firm and its staff: Comply with relevant ethical requirements, and Maintain
independence where required to do so by those requirements. The firm should:

Communicate its independence requirements to staff, and Identify and evaluate circumstances
and relationships that create threats to independence, assessing the impact of such threats and
applying safeguards or withdrawing from the engagement if appropriate.

ACCEPTANCE AND CONTINUANCE OF ENGAGEMENTS

ISQC 1 requires the firm to establish policies and procedures to provide it with reasonable
assurance that the firm will only take on or continue work where the firm:

Is competent to perform the engagement has the capabilities (including the necessary resources)
to do so can comply with the relevant ethical requirements, and has considered the integrity of
the client and does not have information which would lead it to conclude that the client lacks
integrity. The policies and procedures should include requiring the firm to:

 Obtain sufficient information to make such decisions (for new or existing engagements)
 Consider potential conflicts of interest (and therefore whether it should accept the
engagement)
 Document all identified issues and how they were resolved.
These requirements mean that there should be a review of proposed new clients and (at regular
intervals) of existing clients, to make sure that the firm will be independent, that there are no
conflicts of interest and the firm has the technical competence to do the audit work.

When an audit firm accepts an audit engagement from a new client, suitable procedures should
therefore be carried out to ensure that:

 The firm will be independent and there are no conflicts of interest

 The firm has the technical competence to do the work
 Professional clearance has been obtained from the previous auditors of the new client
 Appropriate anti-money laundering (client identification) procedures are performed.

HUMAN RESOURCES

ISQC 1 requires the firm to ensure: it has sufficient personnel with the competence, capabilities
and commitment to ethical principles to meet its overall quality control objectives, and that for
each engagement an appropriate engagement partner and team are assigned.

Policies should therefore exist for the recruitment, training and development of staff. The firm
should ensure compliance with ISAs and audit staff should have a good knowledge of accounting
standards and local/national statutory accounting regulations

ENGAGEMENT PERFORMANCE

Policies and procedures are required to include:

 Those to promote consistent quality engagement performance

 Supervision responsibilities
 Review responsibilities (on the basis that more experienced team members review the
work of less experienced team members)

Guidance on consultation to ensure that:

 Appropriate consultation takes place on difficult or contentious matters

  Sufficient resources are available for such consultation
 The nature, scope and conclusions of the consultation are documented (by both parties)
 Conclusions arising from the consultation are implemented

MONITORING

The firm is required to establish a monitoring process designed to provide it with reasonable
assurance that its quality control system is relevant, adequate and operating effectively. This
process should include inspecting, on a cyclical basis, at least one completed engagement for
each engagement partner. Responsibility for the monitoring process should be given to a partner
or other appropriate person with sufficient experience and authority. When monitoring reviews
(also referred to as ‘cold reviews’) are carried out they should not be performed by those
involved with the engagement or the engagement quality control review

DOCUMENTATION

The following matters are required to be documented.

 Evidence of the operation of each element of the system of quality control.

 Complaints and allegations made against the firm and how these were resolved.

Documentation must be retained for a sufficient period of time, as a minimum to comply with
relevant laws and regulations.

ICAG QUALITY ASSURANCE MONITORING

ICAG has direct responsibility for quality assurance in Ghana. Subsequently, ICAG has
developed a Quality Assurance Monitoring (QAM) system managed by an Audit Quality
Monitoring (AQM) Unit.

The AQM’s work involves reviewing the audit and assurance work, internal control and quality
control systems of registered audit firms, advising on improvements required, then following-up
at a later stage to review progress against their recommendations. As part of its work, the AQM
unit has targeted small and medium sized practices (SMPs) which face greater challenges in
complying with ICQC1 and the ISAs.

So far, the AQM has acted more in an advisory role rather than as a sanctioning body, although
this may change over time. At the time of writing, ICAG has conducted full monitoring visits at
over 100 firms The Institute has also signed a twinning agreement with the Institute of Chartered
Accountants of England and Wales to receive support in training its Quality Assurance
reviewers.

To support its members, ICAG:

 Organizes seminars on the QA review system;

 Produces a QA Review Manual including illustrative templates; and
 Includes courses and workshops on ISQC 1 in its continuing professional development
programs.
 ICAG is also preparing by-laws to guide audit practices in Ghana.

REFERENCE
Institute of Chartered Accountant Ghana. (2019, May) Advance Audit and Assurance. Bracknell,
Berkshire: Emile Woolf International
ISA 220: Quality Control for an Audit of Financials. (2014, August 2). Retrieved November 24,
2021, from LeAccountant website: https://leaccountant.com/isa-220-summary