CHAPTER 4 Quality Control.pdf - GREAT ZIMBABWE UNIVERSITY DEPARTMENT OF ACCOUNTING AND INFORMATION SYSTEM COURSE CODE MAAC501 APPLIED AUDITING ASSURANCE

CHAPTER 4 Quality Control.pdf - GREAT ZIMBABWE UNIVERSITY...

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Page 1 of 8 GREAT ZIMBABWE UNIVERSITY DEPARTMENT OF ACCOUNTING AND INFORMATION SYSTEM COURSE CODE: MAAC501 APPLIED AUDITING & ASSURANCE SERVICES 1 NOTES CHAPTER 4 Quality control Subtopics Principles and purpose Quality control at a firm level Quality control on an individual audit Introduction The role performed by auditors represents an activity of significant public interest. Quality independent audit is crucial, both to users and to the audit profession as a whole. Poor audit quality damages the reputation of the firm and may lead to loss of clients and thus fees, as well as an increased risk of litigation concomitant professional insurance costs. Although there are specific standards giving guidance on how auditors should perform their work with satisfactory quality, these can never cater for every situation. Two standards deal with quality at a general level. These are ISQC 1 Quality control for firms that perform audits and reviews of financial statements, and other assurance and related services engagements, and ISA 220 Quality control for an audit of financial statements Principles and purpose Audit quality is not defined in law or through regulations, and neither do auditing standards provide a simple definition. Although each stakeholder in the audit will give a different meaning to audit quality, at its heart it is about delivering an appropriate professional opinion supported by the necessary evidence and judgements . Many principles contribute to audit quality; including good leadership, experienced judgement, technical competence, ethical values and appropriate client relationships, proper working practices and effective quality control and monitoring review processes. The standards on audit quality provide guidance to firms on how to achieve these principles. Quality control at a firm level The International Standard on Quality Control (ISQC 1) helps audit firms to establish quality standards for their business. The fact that auditors follow international auditing standards provides a general quality control framework within which audits should be conducted. There are also specific quality control standards. Purpose of ISQC 1 ISQC 1.11 The objective of the firm is to establish and maintain a system of quality control to provide it with reasonable assurance that: (a) The firm and its personnel comply with professional standards and applicable legal and regulatory requirements; and (b) Reports issued by the firm or engagement partners are appropriate in the circumstances. We shall now consider the requirements of the rest of the standard, which fall into the following areas.
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Page 2 of 8 Firm and leadership responsibilities for quality within the firm Human resources Engagement performance (see also below, the requirements of ISA 220) Monitoring Firm and leadership responsibilities for quality within the firm ISQC 1.13 Personnel within the firm responsible for establishing and maintaining the firm's system of quality control shall
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