Quality Management

Question 1

Quality management is the subject of three standards

Answer 1

ISQM 1 (firm level)
ISQM 2 (firm level)
ISA UK 220 (engagement level)

Question 2

Benefits of a system of quality mangenent

Answer 2

Standard of all audit work completed is high and consistent
Registered auditors are regarded as professionals who follow standards
Quality of the work completed can be measured against a standard
Individuals within a firm know if the work they have completed is acceptable

Question 3

quality standards require the firm to apply a

Answer 3

Risk based approach, thinking about the specific quality risks for the firm and for its individual engagements. At the centre of the risk based approach is the SOQM

Question 4

Risk based approach

Answer 4

Focusing and prioritising high risk processes to ensure quality objectives are met

Question 5

System of quality management

Answer 5

A system sedimented, implemented and operated by a firm to provide the firm with reasonable assurance

Question 6

Conceptual structure of the risk assessment

Answer 6

Establish quality objectives
Identify risks
Respond to risks

Question 7

Elements of the SOQM

Answer 7

governance and leadership
Relevant ethical requirements
Acceptance and continuance
Engagement performance
Resources
Information and communication

Question 8

Quality objectives for acceptance and continuance of client relations

Answer 8

Whether the client has integrity and ethical values
Whether the firm is able to perform the engagement to the required standards
The firms financial/operational priorities should not lead it to accepting or continuing engagements that should not be accepted

Question 10

For uk firms that undertake audits of fs at least one of the individuals assigned the ultimate responsibility for the SOQM needs to be eligible for the appointment of

Answer 10

Statutory auditor

Question 11

Sub objectives to ensure ethical quality objectives are met

Answer 11

Personnel receive sufficient training
Audit department staff to receive ethical update training every six months
Audit staff do not accept gifts from clients

Question 12

Audit documentation should contain ISA 230

Answer 12

What would be necessary to provide an experienced auditor, with no previous connection with the audit, with an understanding of the nature, extent and timing of audit procedures, the results of audit procedures and the audit evidence obtained and significant matters arising during the audit and conclusions reached theron

Question 13

When difficult or contentious issues arise

Answer 13

The assurance team must consult properly on the matter and the conclusions drawn as a result of consultation must be properly recorded

Question 14

Any differences of opinion

Answer 14

Must be resolved prior to the assurance report being issued. This may mean that a person independent of the engagement eg engagement quality reviewer, may have to be involved in resolving the difference of opinion

Question 15

The EQR is applied only

Answer 15

For audits of PIEs
Where the audit engagement partner has determined that an EQR is needed eg as an ethical safeguard
Audits or other engagements for which the firm determined that an engagement quality review is @m appropriate response to address one or more quality risks

Question 18

Circumstances where an EQR may be performed, even though there might not be a legal requirement ISQM 1

Answer 18

Engagements requiring a high level of complexity or judgement
Engagements which have a history of control deficiencies of regulatory intervention
Anomalies encountered during engagement acceptance and continuance procedures
Engagements which contain the use of info required for subsequent purposes
Higher risk entities that fall outside the scope of PIEs

Question 19

For listed entities, an EQR is conducted by

Answer 19

A suitably qualified partner or other person in the firm not otherwise involved in the engagement or by an external consultant. Role is to review the significant judgements made on the engagement. The engagement partner is still responsible for the engagement as a whole, so if something goes wrong they cannot share their responsibility with the reviewer

Question 21

The EQR is not a review of the whole audit but

Answer 21

Only of the significant judgements made

Question 23

Requirements of the engagement quality reviewer ISQM 2

Answer 23

Have the competence and the abilities, including sufficient time and the appropriate authority to perform the EQR
comply wi5 the relevant ethical requirements
Comply with provisions of law and regulation that are relevant to the eligibility of the EQ reviewer

Question 24

Uk where the engagement being reviewed is an audit, the reviewer must be

Answer 24

Eligible for appointment as statutory auditorm

Question 25

ISQM stipulates a cooling off period of at least

Answer 25

2 years for partners who were previously responsible for the engagement

Question 26

Firm must hire personnel with the competence and capabilities to

Answer 26

Consistently perform quality engagements Perform activities in relation the to SOQM demonstrate a commitment to quality

Question 27

For any engagements that are statutory audits, the firm appoints

Answer 27

One key audit partner who is also an engagement partner

Question 28

Monitoring and mediation

Answer 28

Monitoring engagements that have been completed and fixing any problems that are discovered.

Question 29

Cold reviews

Answer 29

Take place after the assurance assignment has been completed Conducted either as a process whereby partners in a firm review each others work By a team specifically constituted to conduct such reviews By a suitably qualified external consultant

Question 30

Appropriate courses of action where failures are identified

Answer 30

Communication of the findings within the firm Additional training and professional development Changes to the firms policies and procedures Disciplinary actions to those who repeatedly fail to comply with the firms standards

Question 31

A hot review takes place

Answer 31

Before the auditors report is issued, performed by a partner not otherwise involved in the engagement or an external consultant

Question 32

The individual who is ultimately responsible for the SOQM must review it, at least

Answer 32

Annually

Question 33

Auditors responsibilities for quality management

Answer 33

ISQM 1 ISA 220

Question 34

The audit engagement partner is responsible for

Answer 34

Managing and achieving quality on the audit engagement understanding the relevant ethical requirements for the audit and informing the engagement team Determine the firms policies and procedures for acceptance and continuance and the auditing standard for planning and performing the audit have been followed Allocating sufficient appropriate resources in order to satisfactorily complete the engagement Address feedback km the conduct of the audit and any actions that need to be taken

Question 35

Is ICAEW practice assurance schem primarily disciplinary?

Answer 35

No but disciplinary action may be taken as a result of the review

Question 36

Four items the engagement partner should ensure the assurance team is aware of prior to commencing an engagement

Answer 36

What work they are supposed to be doing The nature of the entity’s business Any risks relevant to the engagement Problems that might arise during the engagement The detailed approach to the engagement

Question 38

Informative role of the senior supervisor

Answer 38

Inform u of your responsibilities Explain objectives of work being carried out Explain nature of the entity’s business Highlight possible accounting and audit problems which may effect the procedures you’re carrying out

Question 39

What would u expect the review to consider before being passed to the manager

Answer 39

Work properly conducted in accordance with plan/ programmes Working papers to a standard/evidence recorded Conclusions valid Matters identified for further consideration Working papers headed, initialled, dated

Question 40

Objectives of a firms SOQM

Answer 40

Ensure that the auditor performs the right work to a high standard and adequately records the work done Ensured the auditor draws the correct conclusions from evidence available, forms the appropriate audit opinion and deals adequately with issues raised including reporting to management Protects the auditor from risks arising as a result of incompetence or negligence of the clients staff and protect the firm firm the risk of litigation

Question 41

What does SOQM include

Answer 41

Selecting the appropriate team, supervising staff, consulting sufficiently with colleagues and outside experts and reviewing the work carried out by the team with sufficient care

Question 42

Attributes of an individual who is appointed by a firm to undetake engagement quality reviews

Answer 42

Technically competent Experience of the audited entity’s industry and listed companies Possess an understanding of the entity and the engagement Independent of both the audited entity and the engagement team Have the authority to evaluate objectively the judgements and conclusions reached during the audit Someone eligible for appointment as statutory auditor Not be intimidated

Question 43

Role of the engagement quality reviewer

Answer 43

Ensures that professional standards and legal and regulatory standards have been met by, -discussion of significant matters with the engagement partner -review of selected documentation, FS and proposed auditors report -review of judgements, particularly materiality and significant risks -evaluation of conclusions -evaluation of the firms independence

Question 44

Purpose of an engagement quality review

Answer 44

Reduce the level of engagement risks on audits of listed entities and other audits where the firm has determined a review is required eg high risk engagements

Question 45

Audit managers review determines whether

Answer 45

Sufficient appropriate evidence has been used Evidence supports the audit conclusions Work has been performed in accordance with audit standards Work is adequately documented

Question 46

The role of monitoring

Answer 46

Considers compliance with the firm’s procedures Aims to improve the quality of the firms future audits by identifying areas where training is required Performed by senior staff not involved in the engagement after the report is signed Performed on an on going basis on a sample, includes at least one engagement for each partner