• 5 Marks

AA – Dec 2022 – L2 – Q1c – Professional and Ethical Considerations

Explains the need for a quality control system in accounting firms, with reference to the audit of God First Microfinance.

You are the manager in charge of the audit of God First Microfinance Co. Ltd for the year ended 31 December, 2021. Due to the highly regulated environment in which such companies have to operate, your partner has requested that, right from the planning stage of the audit, you strictly apply the requirement of ISA 220: Quality Control for an audit of financial statements.

Required:
State FIVE (5) reasons for the need for a quality control system in accounting firms.

The need for a quality control system in accountancy firms:

  • Quality control reduces the risk for the audit firm that it will issue an incorrect audit opinion.
  • Quality control helps to avoid legal actions or being sued for negligence.
  • It prevents legal damages and legal costs.
  • Helps to maintain the client relationship and avoid loss of the client.
  • Avoids adverse publicity and damage to the reputation of the audit firm.
  • Prevents disciplinary proceedings by a professional body such as ICAG.
    (5 marks)
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