- 15 Marks
Question
The partners of a number of small firms, some of whom act as alternate firms to each other, were considering the outcome of some reviews by the Financial Reporting Council on some of the financial statements the firms prepared. These reviews showed significant lapses in the works they carried out and compliance failure of some appropriate standards. Some other practitioners amongst them also raised concerns about their failure to meet most of the monitoring guidelines issued by the Professional Practice Monitoring Committee of the Institute. Based on these, it has become imperative that something has to be done urgently to save them from further sanctions and possible litigations.
The partners of these small firms have consulted, sought and obtained approval of your firm to train them on requirements of relevant regulatory bodies as part of your firm’s contribution to the accountancy profession in general and in recognition of your firm as one of the reputable big firms. Your partner has directed that you prepare and make a presentation to help improve their service delivery standards.
Required:
Prepare an outline for a paper that will be used to address these practitioners on the following:
a. The consequences and actions that could arise as a result of poor quality professional service delivery.
(3 Marks)
b. The responsibilities of “key quality control matters” placed on the engagement partner in accordance with ISA 220-Quality Control for an Audit of Financial Statements.
(12 Marks)
Answer
a.
The consequences and actions that would arise as a result of poor quality professional service delivery could be any (or all) of the following:
i. Legal actions and legal costs;
ii. The loss of the client(s);
iii. Adverse publicity and damage to the reputation of the audit firm; and
iv. Disciplinary proceedings by a professional body, such as ICAN.
b.
The responsibilities of “key quality control matters” placed on the engagement partner in accordance with ISA 220-Quality Control for an Audit of Financial Statements include:
i. The engagement partner shall take responsibility for the overall quality on the engagement; ii. The engagement partner shall be sufficiently and appropriately involved throughout the engagement;
iii. The engagement partner shall take responsibility for:
• Direction, supervision and performance of the audit engagement; and
• Performance of all significant matters;
iv. The engagement partner shall take responsibility for the engagement team by:
• Being sufficiently and appropriately involved throughout the engagement;
• Taking responsibility for the direction, supervision and performance of the audit engagement; and
• Taking responsibility for reviews before the report is issued;
v. The engagement partner shall remain alert for engagement circumstances or developments that may give rise to the need for an engagement quality control review;
vi. The engagement partner shall consider the results of the monitoring procedures of the firm and whether arising issues or deficiencies were addressed to the satisfaction of senior management;
vii. The engagement partner shall consider the matters raised by the firm’s system of quality control;
viii. The engagement partner shall document considerations that are required by the firm’s policies or procedures on quality control;
ix. The engagement partner shall take responsibility for the direction, supervision, and performance of the audit engagement;
x.
• Discussion of significant matters with the engagement partner;
• Review of the financial statements and the proposed audit report;
• Review of selected audit documentation relating to significant judgments; and
• An evaluation of the conclusions reached and whether the proposed audit report is appropriate.
xi. Due consideration is given to the engagement team’s evaluation of the firm’s independence in relation to the audit engagement;
xii. Due consideration is made whether appropriate consultation has taken place on difficult or contentious matters; and
xiii. Due consideration whether audit documentation selected for review reflects the work performed and the conclusions reached.
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