AUDIT QUALITY CONTROL

Audit Quality Control (iSA 220)

The quality of the work carried out by the auditor is of fundamental importance. This is especially so in the light of potential of being sued for negligence. The auditor remains personally responsible for the work he carries out and the opinion he issues. The only way of reducing the risk of being sued is to ensure that work performed by the firm is of the highest quality possible

Quality control refers to the various policies and procedures put in place by the auditor to ensure that all audits conducted by the audit firm meet the quality standards set out by the accounting profession and the firm’s own quality standards.

Objectives of Audit Quality Control

To meet professional requirements. Audit staff employed by the firm should adhere to the principles of independence, objectivity, confidentiality and professional behaviour.
Skill and competence. The audit firm should be staffed by personnel who have attained and maintained the technical standards and professional competence required to enable them fulfill their responsibilities with due care.
Assignment. audit work is to be assigned to personnel who have the degree of technical training and proficiency required in the circumstances.
Delegation. There should be sufficient direction, supervision and review of work at all levels to provide reasonable assurance that the work performed meets appropriate standards of quality.
Consultation. Where necessary, consultation within and without the firm should be carried out with those with appropriate knowledge.
Acceptance and retention of clients. an evaluation of prospective clients and a review on an ongoing basis of existing clients should be conducted. in making a decision to accept or retain a client, the firm’s independence and ability to serve the client properly and the integrity of the client’s management should be considered.
Monitoring. The firm should continuously monitor the adequacy and operational effectiveness of quality control policies and procedure’s.

The firm’s general quality control policies and procedures should be communicated to its personnel in a manner that provides reasonable assurance that the policies are understood and implemented.

Quality control policies and procedures at individual audit level

Delegation. Audit work should be delegated by the reporting partner to staff who have appropriate experience, training, proficiency and independence. This will provide reasonable assurance that such work will be performed with due care by persons having he required technical competence.
Direction. Audit assistants to whom work is delegated should be given appropriate instructions. This involves informing audit assistants of their responsibilities and objectives of the procedures they are to perform. It also involves informing them of matters such as nature of client’s business and the possible accounting and auditing problems.
Supervision. This involves monitoring the progress of the audit to consider whether assistants have the necessary skills and competence to carry out their assigned tasks, establishing whether assistants understand the audit instructions and resolving any differences of professional judgment between personnel. Supervision also entails identifying and addressing any significant accounting and auditing questions raised in course of the audit and ensuring that work is being carried out in accordance with the overall audit plan and audit programme.
review Work performed by each staff member should be reviewed by a person of equal or higher competence to ensure that work has been performed in accordance with audit programme, has been properly documented and that audit objectives have been met.

What is Peer Review?

Peer review may be described as an independent review of a firm’s accounting and auditing practices. it is intended that the review be done by practitioners upon fellow practitioners hence the term peer review. The work of the review is limited to:

professional aspects of the practice.
overall total quality control policies.
Professional aspects of firm’s accounting and auditing practices like maintenance of working papers and custody of financial statements.

Objectives of Peer Review

To promote compliance with professional standards and other technical pronouncements.
To provide reasonable assurance to users of financial statements that professional standards have been complied with in performance of audit and related services.
To promote uniform application of generally accepted methods of professional practice.
To gain increased user confidence in the reliability of audited financial statements.
To establish a mechanism of continuous quality improvement in professional practice and a self regulatory framework for policies and procedures.
To enhance the status and image of accounts to the public through assurance of compliance and quality in performance of audit and related services.
To help ensure that auditors are competent and independent and to identify potential problems in this regard at an early stage for necessary corrective actions.
To help identify weaknesses in the audit process and provide technical assistance for professional development.

Reasons for introducing Peer Review

There is desire on the part of professional bodies worldwide to ensure that members apply and observe professional standards.
The institute of certified public accountants of Kenya (ICPAK) deems it appropriate to ensure adherence to existing technical standards through this mechanism of monitoring compliance.
It is better for professional bodies to be self regulating than being regulated by the governments.

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