ASA 220 - Quality Control for Audits of Historical Financial Information - April 2006
Engagement PerformanceEngagement Performance
Start here
Get a plain-English read of Engagement Performance
Turn the raw legal text into a practical explanation grounded in ASA 220 - Quality Control for Audits of Historical Financial Information - April 2006.
25 The engagement partner shall take responsibility for the direction, supervision and performance of the audit engagement in compliance with Auditing Standards and regulatory and legal requirements, and for the auditor’s report that is issued to be appropriate in the circumstances.
26 Ordinarily, the engagement partner directs the audit engagement by informing the members of the engagement team of:
(a) their responsibilities;
(b) the nature of the entity’s business;
(c) risk-related issues;
(d) problems that may arise; and
(e) the detailed approach to the performance of the engagement.
Ordinarily, the engagement team’s responsibilities include maintaining an objective state of mind and an appropriate level of professional scepticism, and performing the work delegated to them in accordance with the ethical principle of due care. Members of the engagement team are ordinarily encouraged to raise questions with more experienced team members and communicate as appropriate within the engagement team.
27 It is important that all members of the engagement team understand the objectives of the work they are to perform. Appropriate team-working and training are necessary to assist less experienced members of the engagement team to clearly understand the objectives of the assigned work.
28 Supervision includes the following:
Tracking the progress of the audit engagement.
Considering the capabilities and competence of individual members of the engagement team, whether they have sufficient time to carry out their work, whether they understand their instructions, and whether the work is being carried out in accordance with the planned approach to the audit engagement.
Addressing significant issues arising during the audit engagement, considering their significance and modifying the planned approach appropriately.
Identifying matters for consultation or consideration by more experienced engagement team members during the audit engagement.
29 Review responsibilities are determined on the basis that more experienced team members, including the engagement partner, review work performed by less experienced team members. Ordinarily, reviewers consider whether:
(a) the work has been performed in accordance with Auditing Standards and regulatory and legal requirements;
(b) significant matters have been raised for further consideration;
(c) appropriate consultations have taken place and the resulting conclusions have been documented and implemented;
(d) there is a need to revise the nature, timing and extent of work performed;
(e) the work performed supports the conclusions reached and is appropriately documented;
(f) the evidence obtained is sufficient and appropriate to support the auditor’s report; and
(g) the objectives of the engagement procedures have been achieved.
30 Before the auditor’s report is issued, the engagement partner, through review of the audit documentation and discussion with the engagement team, shall be satisfied that sufficient appropriate audit evidence has been obtained to support the conclusions reached and for the auditor’s report to be issued.
31 Ordinarily, the engagement partner conducts timely reviews at appropriate stages during the engagement. This allows significant matters to be resolved on a timely basis to the engagement partner’s satisfaction before the auditor’s report is issued. Ordinarily, the reviews cover critical areas of judgement, especially those relating to difficult or contentious matters identified during the course of the engagement, significant risks, and other areas the engagement partner considers important. The engagement partner need not review all audit documentation. However, under ASA 230 Audit Documentation, the partner needs to document the extent and timing of the reviews. Under paragraph 30 of this Auditing Standard, issues arising from the reviews need to be resolved to the satisfaction of the engagement partner.
32 Ordinarily, a new engagement partner taking over an audit during the engagement reviews the work performed to the date of the change. Ordinarily, the review procedures are sufficient to satisfy the new engagement partner that the work performed to the date of the review has been planned and performed in accordance with Auditing Standards and regulatory and legal requirements.
33 Where more than one partner is involved in the conduct of an audit engagement, it is important that the responsibilities of the respective partners are clearly defined and understood by the engagement team.
Consultation
34 The engagement partner shall:
(a) be responsible for the engagement team undertaking appropriate consultation on difficult or contentious matters;
(b) be satisfied that members of the engagement team have undertaken appropriate consultation during the course of the engagement, both within the engagement team and between the engagement team and others at the appropriate level within or outside the firm;
(c) be satisfied that the nature and scope of, and conclusions resulting from, such consultations are documented and agreed with the party consulted; and
(d) determine that conclusions resulting from consultations have been implemented.
35 Effective consultation with other professionals requires that those consulted be given all the relevant facts that will enable them to provide informed advice on technical, ethical or other matters. Where appropriate, the engagement team consults individuals with appropriate knowledge, seniority and experience within the firm or, where applicable, outside the firm. Under paragraph 34 of this Auditing Standard, conclusions resulting from consultations need to be appropriately documented and implemented.
36 It may be appropriate for the engagement team to consult outside the firm, for example, where the firm lacks appropriate internal resources. They may take advantage of advisory services provided by other firms, professional and regulatory bodies, or commercial organisations that provide relevant quality control services.
37 Under paragraph 34 of this Auditing Standard, the documentation of consultations with other professionals that involve difficult or contentious matters need to be agreed by both the individual seeking consultation and the individual consulted. Ordinarily, the documentation is sufficiently complete and detailed to enable an understanding of:
(a) the issue on which consultation was sought; and
(b) the results of the consultation, including any decisions taken, the basis for those decisions and how they were implemented.
Differences of Opinion
38 Where differences of opinion arise within the engagement team, with those consulted and, where applicable, between the engagement partner and the engagement quality control reviewer, the engagement team shall follow the firm’s policies and procedures for dealing with and resolving differences of opinion.
39 As necessary, the engagement partner informs members of the engagement team that they may bring matters involving differences of opinion to the attention of the engagement partner or others within the firm as appropriate without fear of reprisals.
Engagement Quality Control Review
40 For audits of financial reports of listed entities, the engagement partner shall:
(a) determine that an engagement quality control reviewer has been appointed;
(b) discuss significant matters arising during the audit engagement, including those identified during the engagement quality control review, with the engagement quality control reviewer; and
(c) not issue the auditor’s report until the completion of the engagement quality control review.
For other audit engagements where an engagement quality control review is performed, the engagement partner shall follow the requirements set out in subparagraphs (a) to (c).
41 Where, at the start of the engagement, an engagement quality control review is not considered necessary, ordinarily the engagement partner is alert for changes in circumstances that would need such a review.
42 An engagement quality control review shall include an objective evaluation of:
(a) the significant judgements made by the engagement team; and
(b) the conclusions reached in formulating the auditor’s report.
43 Ordinarily, an engagement quality control review involves:
Discussion with the engagement partner.
A review of the financial information and the auditor’s report.
Consideration of whether the auditor’s report is appropriate.
A review of selected audit documentation relating to the significant judgements the engagement team made and the conclusions reached.
The extent of the review depends on the complexity of the audit engagement and the risk that the auditor’s report might not be appropriate in the circumstances. The review does not reduce the responsibilities of the engagement partner.
44 An engagement quality control review for audits of a financial report ordinarily includes considering the following:
The engagement team’s evaluation of the firm’s independence in relation to the specific audit engagement.
Significant risks identified during the engagement (in accordance with ASA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement), and the responses to those risks (in accordance with ASA 330 The Auditor’s Procedures in Response to Assessed Risks), including the engagement team’s assessment of, and response to, the risk of fraud.
Judgements made, particularly with respect to materiality and significant risks.
Whether appropriate consultation has taken place on matters involving differences of opinion or other difficult or contentious matters, and the conclusions arising from those consultations.
The significance and disposition of corrected and uncorrected misstatements identified during the audit.
The matters to be communicated to management and those charged with governance and, where applicable, other parties such as regulatory bodies.
Whether audit documentation selected for review reflects the work performed in relation to the significant judgements and supports the conclusions reached.
The appropriateness of the auditor’s report to be issued.
Engagement quality control reviews for audits of historical financial information other than an audit of a financial report may, depending on the circumstances, include some or all of these considerations.