The Firm’s System of Quality Management The Firm’s System of Quality Management and Role of Engagement Quality Reviews

The Firm’s System of Quality Management and Role of Engagement Quality Reviews

1. ASQM 1 establishes the firm’s responsibilities for its system of quality management and requires the firm to design and implement responses to address the quality risks in a manner that is based on, and responsive to, the reasons for the assessments given to the quality risks.[3] The specified responses in ASQM 1 include establishing policies or procedures addressing engagement quality reviews in accordance with this ASQM.

2. The firm is responsible for designing, implementing and operating the system of quality management. Under ASQM 1, the objective of the firm is to design, implement and operate a system of quality management for audits or reviews of a financial report, or other assurance or related services engagements performed by the firm, that provides the firm with reasonable assurance that:

   1. The firm and its personnel fulfill their responsibilities in accordance with AUASB standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and

   2. Engagement reports issued by the firm or engagement partners are appropriate in the circumstances.[4]

3. As explained in ASQM 1,[5] the public interest is served by the consistent performance of quality engagements. Quality engagements are achieved through planning and performing engagements and reporting on them in accordance with AUASB standards and applicable legal and regulatory requirements. Achieving the objectives of those standards and complying with the requirements of applicable law or regulation involves exercising professional judgement and, when applicable to the type of engagement, exercising professional scepticism.

4. An engagement quality review is an objective evaluation of the significant judgements made by the engagement team and the conclusions reached thereon. The engagement quality reviewer’s evaluation of significant judgements is performed in the context of AUASB standards and applicable legal and regulatory requirements. However, an engagement quality review is not intended to be an evaluation of whether the entire engagement complies with AUASB standards and applicable legal and regulatory requirements, or with the firm’s policies or procedures.

5. The engagement quality reviewer is not a member of the engagement team. The performance of an engagement quality review does not change the responsibilities of the engagement partner for managing and achieving quality on the engagement, or for the direction and supervision of the members of the engagement team and the review of their work. The engagement quality reviewer is not required to obtain evidence to support the opinion or conclusion on the engagement, but the engagement team may obtain further evidence in responding to matters raised during the engagement quality review.