ISA 220 (Revised) — Quality Management for an Audit of Financial Statements

ISA 220 (Revised) DEALS with the SPECIFIC responsibilities of the auditor regarding ‘Quality Management‘ for an Audit of Financial Statements.

ISA 220 (Revised) – Introduction

1. Scope of this ISA

It also addresses where applicable the responsibilities of the ‘Engagement Quality Control Reviewer‘. This ISA is to be read in CONJUNCTION with relevant ethical Requirements.

2. Effective Date

This ISA is EFFECTIVE for audits of financial statements for periods beginning on or after December 15, 2009.

ISA 220 – Objective

The Objective of the ‘Auditor’ is to IMPLEMENT quality control procedures at the engagement level that provide the auditor with Reasonable assurance that:

The audit complies with professional standards and applicable legal and regulatory Requirements; AND
The auditor’s report issued is appropriate in the circumstances.

ISA 220 – Definitions

1. Engagement Partner

The Partner or Other person in the firm who is RESPONSIBLE for the audit engagement and its performance, and for the auditor’s report that is issued.

2. Engagement Quality Control Review

A ‘process‘ designed to provide an objective evaluation on or before the date of the auditor’s report of the SIGNIFICANT Judgments the engagement team Made and the conclusions it reached in formulating the auditor’s report.

3. Relevant Ethical Requirements

Ethical Requirements to which the Engagement Team and Engagement Quality Control Reviewer are subject, which comprise Part A and B of the ‘Code of Ethics for Professional Accountants‘ (IESBA Code).

ISA 220 – Requirements

1. Leadership Responsibilities for Quality on Audits

The ‘Engagement Partner‘ shall TAKE responsibility for the overall quality.

2. Relevant Ethical Requirements

The ‘Engagement Partner’ shall REMAIN ALERT through observation and Making inquiries for evidence of non-compliance.

If Matters regarding NON-COMPLIANCE come to the attention, then the engagement partner in consultation with others in the firm shall DETERMINE the appropriate action.

2.1 Independence

The Engagement Partner shall FORM a conclusion on compliance with independence requirements. In doing so, the engagement partner shall:

OBTAIN relevant information from the firm and where applicable network firms;
EVALUATE information on identified breaches; AND
TAKE appropriate action to eliminate such threats or reduce to an acceptable level or if considered appropriate WITHDRAW.

3. Acceptance and Continuance of Client Relationships and Audit Engagements

The ‘Engagement Partner’ shall be SATISFIED that appropriate procedures have been followed, and shall DETERMINE that conclusions reached in this regard are appropriate.

If the engagement partner obtains the information that would have caused the firm to DECLINE, the engagement partner shall COMMUNICATE that promptly to the firm.

4. Assignment of Engagement Teams

The ‘Engagement Partner’ shall be SATISFIED that the engagement team has the appropriate competence and capabilities to:

PERFORM the audit engagement in accordance with professional standards and applicable legal and regulatory Requirements; AND
ENABLE an auditor’s report that is appropriate in the circumstances to be issued.

5. Engagement Performance

5.1 Direction, Supervision and Performance

The ‘Engagement Partner’ shall TAKE Responsibility for:

The direction, supervision and performance of the audit engagement; AND
The auditor’s report being appropriate.

5.2 Reviews

The ‘Engagement Partner’ shall TAKE responsibility for reviews being performed in accordance with the firm’s review policies and procedures.

On or before the date of the auditor’s report, the engagement partner shall be SATISFIED that sufficient appropriate audit evidence has been obtained.

5.3 Consultation

The ‘Engagement Partner’ shall:

TAKE responsibility for consultation on difficult or contentious Matters;
Be SATISFIED that Members of the engagement team have undertaken appropriate consultation;
Be SATISFIED that the nature and scope of and conclusions resulting from such consultations are agreed with the party consulted; AND
DETERMINE that conclusions have been Implemented.

5.4 Engagement Quality Control Review

For audits of ‘Financial Statements’ of LISTED entities, the Engagement Partner shall:

DETERMINE that an engagement Quality Control Reviewer has been appointed;
DISCUSS significant Matters with the engagement ‘Quality Control Reviewer‘; AND
NOT DATE the auditor’s report until the completion of the engagement quality control review.

5.5 Differences of Opinion

If differences of opinion arise, the engagement team shall FOLLOW the firm’s policies and procedures for dealing with and resolving differences of opinion.

6. Monitoring

An EFFECTIVE system of ‘Quality Control’ includes a Monitoring process that provides reasonable assurance that firm policies and procedures are relevant, adequate and operating effectively.

The ‘Engagement Partner’ shall CONSIDER the results of the firm’s Monitoring process.

7. Documentation

The ‘Auditor‘ as per ISA 220 shall INCLUDE in the audit documentation:

Issues identified in relation to compliance with relevant ethical requirements and how they were resolved;
Conclusions on compliance with independence Requirements;
Conclusions reached regarding the acceptance and continuance of client relationships and audit engagements; AND
The nature and scope of conclusions resulting from consultations.

Synopsis

ISA 220 ‘Quality Management for an Audit of Financial Statements‘ DEALS with the specific responsibilities of the auditor regarding ‘Quality Management‘ for an Audit of Financial Statements.

[200-299] General Principles and Responsibilities