AUDITING & ASSURANCE

PRINCIPLES
PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY

By:
NILO N. IGLESIAS, CPA, MBA, REA
 The
System of Quality Control
 Introduction
⚫ If the public is to rely on the professional CPA’s work, it is essential that
appropriate controls are put in place to ensure that their work is
consistently of high quality
⚫ The need for the CPA to implement and maintain quality control
measures is derived from the fact that audits are usually conducted by
audit teams.
⚫ It is only by implementing quality control policies and procedures that
CPA can ensure that all members of the audit teams perform the same
level of quality of work.
⚫ Standards are established to measure the quality of performance of
individuals and organizations.
⚫ Standards relating to the accounting profession concern themselves with
CPA’s professional qualities, the judgment exercised by the CPAs in the
performance of their professional engagement and the CPA firm’s quality
control policies and procedures.
Elements of System of Quality Control
PSA 220 states that audit firm should implement
policies and procedures designed to ensure that all
audits are conducted in accordance with PSAs.
The following quality control policies that serve as a
guide to audit firms in establishing their own system of
quality control are as follows:
1) Leadership responsibilities for quality on audits
2) Ethical requirements
3) Independence
4) Acceptance and continuance of client relationship
5) Human resources and assignment
6) Engagement performance
7) Monitoring
Leadership Responsibilities for Quality on Audits
• The firm should establish policies and procedures
designed to promote an internal culture based on
recognition that quality is essential in the performance
of the engagements.
• The engagement partner should take responsibility for
the overall quality on each engagement to which the
partner is assigned.
• The engagement partner should set example regarding
the quality of audit emphasizing through actions and
messages the importance of performing work that
complies with professional standards, complying with
the firm’s quality control policies and procedures, and
issuing appropriate audit reports.
Ethical Requirements
• The firm should establish policies and procedures
designed to provide it with reasonable assurance
that the firm and its personnel with ethical
requirements, which include:
1) Integrity
2) Objectivity
3) Professional competence and due care
4) Confidentiality
5) Professional Behavior
• Any issues involving engagement team member’s
non-compliance with the ethical requirements must
be properly resolved and documented.
Independence
• The firm should establish policies and procedures designed to
provide it with reasonable assurance that the members of the
engagement team, the firm and the network firm maintain
independence when providing assurance services.
• The engagement team should form a conclusion on
compliance with independence requirements that apply to the
audit engagement
1) Obtain relevant information to identify circumstances and
relationship that create threats to independence
2) Evaluate information on identified breaches of the firm’s
independence policies and procedures to determine whether
they create threats to independence
3) Take appropriate safeguards to eliminate such threats or
reduce them toan acceptable level
4) Documents conclusions on independence and basis for such
conclusion
Acceptance and Continuance of Client
Relationship
• The firm should establish policies and procedures
for the acceptance and continuance of client
relationship , designed to provide it with reasonable
assurance that it will undertake.
• That the firm will only undertake the relationship
and engagement where it:
1) Has considered the integrity of the client.
2) Is competent to perform the engagement and has
the capabilities, time and resources to do so
3) Can comply with ethical requirements.
Human Resources and Assignment
• The firm should establish policies and procedures to
provide it reasonable assurance that it has sufficient
personnel with capabilities and commitment to ethical
principles necessary to perform the engagement.
• Such policies should address issues concerning
personnel, to wit:
1) Recruitment
2) Performance evaluation, compensation and
promotion
3) Capabilities and competence
4) Career development
5) Assignment of engagement teams
Engagement Performance
• The firm should establish policies and procedures to provide it
with reasonable assurance that:
a) Engagement are performed in accordance with professional
standards and other regulatory and legal requirements; and
b) Audit report issued is appropriate in the circumstances.
• The engagement partner should take responsibility for the
direction, supervision, review and overall performance of the
audit engagement.
Direction
Assistants should be informed of their responsibilities, nature
of entity and potential problems that may arise and detailed
approaches to the performance.
Engagement Performance
Supervision
Monitoring the progress of the audit resolving issues
and considering level of consultation.
Review
Work performed by assistants should be reviewed to
consider whether procedures, evidence and
documentation are appropriate.
Consultation
Encourage personnel to seek assistance from
authoritative sources either within or outside the firm.
Engagement Performance
Engagement Quality Control Review
This requires the engagement partner to:
▪ Determine that an engagement quality control reviewer has been appointed.
▪ Discuss the significant matters arising during the audit engagement.
▪ Not to issue the auditor’s report until completion of the engagement quality
control review
Difference of Opinion
The engagement team should follow the firm’s policies and procedures for
dealing with and resolving differences in opinion that arise within the
engagement team concerning issues and application of principles.
Bring matters involving difference in opinion to the attention of engagement
matters or others within the firm for resolution.
Audit report should not be issued until matters involving differences of
opinion is resolved.
Monitoring
• The continued adequacy and operational
effectiveness of quality control policies and
procedures is to be monitored.
• Policies and procedures must be adopted to
provide reasonable assurance that the system
of quality control are relevant, adequate and
operating effectively.
• It should be communicated to its personnel in
a manner that are understood and
implemented.
QUALITY CONTROL REVIEW
• Recognizing the importance of the professional accountants’
services to the society, the government thru the Board of
Accountancy (BOA) has required all CPA firms and individual
CPA in public practice to obtain certificate of accreditation to
practice public accountancy.
• Such certificate is valid for 3 years and can be renewed after
complying with the requirements of the BOA.
• The Professional Regulation Commission (PRC) has created a
Quality Review Committee (QRC) which shall conduct a quality
review of applicants for registration to practice public
accountancy and shall recommend the revocation of the
certificate of registration of CPAs who have not observed the
quality control measures prescribed for the practice of public
accountancy.
 Next …….
Questions/
Reactions… AUDITOR’S
……
RESPONSIBILITY
 THANK YOU…….
Auditing &
Assurance-
KEEP SAFE
Principles
AND
BE HEALTHY!!!