Professional Documents
Culture Documents
Isqm 1 & 2
Isqm 1 & 2
Isqm 1 & 2
Awareness
Typical scenario – Client Acceptance
What Quality Objectives do we set for this?
We only serve “Right” clients
Right means – we are proud to associate with, ethical, pays our fees
etc; We can serve them competently
What can go wrong with our accepting any Client?
Our reputation impaired, misaligned expectations – conflict,
reputation
Sanction due to conflict of interest
Loss other client due to conflict of interest
Sanction due to independence issue – breach regulation e.g. BOT,
CMSA, NBAA etc
Resources
Firm to embrace technological advancements
in support of its FQRM system, as well as at
engagement level. Expectations are provided
by ISQM1, Reliance of technology, inhouse or
outsource - firm’s responsibilities
Media policy
ISQM2: Engagement Quality Review –
determined at acceptance level
EQR is Firm wide QRM issue:
ISQM 1 address engagements for which EQR should be
placed but the specifics of the EQR person, procedures
etc are addressed at ISQM2.
EQR engagement criterial are:
Audits of Listed companies
Audit of PIEs – significant public interest
Where EQR is required by law or regulations; or Firm
determines EQR is appropriate due to some criteria
during client/engagement acceptance
Monitoring and remediation process
Asante Sana
ISQM 2: EQR
Questions to be explored
What is EQR
Why EQR?
When is EQR performed?
Who performed EQR, The “EQR”?
What are the responsibilities of EQR?
Questions to be explored
Is EQR required for all audits?
Can anyone – Senior/Manager be EQR, or only Partner?
What does EQR do exactly?
Can EQR boss the boss, or s/he is the boss of EP/PIC? Whose
conclusion is it anyway?
EQR make decision or mere recommendations?
EQR documents his reviews and signs WPs?
Should EQR also be at client’s, team’s meeting, charge time?
Can EQR sign audit opinion for which he/she is EQR?
Are independence restrictions equally apply to EQR?
Objective of ISQM 2
Further guides ISQM 1 and ISA 220R
Define appointment and eligibility of EQR
Assigns Responsibilities to (i) the FIRM and (ii), the
EQR - clarity
Framed with the FIRM’S objective
FIRM’S response to identified Quality Risk
Outcome-oriented objective
EQR to perform Objective Evaluation of Significant
Judgement made by ET and their conclusion
Performance and documentation of EQR
Is ISQM 2 New?
Examples….
ISQM 1: Provides Examples of law & regulations
Are Public Interest Entities (PIE) as defined in a particular
jurisdiction;
Public Enterprises:- Operate in the public sector or which are
recipients of government funding, or entities with public
accountability;
Operate in regulated industries (e.g., financial institutions
such as banks, insurance companies and pension funds);
Meet a specified asset threshold; or
Are under the management of a court or judicial process
(e.g., liquidation).
NBAA Guidance?
ISQM 1: Examples of Firm’s own election
entities operating in an industry that typically has
accounting estimates with a high degree of estimation
uncertainty;
Going concern risk
Assurance/review engagements that require specialized
skills and knowledge in measuring or evaluating evidences
IPO, reporting accountant, forensic
Unusual circumstances in acceptance e.g., disagreement
with previous professional
High public profile engagement
Emerging industry, not very conversant with
Appointment and Eligibility of EQR
COMPETENCE, i) Competence,
CAPABILITY & TIME! ii) Capabilities,
iii) Sufficient time
iv) Appropriate authority
Prof. Standards, legal
& Regs. Firm policies
ELIGIBILITY CRITERIA
Industry knowledge Comply with Laws
Complexities & Comply with IFAC & Regs. Relevant
Code of Ethics incl. to eligibility of
specialist skills EQR
Objectivity &
History of passing AQR Independence
Sufficient Time –
nature, timing &
extent
Appointment and Eligibility of EQR
APPROPR. i) Competence,
AUTHORITY! ii) Capabilities,
iii) Sufficient time
iv) Appropriate authority
Avoid intimidation of
EQR, hierarchical
structure ELIGIBILITY CRITERIA
Culture & policy Comply with Laws
Policy on conflict Comply with IFAC & Regs. Relevant
resolution/ Code of Ethics incl. to eligibility of
differences of Objectivity & EQR
opinion Independence
Prof. responsibility
Appointment and Eligibility of EQR
Ethical i) Competence,
ii) Capabilities,
considerations! iii) Sufficient time
Independence threats, iv) Appropriate authority
self review, familiarity,
ELIGIBILITY CRITERIA
Intimidation threat –
from EP/PIC Comply with Laws
Comply with IFAC & Regs. Relevant
Should consider Code of Ethics incl. to eligibility of
safeguards; policy for Objectivity & EQR
=>2yrs cooling-off Independence