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AAA SMART COURSE 2021-22
KASHIF KAMRAN –FCCA
Lecture 6
Objective: Quality control- practice
SepDec-2020 –
Required:
Comment on the quality of the planning and performance of the audit of Rivers Co, discussing the quality control,
ethical and other professional issues raised and recommending appropriate actions to be taken. (15 marks

 Comment – on quality of planning and performance

 Discuss- issues (ethical, professional , quality control)
 Recommend – action (where necessary)
Example- Lecture 5
Aneesa- audit manager
Aneesa has performed the complete detailed review of working papers, and no further review of working papers
was performed by the senior audit manager Pat. Aneesa is inexperience an audit manager because she was
recently promoted into the role of audit manager, which bring in doubt the quality with which review of the
working papers was performed and the review wasn’t checked by anyone else particular in the risky areas.
Aneesa is inexperience, thus the quality of audit is compromised
Comment on the quality

 Find an issue from a case

 Explain why it is an issue
 If the issue is a component (input) of quality – then connect the issue with the component of quality which
has been compromised.
Student note: it was a 15 marks answer, so it’s not necessary that you connect forcefully every issue with a
comment on quality. If you comment on quality for like 3-4 issues in a 15 marks answers that quite reasonable
that you have done justice with the requirement

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Sept 18 Q3b

Required:
Comment on the quality of the planning and performance of the audit of Watson Co discussing the quality
control and other professional issues raised. (10 marks) / 1 mark per issue= 10 issues

Brainstorming session:
1. Temporarily assigned audit manager- (audit is nearing completion)
2. you are in the process of reviewing the audit working papers
3. audit supervisor, who is a part-qualified chartered certified accountant
4. Final clearance meeting next week
5. audit assistant and myself have done our best to complete all of the audit work
6. we only saw Rodney on the first day of the audit about a month ago when I think he was already feeling
unwell.
7. We had a short briefing meeting with him at which he told us ‘if in doubt, follow last year’s working
papers.’
8. This was not identified at planning as a high risk area.
9. have filed a copy of the valuation report and I have looked up the valuers online and have found a very
professional looking website which confirms that they know what they are doing.
10. cost of the SARs scheme based on this valuation is being appropriately recognised
11. A corresponding equity reserve has also been correctly recognised on the statement of financial position
12. amount also seems immaterial and I can’t see any need to propose any amendments to the financial
statements

Comment on the quality

 Find an issue from a case

 Explain why it is an issue
 If the issue is a component (input) of quality – then connect the issue with the component of quality which
has been compromised. (WHERE NECESSARY)
Student note: it was a 10 marks answer, so it’s not necessary that you connect forcefully every issue with a
comment on quality. If you comment on quality for like 3-4 issues in a 10 marks answers that quite reasonable
that you have done justice with the requirement
Answer:
Temporarily assigned audit manager
The temporary audit manager has been assigned too late, just when audit in nearing completion and the final
clearance meeting is next week. The temp manager is not well equipped with knowledge of Watson company, its
issues and this will create obstacles in the conduct of this work particularly the review of the working papers. (1)
Review of working paper
The temp manager main role is to review the working papers prior to the final clearance meeting next week and
there is a doubt on quality of this review undertaken as the manager will be under time panic and does not have
desired knowledge. Review of working papers by the audit is a component of audit quality and engagement
performance and its seems this will be compromised. (1)
Part qualified supervisor
The supervisor is not competent enough to serve the position, as he is part qualified. This seems to be an
inappropriate assignment of team to the audit engagement of Watson company knowing the facts it sis a listed
company. Team assignment is a critical element of quality control and with assignment of a part qualified
accountant to the role of supervision, the quality of engagement performance was compromised

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Size of team
The audit engagement for Watson was performed a team of two members, the audit assistant and the supervisor,
which is not the right size of team considering it’s a listed company. Less number of staff will create burden and
panic and could result is overlooking of issues during audit. (1)
Rodney – a month ago
Rodney was absent from the entire conduct of audit, which means that the engagement has been performed
without proper supervision. Supervision is an important element of engagement performance and overall of
quality of audit, and the absence of the audit manager throughout means that there was no proper monitoring of
the team members and their work, which must had compromised the quality with which this engagement has
been performed. (1)
Short briefing meeting
The short briefing meeting compromise the importance of effective planning and overall direction needed to
perform engagement. Short meeting must not have focussed rightly on all issues which requires attention during
the conduct of audit, just like the issue of SAR was ignored in the planning meeting. It seems that overall quality
of direction has been compromised here and direction is an critical element of engagement performance. (1)
Use last year working paper
This is a wrong judgement by the audit manager, as not for all issues last year working papers could be ideal.
Last year WPs can provide guidance only in repetitive areas but there will be no guidance for areas incorporated
in the FS for the first like SAR. (1)
Conclusion
As evident above the planning and performance of Watson company had numerous issues. There was evidence
of inappropriate direction, absence of audit manager, wrong selection of team and exercise of inappropriate
judgement which all led to comprising quality in conduct of this engagement
Assignment –

 Wrap up the rest of the Sep 18 Q3b answer

 Attempt from scratch June 2016 Q2a

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Dec 15 Q5(c)

c) Discuss the quality control procedures which should be carried out by Rockwell & Co prior to the audit
report on the Hopper Group being issued. (4 marks)/ 1 = 4 procedures

 Review of the working papers

o Detailed review
o Manager review
o Partner review
 Consultation
 Engagement quality control review

Answer
Following are the quality control procedures, which should be performed by the audit firm prior to the issuance
of the audit report:
 There should be a proper review of the audit working papers which includes a detailed reviewed ,
followed by an audit manager review of risky areas and the audit partner of the risky areas.
 Further there should a proper consultation between the audit engagement partner and the audit manager
of issues during audit .
 Moreover, there should be an appropriate consultation between the engagement partner and those
charged with governance and further consultation with an independent partner for second opinion if
needed
 There should be an engagement quality control review by an independent partner or manager to ensure
that all audit work has adhered to the firm policies of quality control

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SUMMARY – BLOCK 2

How to prepare for Block 2? (Syllabus area B & C)

 Have the right knowledge

o Tutor lectures (6)
o Articles (5)
 Acceptance decision
 Audit in a specialized industry
 Exam technique article part 1 ethics
 Proposed amendments in code
 Audit quality a perpetual current issues
 Develop your own short notes
o Tutor support files for each lecture (printout)
o Read articles
o Convert the knowledge from articles + tutor support file into your own notes
 Practice adequately
o Sept 18 exams onwards (first)
o Later do rest of the question on the PowerPoint slides (second)
 Key tips and techniques
o Writing an answer (good answer)
 Use headings
 Develop a paragraph of reasonable length (2-4 sentences long)
 Issue (picked from case and rephrased in your own words)
 Explaining why it is an issue
 Just alone writing an ethical threat will not give you marks, for e.g. just saying it is a self-
review threat will score you nothing, till the time you justify why it is a threat to score 1
mark
o Sound on safeguards – particularly you should know services allowed to listed companies and
services prohibited listed company ( Read the ethics chapter from the text book of choice)
o Management threat- capable of picking and justifying it
o Content of proposal documents
o Rules of advertisement
o Matters in accepting:
 A new audit client
 An engagement from an existing client
o What are professional issues?
o Quality control input – 6 of them
o Quality control procedures
 Marking scheme
o 1 mark for everything except for
 Proposal document – 2 marks per point
 Accepting a new audit client (discrete question) – 2 mark per point

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