Acca aaa s21 Notes

QUALITY CONTROL
1. Introduction
Quality control in auditing doesn’t just mean do an audit properly: that could just be down to good 
luck. It means that these must be a system of quality control which substantially ensures that all audits 
are executed properly and which provides documentary evidence that quality control procedures 
have been applied effectively.
2. Quality control (firm-wide)
ISA 220 
Quality Control for an Audit of Financial Statements
states that quality control systems, policies 
and procedures are the responsibility of the audit firm. In particular, responsibility for the quality of 
each audit lies with the partner in charge of the audit.
Under International Standard for Quality Control 1 (ISQC 1), the 
firm
has an obligation to establish 
and maintain a 
system 
of quality control to provide it with reasonable assurance that: 
(1)
The firm and its personnel comply with professional standards and applicable legal and 
regulatory requirements; and 
(2)
Reports issued by the firm or engagement partners are appropriate in the circumstances.
Note again the use of the word ‘system’. You will know that under the Code of Ethics for Professional 
Accountants to avoid self-interest threats firms have to ensure that no one involved in an audit owns 
shares in the audit client and that fees from any one client must not be too great. However, these 
safeguards cannot be left up to chance. Auditing firms need systems in place that will ensure that 
ethical codes are not broken and will provide evidence that quality has been maintained. To comply 
with the self-interest rules just mentioned, the quality control system might require that each year:
๏
Every member of the audit staff must sign a declaration stating that they do not own client 
shares.
๏
A partner should review fees and sign a declaration that fee limits have not been exceeded.
ISQC 1 identifies six elements to be addressed in a system of quality control:
๏
Leadership
. The firm must establish policies and procedure designed to promote an internal 
culture that recognises that quality is essential in performing engagements.
๏
Ethics
(covered earlier in these notes). Throughout the audit engagement, the engagement 
partner shall remain alert, through observation and making inquiries as necessary, for evidence 
of non-compliance with relevant ethical requirements by members of the engagement team.
๏