The continued adequacy and operational effectiveness of quality control policies and procedures are monitored by the Firm.
- Define the scope and content of the Firm’s monitoring programme.
- Determine the monitoring procedures necessary to provide reasonable assurance that the Firm’s other quality control policies and procedures are operating effectively
- Determine objectives and prepare instructions and review programs for use in conducting monitoring activities.
- Provide guidelines for the extent of work and criteria for selection of engagements for review.
- Establish the frequency and timing of monitoring activities
- Establish procedures to resolve disagreements which may arise between reviewers and engagement or management personnel.
- Review and test compliance with the firm’s general quality control policies and procedures.
- Review selected engagements for compliance with professional standards and with the Firm’s quality control policies and procedures.
- Provide for reporting findings to the appropriate management levels, for monitoring actions taken or planed, and for overall review of the Firm’s quality control system.
- Discuss general findings with appropriate management personnel.
- Discuss findings on selected engagements with engagement management personnel
- Report both general and selected engagement findings and recommendations to firm’s management together with corrective actions taken or planned.
- Determine that planned corrective actions were taken.
- Determine need for modification of quality control policies and procedures in view of results of monitoring activities and other relevant matters.
The Policy includes an ongoing consideration and evaluation of the firms SQC and a periodic inspection of a selection of completed engagements
► Monitoring the process of quality control is entrusted to a partner with sufficient and appropriate experience and authority in the firm. Covers both the appropriateness of the design and effectiveness of the operation of the system of quality control
► Evaluation of the SQC includes matter such as
► Analysis of new developments (professional, regulatory & legal requirements) and how reflected in firm policies & procedures, written confirmation of independence compliance, continuing professional development including training (could include internal training) and decisions related to acceptance an continuance of clients and engagements
► Determination of corrective actions to be taken (including to firm systems)
► Communication to appropriate firm personnel of weaknesses identified
► Follow up to ensure required modifications are made
► Inspection of completed engagements performed on a cyclical basis
► But requires at least one engagement for each partner over an inspection cycle (which ordinarily should not exceed 3 years) ► Inspection cycle is organized based on ► Size of the firm ► Number of geographical locations of offices ► Results of previous monitoring activities ► Nature and complexity of firm’s practice and organization and risks associated with firm clients ► Smaller firms and sole practitioners could use suitably qualified external persons or another firm to carry out the inspection or share resources with other firms.
► The firm should evaluate the effect of the deficiencies and determine whether they are ► Instances that do not necessarily indicate that the firm’s SQC is insufficient or that ► The deficiencies are systemic, repetitive or other deficiencies that require corrective action ► It should communicate to relevant engagement partners and other relevant personnel (engagement team for engagement specific issues or senior members of the firm for generic issues) deficiencies noted and recommendations for remedial action ► Recommendations should result in one or more of ► Taking appropriate remedial action in relation to an engagement or personnel ► Communication of findings to those responsible for training and professional development ► Changes to the SQC procedures and policies ► Disciplinary action for repeated non compliance cases ► At least annually, the firm should communicate the results of the monitoring of its quality control system to engagement partners and other persons
Monitoring-Complaints and allegations ► The firm should establish policies & procedures to ensure it deals appropriately with ► Complaints and allegations that the work performed by the firm fails to co ply with professional standards and regulatory and legal requirements; an d ► Allegations of non-compliance with the firm’s system of quality control ► To ensure compliance with these requirements the firm ► establishes clearly defined channels for personnel to raise concerns (in a manner which enables them to come forward without fear of reprisals ► Investigates these in accordance with its policies and procedures (supervised by a partner with sufficient appropriate experience and authority in the firm). Legal counsel may be used as deemed necessary.
The need for, and extent of, inspection procedures depends, in part, on the existence and effectiveness of the other monitoring procedures. The nature of inspection procedures varies based on the quality control policies and procedures and the effectiveness and results of monitoring procedures. The documentation prepared to evidence the monitoring operations are:
- Engagement quality control review
- Review of engagement ,documentation ,reports, clients’ financial statements for selected engagements after the report release date
- Inspection procedures
- Audit checklists
- Audit observations
- Applicable AS & SA processes
- Reviews of the work or report when performed by the engagement team members prior to the date of the report are not monitoring procedures.
Retaining the reports issued related to special audit engagements