Acfn 723 Chapter 3 - 2019

Acfn 723: Advanced Auditing
Addis Ababa University

College of Business and Economics
Department of Accounting & Finance
• Module Title: Advanced Auditing

• Module Code: ACFN 723
• Credit Value: 2 Cr hours [4.5 ECTS]
• Instructor: Dr. P. Laxmikantham
Acfn 723: Advanced Auditing /PLK

Chapter 3
Professional Ethics,
Independence and
Quality Control

Chapter 3
Professional ethics, independence, and quality
control, (IAASB, ISQC 1)
• Ethics and ethical professional behavior
• IESBA code of ethics for professional accountants
• OFAG and EPAAA code of ethics
• Auditor independence in the EU
• Quality control systems

Source: IESBA
• International Ethics Standards Board for Accountants (IESBA)
• The IESBA develops and issues the Code of Ethics for Professional
Accountants for use by professional accountants/auditors around
the world
• Handbook of the Code of Ethics for Professional Accountants 2015

Edition
• Effective Date:
It will be effective on April 15, 2016, early adoption is permitted.

Source: IESBA
• The International Ethics Standards Board for Accountants (IESBA):
1. It is an independent standard setting body that develops an

internationally appropriate Code of Ethics for Professional
Accountants (the Code).
2 The objective of the IESBA is to serve the public interest by

setting high quality ethics standards for professional
accountants.

Source: IESBA
3 The IESBA’s long term objective is convergence of the Code’s
ethical standards for professional accountants, including
auditor independence standards, with those issued by
regulators and national standard setters.
4 Convergence to a single set of standards can enhance the

quality and consistency of services provided by professional
accountants throughout the world and can improve the
efficiency of global capital markets

Fundamental Principles/IESBA
• A professional auditor/accountant has to comply with the following

fundamental principles:
(a) Integrity: to be straightforward and honest in all professional
and business relationships.
(b) Objectivity: to not allow bias, conflict of interest or undue
influence of others to override professional or business
judgment
(c) Professional Competence and Due Care: to maintain
professional knowledge and skill at the level required.
(d) Confidentiality: to respect the confidentiality of information
acquired as a result of professional and business relationships
(e) Professional Behavior: to comply with relevant laws and
regulations and avoid any action that discredits the profession
Ethics and Professional Behaviour
Refers to a system or code of

conduct based on moral duties and
Ethics obligations that indicate how
an individual should interact with
others in society.
Refers to the conduct, aims or

Professionalism qualities that characterize or mark a
profession or professional person.

Ethics—A Key Concept
Ethics
Beliefs that
Accepted
distinguish
standards of
right from
good and
wrong
bad
behavior

The Basis for Ethics in
Auditing/Accounting
• What is Ethics?
– Accepted standards of behavior
– Practices of those in a profession
– Laws
– Expectations of society

Guidelines for
Ethical Decisions
 Identify ethical  Analyze  Make ethical

concerns options decision
Use personal ethics Consider all good Choose best option

to recognize ethical and bad after weighing all
concern. consequences. consequences.

Ethics and Morality
• Ethics – derived from Greek meaning custom or
character
• Morals – derived from Latin meaning customs,

manners, character
• Essentially ethics and morals are the same

Integrity
• Acts of an person with Integrity
– Truthfulness
– Courage
– Sincerity
– Honesty
• Courage to stand by principles even in face of
pressure

Moral Point of View
• Emphasizes practical reason and rational choice
• Deliberation precede choice of action
– Reason
– Thought
– Voluntary
• Ends do not justify the means

Personal Integrity
• Essential characteristic for CPA
• Learn to be ethical
– By practice
– Exercising virtues
– Enable to lead life of excellence

Six Pillars of Character
• Trustworthiness
• Respect
• Responsibility
• Fairness
• Caring
• Citizenship

Trustworthiness
• Honesty
– Truth without deception
• Acting with integrity
– Courage of convictions
• Being reliable
– Follow through with promises and commitments
• Exercising loyalty
– Keep confidences
– Never take precedence over honesty and integrity
Respect
• Civility
• Courtesy
• Decency
• Dignity
• Autonomy
• Tolerance
• Acceptance

Responsibility
• Accountable for what we do and who we are
• Reflect on alternative courses of action using
ethical principles
• Act diligently
• Due Care Test
– Reasonable person would conclude one acted
with level of care expected in circumstance

Fairness
• Treats others
– Equally
– Impartially
– Openly
• Balance without influence

Caring
• Empathy
• Ability to understand
• Sensitive
• Concern about the feelings of others

Citizenship
• Civic virtues and duties
• Behave as part of a community
• Obey the laws
• Be informed of the issues
• Volunteer in your community
• Vote in elections

Codes of Conduct on
the International Level
The Code of Ethics for Professional
Accountants, issued by the International
Federation of Accountants (IFAC), govern the
activities of professional accountants worldwide.
In addition to competence, objectivity, independence,

and confidentiality, the IFAC’s code deals with
the accountant’s ethical responsibilities in:
Taxes
Independence
Fees and commissions
Advertising and solicitation
Handling of monies
Cross-border activities.

The Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 was intended to protect the

interests of those who invest in publicly traded companies by
improving the reliability and accuracy of corporate financial
reports and disclosures. Six key aspects of the legislation include:
 The Act requires both the CEO and CFO to certify in writing
that their company’s financial statements and disclosures
fairly represent the results of operations.
 The Act establishes the Public Company Accounting Oversight
Board to provide additional oversight of the audit profession.
 The Act places the power to hire, compensate and terminate
public accounting firms in the hands of the audit committee.
 The Act places restrictions on audit firms, such as prohibiting
public accounting firms from providing a variety of non-audit
services to an audit client.
The Sarbanes-Oxley Act of 2002
 The Act requires that a company’s annual report contain an

internal control report that is accompanied by an opinion from
the company’s audit firm about the fairness of that report.
 The Act establishes severe penalties for certain behaviors,
such as:
• Up to 20 years in prison for altering or destroying any
documents that may eventually be used in an official
proceeding.
• Up to 10 years in prison for retaliating against a
“whistle blower.”

EPAAA: Code of Ethics
• The word “ethics” in general usage means the philosophy of human
conduct with emphasis on “right” and “wrong” which are moral
questions.
• “Right action” for a professional will of course include conformity with
moral standards, but will also include behavior designed for practical as
well as idealistic purposes.
• A code of professional ethics may be designed in part to encourage ideal
behavior but basically such a code is intended to be enforceable.
• It should be at a higher level than the law but it must be at a lower level
than the ideal.
• It is a practical working tool.

• “Professional ethics” therefore, may be regarded
as a mixture of moral and practical concepts all
reduced to rules which are intended to be
enforceable, to some extent at least, by
disciplinary action.

• A member of the Ethiopian Professional Association of
Accountants and Auditors shall at all times maintain:
1. independence of thought and action,
2. hold the affairs of his clients in strict confidence,
3. strive continuously to improve his professional skills,
4. observe prescribed auditing standards,
5. promote sound and informative financial reporting,
6. uphold the honor and dignity of the accounting profession,
and
7. maintain high standards of personal conduct.

Ethiopian Code of Ethics for Professional Accountants
Issued by Office of Federal Auditor General (OFAG)
(January 2004)
The Objectives of the Accountancy Profession

• The Code recognizes that the objectives of the
accountancy profession are:
– to work to the highest standards of professionalism,
– to attain the highest levels of performance and
generally
– to meet the public interest, honor public trust, and
demonstrate commitment to professionalism

Four basic needs to be met:
• Credibility: In the whole of society there is a need for credibility in

information and information system. It is essential that the information
be considered to be thoroughly accurate, reliable and viewed as
impartial.
• Professionalism: There is a need for individuals who can be clearly
identified by clients, employers and other interested parties as
professional persons in the accountancy field.
• Quality of services: There is a need for assurance that all services
obtained from professional accountant are carried out to the highest
standards of performance.
• Confidence: Users of the services of professional accountants should be
able to feel confident that there exists a framework of professional
ethics, which governs the provision of those services.

Basic Principles
• Integrity: A professional accountant should be straightforward
and honest in performing professional services.
• Objectivity: A professional accountant should be fair and
should not allow prejudice or bias, conflict of interest or
influence of others to override objectivity.
• Independence: Professional accountants working in attestation
function should be independent of their clients and maintain
an independent attitude.

Basic Principles
• Professional Competence and Due Care: A professional accountant should
perform professional services with due care, competence and diligence and
has a continuing duty to maintain professional knowledge and skill at a
level required to ensure that a client or employer receives the advantage of
competent professional service based on up-to-date developments in
practice, legislation and techniques.
• Confidentiality: A professional accountant should respect the confidentiality

of information acquired during the course of performing professional
services and should not use or disclose any such information without
proper and specific authority or unless there is a legal or professional right
or duty to disclose.

Basic Principles
• Professional Behavior: A professional accountant should act in
a manner consistent with the good reputation of the
profession and refrain from any conduct, which might bring
discredit to the profession. The obligation to refrain from any
conduct which might bring discredit to the profession requires
IFAC member bodies to consider, when developing ethical
requirements, the responsibilities of a professional accountant
to clients, third parties, other members of the accountancy
profession, staff, employers, and the general public.

Professional Code of Ethics applicable to auditors only
Issued by the OFAG (August 2008)
Fundamental Principles
• Integrity (Propriety): Auditors should maintain a high standard of
professional and personal conduct in performing their audit work and in
their relationships with staff of audited bodies.
• Independence: Auditors should be independent of the audited body and
maintain an independent attitude.
• Objectivity/Impartiality: Auditors must be fair and must not allow
prejudice or bias to override their objectivity. They should carryout their
work impartially and objectively.

[Cont]
• Professional Competence/Professional development: An auditor has a duty
to maintain high level of competence throughout his/her professional
career. He/she should only undertake work, which he/she or the OFAG can
expect to complete with professional competence.
• Confidentiality: Auditors should respect the confidentiality on information
required in the course of their work and should not disclose any such
information to a third party without specific authority or unless there is a
legal or professional duty to disclose.

[Cont]
• Political neutrality: To maintain both actual and perceived political
neutrality of the OFAG, and to maintain their independence from political
influence and discharge their duties in an impartial way the Auditor
General, Deputy Auditor General, executive officers and all auditors should
not be involved in a partisan politics.
• Conflict of Interest: Conflict of interest involving an auditor and an audited
organization must always be avoided.
• Reasonable care: Auditors should take all reasonable care in planning and
carrying out their audit work in gathering and evaluating evidence and in
reporting audit findings.

[Cont]
• Constructiveness: Auditors should adopt a
constructive and positive approach to their work
and relationships.
• Economy, Efficiency and Effectiveness of
operations: Auditors should seek to improve the
economy, efficiency and effectiveness with which
the office uses its own resources in carrying out its
work.

Office of Federal Auditor
General
• Vision:
– To strengthen the
• performance,
• transparency,
• democratization process,
• accountability as well as
• the good governance of the Federal Government for
the benefit of the Ethiopian people.

Office of Federal Auditor
General
• Core Values:
– Professional independence
– Transparency and integrity
– Professional competence and quality of work
– Good ethical behavior
– Strengthening accountability
– Professional confidentiality
– Efficient and timely service delivery
– To see proper utilization of country’s scarce resources

Federal Ethics and Anti-Corruption
Commission [FEAC]
• Objectives:
– In cooperation with relevant bodies, to strive to create
an aware society where corruption will not be
condoned or tolerated by promoting ethics and anti-
corruption education,
– in cooperation with relevant bodies, to prevent
corruption offences and other improprieties,
– To expose, investigate and prosecute offences and
impropriety.

Theories of Ethical Behaviour
Recognizes that decision-making involves

trade-offs between the benefits and burdens
Utilitarianism of alternative actions and focuses on the
consequences and individuals affected.
Assumes that individuals have certain

Rights-Based rights and other individuals have a duty to
respect those rights when making
Approach decisions.
Justice-Based Is concerned with issues such as equity,

fairness and impartiality.
Approach

Conceptual Framework Approach
• Requires auditors to identify threats that may compromise

ethical behavior and, when necessary, apply safeguards to
eliminate or reduce the threats to an acceptable level.
• Requires active consideration of issues and can be applied to
differing circumstances.
• Requires judgment rather than literal interpretations encouraged
by a pure rules approach.
However, in certain situations the conceptual framework
approach will prohibit the accountant from entering into the
interest and relationship or provide the non-assurance service
because there would be no safeguards available to sufficiently
reduce the threats to an acceptable level.
IESBA Code of Ethics for
Professional Accountants
Organization and Content of IESBA Code of Ethics for Professional Accountants

IESBA Code Part A: Fundamental
Principles and Conceptual Framework
Part A of the Code establishes the

fundamental principles for professional
accountants’ behaviour and the conceptual
framework for applying the principles.

IESBA Code of Ethics for
Professional Accountants
Professional accountant: An individual who is a member of an IFAC

member body.
Professional accountant in public practice: A professional

accountant, irrespective of functional classification (e.g. audit, tax or
consulting) in a firm that provides professional services. This
term is also used to refer to a firm of professional accountants in public
practice.
A professional accountant in business: A professional accountant

employed or engaged in an executive or non-executive capacity in such
areas as commerce, industry, service, the public sector, education,
the not for profit sector, regulatory bodies or professional bodies, or a
professional accountant contracted by such entities.

Integrity Objectivity
Professional
Competence and
Due Care
Professional
Confidentiality Behaviour

Fundamental Principles of Professional Ethics

Conceptual Framework Approach
Threats are created by circumstances and relationships that

could compromise an accountant’s ability to comply with the
fundamental principles.
Safeguards are actions or other measures that may
eliminate threats or reduce them to an acceptable level.
Identify threats to compliance with the fundamental

principles.
Evaluate the significance of the threats identified.
Apply safeguards, when necessary, to eliminate the

threats or reduce them to an acceptable level.
Categories of Threats
Categories of Threats

Safeguards
Safeguards created by the

profession, legislation or regulation
Professional
accountants in
public practice
Safeguards in the work
environment
Professional
accountants in
Prohibitions: business
When safeguards are
not adequate
Safeguards created by the profession,
legislation or regulation
• Educational, training and experience and

requirements for entry into the profession.
• Continuing professional development
requirements.
• Corporate governance regulations.
• Professional standards.
• Professional or regulatory monitoring and
disciplinary procedures.
• External review by a legally empowered third
party of the reports, returns, communications
or information produced by a professional
accountant.
IESBA Code Part B: Professional
Accountants in Public Practice
IESBA Code Part B: Professional

Accountants in Public Practice illustrates how
the conceptual framework contained in Part A
of the Code is to be applied in specific
situations by professional accountants in
public practice (i.e. practitioners).

Part B: Situations
Professional Fees & Other Types

Appointment of Remuneration
Second
Opinions
Conflicts of Gifts &
Interest Hospitality
Marketing
Professional Custody of Client’s
Services Assets
Objectivity – All
Services Independence – Other
Assurance Engagements
Independence – Audit and

Review Engagements

Part B: Examples of Circumstances and
Relationships That May Create Threats
Examples of Circumstances and Relationships that May Create Threats for Practitioners
(continued) Acfn 723: Advanced Auditing /PLK

Part B: Examples of Circumstances and
Relationships That May Create Threats
Continued.

Part B: Examples of Safeguards in
Work Environment
Examples of Safeguards in the Work Environment for Practitioners

Part B: Examples of Safeguards in
Work Environment
continued

Part B: Independence
- Audit and Review Engagements
The state of mind that permits the expression of a

Independence conclusion without being affected by influences that
compromise professional judgement, thereby allowing
of Mind
an individual to act with integrity and exercise
objectivity and professional skepticism.
The avoidance of facts and circumstances that are so

significant that a reasonable and informed third party
Independence would be likely to conclude, weighing all the specific
in Appearance facts and circumstances, that a firm’s, or a member of
the audit team’s, integrity, objectivity or professional
skepticism has been compromised.

- Conceptual Framework Approach
Identify threats to independence.
Evaluate the significance of the threats identified.
Apply safeguards, when necessary, to eliminate the

threats or reduce them to an acceptable level.
When the practitioner determines that appropriate

safeguards are not available or cannot be applied
to eliminate the threats or reduce them to an
acceptable level, he or she shall eliminate the
circumstance or relationship creating the threats.
The practitioner shall document conclusions

regarding compliance with independence
requirements, and the substance of any relevant
discussions that support those conclusions.
The Code encourages regular communication with

those charged with governance or a subgroup
thereof such as the audit committee.
Independence is required during the engagement

period and the period covered by the financial
statements.

• Financial interests.
• Loans and guarantees.
• Business relationships.
• Family and personal relationships.
• Employment with an audit client.
• Temporary staff assignments.
• Recent service with an audit client.
• Serving as a director or officer of an audit client.
• Long association of senior personnel with an audit
client, including partner rotation.
• Provision of non-assurance services to audit
clients.
Part B: Provisions of Non-Assurance Services
– Types of Services and Circumstances
• Preparing accounting records and financial statements.
• Valuation services.
• Taxation services.
• Internal audit services.
• IT systems services.
• Litigation support services.
• Legal services.
• Recruiting services.
• Corporate finance services.
• Fees: relative size of fees, overdue fees and contingent
fees.
• Compensation and evaluation policies.
• Gifts and hospitality.
• Actual or threatened litigation.
Part B: Examples of Safeguards Related
to Provision of Non-Assurance Services
Examples of Safeguards Related to Provision of Non-Assurance
Services to Audit Clients

Preparing Accounting Records and
Financial Statements
The practitioner shall not Audit firms may provide assistance to
assume a management management in preparing accounting
responsibility. records or financial statements.
Activities considered
Originating or a normal part of the audit process
changing journal entries, that generally do not threaten
or determining the account independence.
classifications of
Technical assistance
transactions.
and advice on accounting
issues that generally do not
threaten independence.
Preparing or Services related to

changing source documents the preparation of accounting records
or originating data, in electronic and financial statements of a routine or
or other form, evidencing mechanical nature if any self-review
the occurrence threats are reduced to an
of a transaction. acceptable level.
Preparing Accounting Records and
Financial Statements
A public interest entity (PIE) includes a listed

entity and an other entity defined as PIE by
regulation or legislation.
To an audit (or review) client that is a PIE the

firm shall ordinarily not provide accounting
and bookkeeping services, including payroll
services, or prepare financial statements or
financial information which forms the basis of
the financial statements.
Valuation Services
A valuation comprises the making of assumptions with regard to future

developments, the application of appropriate methodologies and
techniques, and the combination of both to compute a certain value, or
range of values, for an asset, a liability or for a business as a whole.
A self-review threat may be created when a firm performs a valuation

that is to be incorporated into the client’s financial statements.
The firm shall not provide a valuation service (or withdraw from the audit
engagement) if the valuation service has a material effect on the financial
statements and the valuation involves a significant degree of subjectivity.
For PIE audit clients the firm shall not provide valuation services to an
audit client if the valuations would have a material effect, separately or in
the aggregate, on the financial statements.
Taxation Services
1. Tax return preparation.
2. Tax calculations for the For PIE audit clients the firm
purpose of preparing the shall ordinary not prepare
accounting entries. such tax calculations of
3. Tax planning and other tax entries that are material to the
advisory services. financial statements.
4. Assistance in the
resolution of tax disputes.
A firm is not permitted to provide tax advice when the tax advice depends on
a particular accounting treatment or presentation in the financial statements,
and
(a) the audit team has reasonable doubt as to the appropriateness of the
related accounting treatment or presentation under the relevant financial
reporting framework; and
(b) the outcome or consequences of the tax advice will have a material effect
on the financial statements.
Internal Audit Services
Internal audit services involve Provision of internal audit

assisting the audit client in the services creates a self-
performance of its internal review threat to
audit activities. independence if the firm
uses the internal audit work
In providing such services the in the course of a
firm shall not assume
subsequent external audit.
management responsibility.
For PIE audit clients the firm shall not provide internal audit services
that relate to a significant part of the internal controls over financial
reporting; financial accounting systems that generate information
that is, separately or in the aggregate, significant to the client’s
accounting records or financial statements; or amounts or
disclosures that are, separately or in the aggregate, material to the
financial statements.
IT System Services
IT system services Provision of IT systems services

related to information may create a self-review threat to
technology (IT) systems independence when the system
include the design or generate information that affects
implementation of the accounting records or financial
hardware statements.
or software systems.
For PIE audit clients the firm shall not provide services
involving the design or implementation of IT systems that form
a significant part of the internal control over financial reporting
or generate information that is significant to the client’s
accounting records or financial statements.

Litigation Support Services
Litigation support services Litigation support services to

include activities such as
an audit client may create
acting as an expert witness,
may create self-review
calculating estimated
damages or other amounts or advocacy threats.
that might become receivable
or payable as the result of
litigation or other legal dispute,
and assistance with document
management and retrieval.
Where the result of a valuation for litigation support will have

a direct effect on the financial statements, the requirements
in the Code relating to valuation services are applicable.

Legal Services
Legal services are defined as Providing legal services to
any services for which the
person providing the services
an entity that
must either be admitted to is an audit client may
practise law before the courts of create both self-review
the jurisdiction in which such and advocacy threats.
services are to be provided or
have the required legal training
to practise law.
The firm is not permitted to act in an advocacy role for an

audit client in resolving a dispute or litigation when the
amounts involved are material to the financial statements.
A partner or an employee of the firm cannot serve as a
General Counsel for legal affairs of an audit client.
Recruiting Services
Recruiting services include Providing recruiting

services such as reviewing services to an audit client
the professional may create
qualifications of applicants, self-interest, familiarity or
interviewing candidates and
intimidation threats.
providing advice on their
suitability for the post.
For PIE audit clients with respect to recruiting directors or

officers of the entity or senior management who will have
a direct influence over accounting records or financial
statements, the firm shall not search for or seek out
candidates for such positions and undertake reference
checks of prospective candidates for such positions.
Corporate Finance Services
Corporate finance services Providing corporate

comprise a broad range of finance services to an
services including assisting in
developing corporate
audit client may create
strategies, identifying possible services may create
targets for the client to acquire, advocacy and self-
advising on disposal review threats.
transactions, assisting finance-
raising transactions and
providing structuring advice.
Certain corporate finance services are not permitted,

such as services involving promoting, dealing in or
underwriting an audit client’s shares.

Prohibited Interests and
Relationships for Audits of PIEs
Prohibited Interests and Relationships for Audits of Public Interest Entities (PIEs)

Prohibited Non-Assurance
Services for Audits of PIEs
Prohibited Non-Assurance Services for Audits of Public Interest Entities (PIEs)

Prohibited Non-Assurance
Services for Audits of PIEs
continued

Independence for
Other Assurance Engagements
An assurance engagement is an engagement in which a

practitioner expresses a conclusion designed to enhance the
degree of confidence of the intended users other than the
responsible party about the outcome of the evaluation or
measurement of a subject matter against criteria.
Many of the same circumstances and relationships discussed

previously related to independence requirements for audits and
reviews are also relevant for other assurance engagements.
Threats to independence typically arise more frequently and are

of greater significance when a non-assurance service is provided
to an audit client. Thus, the provision of non-assurance services
to audit clients is more restricted than to non-audit assurance
clients.

IESBA Code Part C:
Professional Accountants in Business
A professional accountant Situations that may create
in business is an threats:
accountant holding • Potential conflicts.
membership in an IFAC • Preparation and reporting of
body and is employed or information.
engaged in an executive or • Acting with sufficient expertise.
non-executive capacity in an • Financial interests, compensation
organization other than an and incentives linked to financial
audit firm. reporting and decision making.
• Inducements.
Professional accountants in
business must comply with
the IESBA Code’s
fundamental principles
and apply the conceptual
framework when threats to
the principles exist.
Auditor Independence in the EU
From European Commission, Recommendation on Statutory

Auditors’ Independence in the EU: A Set of Fundamental Principles
(2002):
‘A principles-based approach to statutory auditors' independence is
preferable to one based on detailed rules because it creates a robust
structure within which statutory auditors have to justify their actions. It
also provides the audit profession and its regulators with the flexibility
to react promptly and effectively to new developments in business and
in the audit environment. At the same time, it avoids the highly
legalistic and rigid approach to what is and is not permitted which can
arise in a rules-based regime. A principles-based approach can cater
for the almost infinite variations in individual circumstances that arise
in practice and in the different legal environments throughout the EU.
Consequently, a principles-based approach will better serve the needs
of European capital markets, as well as those of SMEs (small and
medium sized enterprises).’

Elements of Quality Control
ISQC 1 Quality Control for Firms That Perform Audits and

Reviews of Financial Statements, and Other Assurance and
Related Services Engagements
Leadership for Acceptance and

Relevant Ethical
quality within Continuance of
Requirements
the firm Client Relations
Human Engagement
Monitoring
Resources Performance

Elements of a Systems of Quality
Control
Elements of a
System of
Quality Control

Selected Quality Control Policies
and Procedures
Selected Quality
Control Policies and
Procedures

Quality Control Programmes
EU 8th Directive.
IFAC SMO 1 European Commission,
Quality Assurance Recommendation on
Quality Assurance for
the Statutory Audit in
the EU: Minimum
Requirements

Quality Control Programmes
The objective of a quality assurance review is to:
1. Determine whether the member is subject to an

adequate system of quality control.
2. The system of quality control is in compliance with such
system.
3. The system of quality control has adhered to
professional standards and applicable legal and
regulatory requirements in performing engagements.
A IFAC member body shall choose either a cycle or risk-

based approach for selecting members for review.

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Acfn 723: Advanced Auditing

Addis Ababa University

• Module Title: Advanced Auditing

Acfn 723: Advanced Auditing /PLK

Acfn 723: Advanced Auditing /PLK

Acfn 723: Advanced Auditing /PLK

• Handbook of the Code of Ethics for Professional Accountants 2015

Acfn 723: Advanced Auditing /PLK

1. It is an independent standard setting body that develops an

2 The objective of the IESBA is to serve the public interest by

Acfn 723: Advanced Auditing /PLK

4 Convergence to a single set of standards can enhance the

Acfn 723: Advanced Auditing /PLK

• A professional auditor/accountant has to comply with the following

Refers to a system or code of

Refers to the conduct, aims or

Acfn 723: Advanced Auditing /PLK

Acfn 723: Advanced Auditing /PLK

Acfn 723: Advanced Auditing /PLK

 Identify ethical  Analyze  Make ethical

Use personal ethics Consider all good Choose best option

Acfn 723: Advanced Auditing /PLK

• Morals – derived from Latin meaning customs,

• Essentially ethics and morals are the same

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In addition to competence, objectivity, independence,

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The Sarbanes-Oxley Act of 2002 was intended to protect the

 The Act requires that a company’s annual report contain an

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The Objectives of the Accountancy Profession

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• Credibility: In the whole of society there is a need for credibility in

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• Confidentiality: A professional accountant should respect the confidentiality

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Recognizes that decision-making involves

Assumes that individuals have certain