AUDIT COMPLIANCE REVIEW

Name of Firm: Year:

The Institute of Chartered Accountants of Pakistan

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AUDIT COMPLIANCE REVIEW GUIDANCE NOTES The Audit Regulations All firms are required to comply with regulations and provisions contained in Chartered Accountants Ordinance, 1961 (X of 1961), the Chartered Accountants Bye-Laws, 1983, Companies Ordinance, 1984 and International Standards on Auditing adopted by the Institute. This annual review is referred to as Audit Compliance Review. All firms are required to furnish this information on 01 July at the time of renewal of practicing certificates of their proprietors / partners. What is an Audit Compliance Review ? In many ways an Audit Compliance Review (ACR) is an internal audit of the way the firm conducts its auditing work and assures the Institute that proper safeguards are in place to ensure compliance with Auditing Standard on Quality Control for Audit Work. The ACR should be completed by: The designated Partner / the Sole Proprietor. A qualified employee only in case where an office / branch is managed by him.

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Yes AUDIT COMPLIANCE REVIEW CHECKLIST Most questions require a Yes or No answer. Where a No answer is given further elaboration is required. All actions taken should be noted (or cross referenced) on the checklist. PART A: WHOLE FIRM QUALITY CONTROL PROCEDURES SECTION 1 GENERAL 1.1 On what date was the previous Audit Compliance Review by the partner carried out. _____________________________ 1.2 1.3 Have all matters requiring action from this review been dealt with? If there is more than one office Have all offices been included in the review? Have the results of the review been notified to the concerned staff of all these offices?

No

SECTION 2 WRITTEN PROCEDURES FOR INTERNATIONAL STANDARDS ON AUDITING (ISAs) 2.1 2.2 Does the firm have written Procedures to ensure compliance with ISAs? Does the firm have an established Quality Control Procedures Manual which complies with the requirements of ISAs?

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Yes 2.3 2.4 2.5 2.6 2.7 Was the Manual reviewed to ensure that it continues to be relevant and complete? Enter date of last review Is there a record of this review on file, including notes of matters arising and action taken? Have all copies of the Manual been updated following the review? Are copies of the Manual available to all staff, engaged in audit work? Have all staff been made aware of the contents and implications of Manual?

No

SECTION 3 PERSONNEL 3.1 3.2 Are personnel files maintained for all staff engaged on audit work? Do personnel files contain documentation relating to the following: Job Application and Interviews References Contract of Employment Appraisals Training Record Disciplinary Matters

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Yes 3.3 Has the firm engaged any new personnel since the last audit compliance review? If Yes: Have the firms established procedures been followed? 3.4 3.5 3.6 recruitment

No

Has an appropriate job description been drawn up?

Has an independence declaration been signed by all principals / audit staff annually? Has a confidentiality declaration been signed by all principals / audit staff on joining the firm? Where performance appraisals have been carried out during the year, have details of appraisals and agreed action been noted on personnel files?

SECTION 4 MAINTAINING COMPETENCE 4.1 Has the firms policy in relation to the following matters been documented? 4.2 Staff Recruitment Training Policy and Procedures Staff Appraisals / Promotion Disciplinary Procedures

Have the firms policies in relation to the matters outlined in 4.1 above been reviewed to ensure that they continue to be appropriate? Enter date of last review. Have the individual training requirements of all audit staff been considered?

4.3

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Yes 4.4 4.5 4.6 Are records of CPE hours professionally qualified staff? maintained for all

No

Does the firm maintain a technical library, available for use by all audit staff? Has the firms library been updated to include copies of all new and recent legislation, ethical statements, accounting and auditing standards, and requirements of particular client businesses? Does the firm retain copies of professional journals? Has standard audit documentation been updated to reflect changes in professional standards and disclosure requirements?

4.7 4.8

SECTION 5 INDEPENDENCE 5.1 Are all audit staff aware of the current procedures to consider the firms independence in respect of individual clients? Has the firm adopted procedures, in relation to each audit assignment, to ensure that consideration is given to its independence, availability of resources and its ability to properly perform the audit, prior to accepting appointment / re-appointment?

5.2

SECTION 6 CONSULTATION ARRANGEMENTS 6.1 Does the firm have established consultation arrangements in respect of technical, ethical, practical and other significant matters? If not available in-house are there arrangements with a suitably qualified third party?

6.2

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Yes 6.3 Are the consultation arrangements referred to in 6.2 above agreed in writing?

No

SECTION 7 QUALITY CONTROL REVIEWS 7.1 Does the firm operate a system of quality control reviews, in relation to specific audit assignments? If No, proceed to section 8 7.2 7.3 Have matters arising from reviews been followed up and appropriate action taken? Are full records of quality control reviews been retained such as the dates, the names of the reviewers, his comments etc. Does the firm maintain procedures requiring hot reviews (i.e. consultation with others prior to completion of the audit) in relation to selected audit assignments? Have these procedures been consistently followed and records retained?

7.4

7.5

SECTION 8 GENERAL 8.1 Have any significant changes occurred in respect of the firms structure, control, number of offices or composition of its client portfolio? Have all relevant disclosures of such changes been made to ICAP? Does the firm hold client moneys? Have the client moneys been handled according to Code of Ethics?

8.2 8.3 8.4

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SECTION 9 SPECIFIC MATTERS Please document below any relevant matters specific to the firm in respect of audit standards compliance.

SECTION 10 MATTERS IDENTIFIED AS REQUIRING ACTION Please summarise below matters arising from this review, including those relating to any negative responses.

Matter Identified None

Action Taken Not Applicable

Review Performed by:

Signed:

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Yes PART B: QUALITY CONTROL PROCEDURES REVIEW CHECKLIST SECTION 1 GENERAL 1.1 Are the audit files complete in regard to the following: Have the accounts been signed as approved by the Directors and the dates of approval of the financial statements by the Directors noted? Have the audit reports been signed and dated? 1.2 Were qualified opinions given? If Yes what were the qualifications? If there are many cases, give three important instances.

No

SECTION 2 FINANCIAL STATEMENTS 2.1 Does the file contain copies of the full financial statements signed by all relevant parties (directors, clients authorised signatories etc.)? Are the dates of approval of the financial statements by the Directors noted? Have both the Directors Report and Auditors Report been appropriately dated? Has a financial statements disclosure checklist been used? Has a review of the financial statements confirmed that no apparent disclosure errors exist?

2.2 2.3 2.4 2.5

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Yes 2.6 Have the reasons supporting the audit opinion adequately documented on the working papers?

No

SECTION 3 ENGAGEMENT 3.1 Are there signed and current letters of engagement on file, detailing the scope of the assignment? Have the engagement being completed in accordance with the terms of the engagement letters? 3.2 Have the firms independence, resources and ability to perform the audit been considered and documented, prior to accepting appointment / re-appointment? Are any fees outstanding? Have signed and relevant letters of representation been obtained? Do their dates coincide with the date of the audit report? 3.5 Have all specific matters, concerning the clients financial position, system of internal controls or other significant issues, arising during the audit been drawn to the clients attention (e.g. by way of management letter or other means)? With regard to new engagement, have letters been obtained from the previous auditor confirming that there are no professional reasons why appointment should not be accepted?

3.3 3.4

3.6

SECTION 4 AUDIT PLANNING 4.1 4.2 Do working papers file indicate that the assignment was adequately planned? Have the audit plans been approved, prior to the assignment commencing, by the responsible individual?

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Yes 4.3 Have the terms of engagement been considered during the planning process to ensure that the scope of the audit is adequate? Have all meetings, telephone calls etc. with the client, prior to beginning the assignment been documented?

No

4.4

4.5

Have relevant laws, regulations and other particular or special circumstances affecting the client or the audit been taken into account in planning the assignment? Have analytical review procedures been adopted at the planning stage? Have audit risk assessment been carried out? Have separate audit programs been included to cover the work required for any specific report to a third party, if applicable? Have the business, its history, the source of accounting entries and the internal controls adopted been recorded? Have the accounting system been documented and assessed as a basis for producing the financial statements? Have materiality and, if appropriate, sample sizes been calculated? Have the audit approach methodology and procedures to be adopted been clearly defined? Have the audit assignment teams been chosen with reference to competence, experience and training? Is there evidence to indicate that the audit assignment team has been fully briefed, prior to commencing the assignment? Was the audit plan specific to the client and adequately documented?
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4.6

4.7 4.8

4.9 4.10

4.11 4.12 4.13 4.14

4.15

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Yes SECTION 5 AUDIT WORKING PAPERS 5.1 Has consideration been given to agreeing opening balances? In the case of a new appointment have steps been taken to confirm the reliability of the opening balances in accordance with the last audited financial statements? 5.2 Has an analytical review of the financial statements been completed and documented and explanations sought where appropriate? Has a standard audit program been used? If Yes: Has it been tailored to suit the clients circumstances? Have the matters and risks identified during planning been addressed? If No: Were the specific details of the work to be done included within the planning documentation? 5.4 Do the working papers adequately record the nature, timing and extent of the audit procedures performed, the results thereof, and the conclusions drawn from the audit evidence obtained? Have all the work specified been completed, properly signed off and evidenced as reviewed? Have conclusions been recorded in respect of each section of the audit? In circumstances where stock is held, was the clients stock count attended? If not, were alternative procedures adequate to verify stock in trade / inventories quantities?

No

5.3

5.5 5.6 5.7

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Yes 5.8 5.9 Were bank confirmation letters obtained covering all banks? Do the lead statements? schedule agree with the financial

No

Do they show comparative figures? Are they supported by further analysis? Are they evidenced as reviewed by the Responsible Individuals? Are all disclosures within the financial statements supported by working papers? 5.10 5.11 5.12 5.13 Have all material balances and transactions been subject to adequate audit work? Has a going concern review been carried out? Has a subsequent events review been carried out upto the date of the audit opinion? Please specify any other relevant matters to the audit.

SECTION 6 AUDIT SAMPLING 6.1 Are there sufficient explanations on file to describe how sample sizes have been determined and how the sample has been selected? Have samples been based on the assessment of audit risk, materiality and the population size? Are the results of sample testing summarised in respect of coverage and related to the total population? Where errors are found in a sample, have their effect on the population as a whole been assessed? Where errors are material has the sample been extended?
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6.2 6.3 6.4 6.5

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Yes 6.6 Do the summaries of errors contain details of all errors noted regardless of whether adjustments have been made and of materiality? Have the summaries of errors been reviewed and considered in respect of the effect on the audit opinion and conclusions?

No

6.7

SECTION 7 AUDIT COMPLETION 7.1 7.2 7.3 Is there evidence of review and supervision of the work by the responsible individual? Have all outstanding points and review points been satisfactorily cleared and documented? Are there summaries of significant matters which have affected the conduct of the audit and / or the audit opinion? Is there documentary evidence that these matters have been considered by the responsible individual? Have all consultations (both internal and external) been fully recorded? Has the analytical review of the final financial statements been fully recorded and explained? Are there final conclusion by the responsible individual that the audit opinion is appropriate and supported by working papers on the file? Are there evidence that the financial statements have been subjected to a final overall review? Has consideration been evidenced of the period between the completion of the audit work and the audit report date for events affecting the opinion? Are there records of meeting with the clients to discuss the financial statements with details of the matters discussed? Does the audit completion section sufficiently document the quality control processes applied?
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7.4 7.5 7.6 7.7

7.8 7.9

7.10

7.11

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SECTION 8 MATTERS ARISING Summary of matters arising from the review, including those relating to any negative responses: Area of Concern Action Taken

Review Performed by:

Signed:

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