At.1306 Quality Control

Quality Control
(AT.1306)
Leomar R. Cabarles
Reviewer, PRTC
Outline
• Relevant Standards
• Introduction
• Objectives
• Requirements of the Standard
2
Relevant Standards
3
Relevant Standards
• PSQC 1– Quality Control for Firms that Perform

Audits, Reviews of FS, and Other Assurance and
Related Services Engagements
• PSA 220 – Quality Control for an Audit of Financial

Statements
4
Introduction
5
Introduction
• PSQC deals with a firm’s responsibilities for its

system of quality control and applies to all firms of
professional accountants in respect of:
• Audits of FSs
• Reviews of FSs
• Other assurance
• Related services engagements
• PSA 220 deals with the specific responsibilities of

the auditor regarding quality control procedures
and engagement quality control reviewer (EQCR)
for an audit of FSs
6
Introduction (Cont’d)
• The nature and extent of the policies and

procedures developed by an individual firm will
depend on various factors, such as the:
• size
• operating characteristics
• whether it is part of a network
7
Objectives
8
Objectives
• The objectives of the firm is to establish and

maintain a system of quality control to provide it
with reasonable assurance that:
• The firm and its personnel comply with

professional standards and regulatory and legal
requirements; and
• Reports issued by the firm or engagement
partners are appropriate in the circumstances.
9
Requirements of the
Standards
10
Requirements of the Standards
• Elements of a System of Quality Control
11
Elements of a System
of Quality Control
12
Elements of a System of Quality
Control
• Includes policies and procedures (that must be
documented) that address each of the following
elements (HEAL ME):
• Leadership responsibilities for quality within the
firm
• Ethical requirements
• Acceptance and continuance of client
relationships and specific engagements
• Human resources
• Engagement performance
• Monitoring
13
Control
elements (HEAL ME):
firm
• Human resources
• Monitoring
• Documentation
14
Control
elements (HEAL ME DOC):
firm
• Human resources
• Monitoring
• Documentation
15
Leadership Responsibilities for Quality
within the Firm
• Designed to promote an internal culture recognizing
that quality is essential in performing
engagements.
• Ultimate responsibility of the firm’s CEO (or

equivalent) or managing board of partners (or
equivalent).
16
Ethical Requirements
• Designed to provide reasonable assurance that the

firm and its personnel comply with relevant ethical
requirements, to wit:
• Comply with fundamental principles and apply

the conceptual framework.
• Maintain independence requirements.
• Notify breaches of compliance with ethical
requirements, and provide resolution.
• At least annually, obtain written confirmation of
compliance.
17
Acceptance and Continuance of Client
Relationships
firm will only undertake or continue relationships
and engagements where the firm:
• is competent to perform the engagement and

has the capabilities;
• complies with relevant ethical requirements; and
• considers the integrity of the client.
18
Communication with Predecessor
Auditor
• Successor must make inquiries of predecessor
auditor before accepting engagement
• Successor initiates communication
• Requires permission of client
• Consider implications of client's refusal
• Nature of inquiries (RAID)

• Integrity of management
• Disagreements with management about audit
procedures or accounting principles
• Communication with Audit Committee about
fraud, illegal acts, or internal control
• Reason for change in auditor
19
Human Resources

firm has sufficient personnel with the competence,
capabilities, and commitment to ethical principles
necessary to:
• perform engagements in accordance with
professional standards and regulatory and legal
requirements; and
• enable the firm or engagement partners to issue

appropriate reports.
• Assignment of engagement teams
20
Engagement Performance
• Designed to provide reasonable assurance that

engagements are performed in:
• accordance with professional standards and

regulatory and legal requirements,
• the firm or the engagement partner issue reports
that are appropriate in the circumstances.
21
Engagement Performance
• Consistency in the Quality of Engagement

Performance
• Supervision
• Review (performed by more experienced)
• Consultation
• Engagement Quality Control Review
• Differences of Opinion
• Engagement Documentation
• Assembly of final engagement files – no > 60 days
• Retention of documentation – no < 7 years
22
Engagement quality control review
(EQCR)
• A process designed to provide an objective
evaluation, on or before the date of the report,
of the significant judgments the engagement team
made and the conclusions it reached in formulating
the report.
• For audits of FSs of listed entities, and those other

engagements, if any, for which the firm has
determined an EQCR is required.
23
Monitoring

policies and procedures relating to the system of
quality control are:
• relevant,
• adequate, and
• operating effectively.
• Evaluation, communication and remediation of

identified deficiencies
• Complaints and allegations
24
Documentation of the System of
Quality Control
• Provide evidence of the operation of each element
of its system of quality control, including:
• Retention of documentation
• Complaints and allegations and the responses to
them
25
Questions?
26
Thank you!!!
27

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Quality Control

• Requirements of the Standard

• PSQC 1– Quality Control for Firms that Perform

• PSA 220 – Quality Control for an Audit of Financial

• PSQC deals with a firm’s responsibilities for its

• PSA 220 deals with the specific responsibilities of

• The nature and extent of the policies and

• The objectives of the firm is to establish and

• The firm and its personnel comply with

• Elements of a System of Quality Control

• Ultimate responsibility of the firm’s CEO (or

• Designed to provide reasonable assurance that the

• Comply with fundamental principles and apply

• is competent to perform the engagement and

• Nature of inquiries (RAID)

• Designed to provide reasonable assurance that the

• enable the firm or engagement partners to issue

• Assignment of engagement teams

• Designed to provide reasonable assurance that

• accordance with professional standards and

• Consistency in the Quality of Engagement

• For audits of FSs of listed entities, and those other

• Designed to provide reasonable assurance that the

• Evaluation, communication and remediation of

• Complaints and allegations

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