Leonardo J Matignas Jr

CPA, CIA, CRMA,CFA

 A distinguishing mark of a profession is
acceptance of its responsibility to the
public

 One way to reflect this responsibility is

for registered firms to establish
systems of quality control that ensure
conformity with the professional
standards and code of ethics relevant
to professional work seanwes.com
Part of the Function of BOA
Conduct an oversight into the quality of audits
of financial statements:
 Through a review of the quality control
measures instituted by auditors
 To ensure compliance with the accounting
and auditing standards and practices,”

[Section 9 (n) of R.A.9298, Powers and Function of the Board]

www.maryblackfoundation.org
BOA Requirement

“Copy of the internal quality review

procedures being implemented to ensure
compliance with the professional, ethical
and technical standards required of the
practice of accountancy...”

(First sentence of Annex B (c) ix, Rules and Regulations

Implementing Republic Act 9298) www.expertbriefings.com
BOA Requirements
 Condition to registration or any renewal Individual CPAs,
Firms or Partnerships of CPAs to undergo quality review in
a manner specified by the Board,
 Compliance with the above requirement through a quality
review performed for other purposes which is substantially
equivalent to quality review of the Board and shall be
made applicable to all Individual CPAs, Firms or
Partnership.”

(Annex B, 3a, Rules and Regulations Implementing RA 9298)

ELEMENTS OF A SYSTEM OF QUALITY CONTROL
Design policies intended to provide the Firm with
reasonable assurance, that its personnel
• Comply with applicable professional standards
• Reports issued by the firm or engagement partners are
appropriate in the circumstances
Procedures necessary to implement and monitor
compliance with such policies
 Scope of Quality Review

•Firm’s responsibility for its system of quality

control
•Audits and reviews of financial statements, and
other assurance and related service engagements
•Quality control procedures for specific types of
engagement are covered by other ISA
•Example: ISA 220 (Audits of financial statements)
Provide reasonable assurance that:

Firm and Personnel

Reports issued
comply
• Professional • By Firm or
Standards (ISA and Engagement Partner
COE)
• Applicable legal and • Appropriate in the
regulatory circumstances
requirements (BOA,
SEC)
 Important reminders

•Person responsible for quality shall have an

understanding of the entire text of ISQC 1.
•Firm shall comply with each requirement of
ISQC 1.
•Except when the requirement is not relevant.
 Policies and
Procedures

Document
Communicate to
personnel
• Laws and regulations require that a practitioner should
implement a system of quality control.
• Practitioner shall ensure that it has comply with the legal
requirements through compliance with ISQC 1 and other
applicable standards and regulations.
Provide assistance to member practitioner in
determining level of compliance with the requirement
of ISQC 1.

The Quality Assurance Review Program of PICPA is

intended to assist practitioner in improving the
quality of their audit work.
Leadership responsibilities for quality within the firm

Relevant ethical requirements

Acceptance and continuance of client relationships
and specific engagements
Human resources

Engagement performance

Monitoring
 Policies and procedures for each
element of a system of quality
control.

 Communication of the policies and

procedures to the firm’s personnel.

teachmelife.wordpress.com
 Manual (Quality Assurance
Manual and Audit Manual) (See:
Handouts No. 12)
 Memorandum
 Minutes of meeting with
acknowledgement from all
personnel
 Organizational structure
Memorandum Meetings with
duly acknowledge minutes of meeting
by Firm
Personnel

Discussions with minutes of the

discussion
Training compliance with Strategic Planning with a
CPD completed strategic plan

Mission Statement displayed in the office

Employment Contract
signed by employees
“All partners and staff are, to
varying degrees, responsible for
implementing the firm’s quality
control policies and procedures.”
For Sole practitioner with no staff,
ISQC 1 does not call for compliance
with the following requirements:
 Assignment of appropriate
personnel to the engagement
team
 Review responsibilities
 Communication of monitoring
result to engagement partners

(A1, ISQC 1)
 Consideration for smaller entities
Internal Control Elements (ISA Firm-Level QC Elements (ISQC 1) Engagement-Level
315) QC Elements (ISA
220)

Control Environment Leadership Responsibilities for Leadership Responsibilities for

(Tone at the Top) Quality within the Firm Quality on Audits
Relevant Ethical Requirements Relevant Ethical Requirements
Human Resources Assignment of Engagement Teams

Risk Assessment Acceptance and Continuance of Acceptance and Continuance of Client

(What Could Go Wrong?) Client Relationships and Specific Relationships and Audit Engagements
Engagements
Risks that the report might not be
appropriate in the circumstances

Information Systems Quality Control System Audit Documentation

(Tracking performance) Documentation
Control Activities Engagement Performance Engagement Performance
(Prevent & detect/correct controls)
Monitoring (Are the firm’s/ engagement’s Ongoing Monitoring of the Firm’s Applying Results of Ongoing
objectives being met?) Quality Control Policies and Monitoring to Specific Audit
Procedures Engagements

IFACs Guide to Using ISA in the Audit of Small and Medium-Sized Entities – Third Edition
LEADERSHIP RESPONSIBILITY FOR QUALITY WITHIN A FIRM
ISQC 1. 18. requires:
 Policies and procedures designed to
promote an internal culture recognizing
that quality is essential in performing
engagements.

 Policies and procedures shall indicate that

the CEO or Board of partner shall assume
Ultimate responsibility for quality within the
Firm.
http://journyx.com/blog/ultimate-responsibility
ISQC 1, 19.
Policies and procedures shall specify that
person or persons assigned operational
responsibility for the firm’s system of quality
control has
 Sufficient and appropriate experience
 Ability to identify quality control issues and
develop policies and procedures
 Authority to implement policies and
procedures
http://entiregospel.com/tag/biblical-
authority/
Manuals
Communications (emails)
Mission statement and vission
Minutes of meetings (Partners and Staff)
Strategic plan
Assignment of appropriate person (Qualification and
years of experience)
Periodic meetings of BOP (Minutes of meetings)
Partner’s involvement in the audit at the planning
stage is not evident.

Policies/procedures not reviewed , updated and/or

documented.

No evidence that the staff have read/understood the

policies/procedures

27
RELEVANT ETHICAL REQUIREMENTS
“The firm shall establish policies and procedures designed to
provide it with reasonable assurance that the firm and its
personnel comply with relevant ethical requirements.”
Integrity;

Independence and objectivity;

Professional competence and due care;

Confidentiality; and

Professional behavior.
Education and training

Adherence to CPD requirements

Adherence to professional standards, monitoring and

professional development procedures

External review of the firms quality control procedures

Adherence to legislation
Identify Identify
Conclusion
Threats Safeguards
Annual independence declaration from all personnel subject to
indendependence.

Partner in-charge of Independence shall document review of

annual independence declaration

Confidentiality Declaration (See Handouts 3: Declaration of

Confidentiality)

Identified threats and evaluation of its significance, if significant

any safeguards, in none actions taken by the firm.
Professional accountants should refrain from
 Disclosing confidential information acquired as a result of
professional and business relationship without authority.
 Using confidential information acquired as a result of
professional and business relationship to their personnal
advantage
ACCEPTANCE AND CONTINUANCE OF CLIENT RELATIONSHIPS AND
SPECIFIC ENGAGEMENTS
Prior to accepting an audit engagement the firm needs to
consider
 Integrity of management
 Engagement team competence
 Compliance with ethical requirements
 Identified breaches and threats reduced to an acceptable
level by applying safeguards
Auditor shall accept an engagement only when:
 Precondition for an audit is present
 Confirming that there is common understanding between
management, those charged with governance (TCWG) and
the auditor.
HUMAN RESOURCES
 Policies and Procedures shall include at a minimum
• Recruitment and retention
• Professional qualification
• Continuing professional development and training
• Work experience
• Coaching by senior staff
• Performance evaluation
• Carreer development
• Promotion
• Compensation
• The estimation of personnel needs
• Assignment of personnel
 Organizational Structure

HR Manual

Performance evaluation result

Staff assignment
ENGAGEMENT Performance
Elements of quality control of an individual audit engagement
Leadership
responsibilities Ethical Client
for quality on requirements relationships
audits

Elements of quality control of

an individual audit engagement Assignment of
Monitoring engagement
team

Engagement
Engagement
quality Consultation
performance
control review
MONITORING
Monitoring consists primarily of
 Understanding the control system
 Determining whether, and to what extent, this control
system is designed and operating effectively.
 Developing recommendations to improve the system,
especially if weaknesses are detected or if professional
standards and practices have changed.
Monitoring are informally performed by small firms through

 Reliance on every partner and staff members at all levels to

informally monitor and enforce quality, ethics, and
professional and firm standards.

 Feedback received from the relevant professional body’s

practice inspection.
• One or more completed and released engagements, for
each engagement partner at each inspection
• Each partner’s files are selected on at least a cyclical basis
• Inspection cycle not more than three years
• Those involved in the engagement team or serving the
EQCR function should not be eligible to act as a monitor on
the same file
Smaller Firms:
• May need to be conducted by the same personnel who
designed and implemented the firm’s quality control
policies and procedures
• May use same individuals who are used to perform the
EQCR function provided that the individual was not on the
engagement team and did not perform an EQCR on the file
• May include other firms for assistance or professional
member bodies
 Evaluating, communicating and remediating any
deficiency
 Complaints and allegations
 Report on the result of monitoring
DOCUMENTATION
The firm shall establish policies and procedures on
documentation of the engagement quality control review
which require documentation that:
a. The procedures required by the firm’s policies on engagement
quality control review have been performed;

b. The engagement quality control review has been completed

on or before the date of the report; and

c. The reviewer is not aware of any unresolved matters that

would cause the reviewer to believe that the significant
judgments the engagement team made and the conclusions it
reached were not appropriate.

ISQC 1.42
There should also be documented policies and procedures
covering the following:

 Completion of the Assembly of Final Engagement Files

 Confidentiality, Safe Custody, Integrity, Accessibility and

Retrievability of Engagement Documentation

 Retention of Engagement Documentation

 Documentation of the System of Quality Control