3. SMO 1: Quality Assurance
SMO 2: International Education Standards for Professional Accountants
& Other Pronouncements Issued by the IAESB
SMO 3: International Standards & Other Pronouncements Issued by the
IAASM
SMO 4: IESBA Code of Ethics for ProfessionalAccountants
SMO 5: IPSAS & Other Pronouncements Issued by the IASB
SMO 6: Investigation & Discipline
SMO 7: IFRS & Other pronouncements issued by the IASB
Statement of Membership Obligations 1 - 7
7. SMO 1:
QualityAssurance
(QA)
Requirement by IFAC
member bodies to set-up a
quality assurance review
system to monitor it’s
members who perform audit,
reviews, other assurance and
related services
engagements of Financial
Statements.
Comply or face penalties…
Para. 1:
In accordance with IFAC Constitution, para 2.3.b, IFAC
member bodies are required to comply with the
SMOs.
9. Sets out requirements of IFAC member bodies to
establish a quality assurance review system for firms
performing audit, review, other assurance & related
service engagements
QA is addressed at three levels:
• engagement level,
• firm level &
• the body responsible for the QA review system.
IAASB establishes standards & provides guidance on
quality control policies and procedures for;
Scope of SMO 1
10. • specific types on engagements (e.g. ISA 220,
Quality Control for an audit of Financial
Statement).
• a firms responsibilities for its system of
quality control for audits and reviews of
financial statements and other assurance &
related services engagements (ISQC 1
• Only to firms performing engagements in the
jurisdiction of the IFAC member body.
Scope of SMO 1 cont’d.
11. Scope of SMO 1 cont’d.
In some jurisdictions, quality assurance review
systems for firms performing audits of listed or
other public interest entities are operated by an
external authority, whiles systems for firms
performing all other audits are operated by IFAC
member bodies.
In such cases, and for efficient reasons, IFAC
member bodies shall give due considerations to
quality assurance system operated by the other
appointed authority to ensure there is no undue
overlap between the systems.
13. Applicability Framework
SMO 1 p.9
Without prejudice to the existence of more complex national frameworks, IFAC member
bodies may have:
• direct responsibility for the area covered by this SMO. The mandate, explicitly given to
the IFAC member body or otherwise implied through general consensus, specifies that
it is responsible for setting the rules and operating the quality assurance review system;
• no responsibility for the area covered by this SMO. The IFAC member body has no
mandate, explicitly given or otherwise implied through general consensus, for any
responsibility for setting the rules and operating the quality assurance review system as
government, regulators, or other appointed authorities have direct responsibility for
the area covered by this SMO; or
14. SMO 1 p.9 cont’d.
• shared responsibility with government,
regulators, or other appointed
authorities. The mandate, explicitly given
to the IFAC member body or otherwise
implied through general consensus,
specifies that it has some responsibility
for the area relating to this SMO.
16. Scope of Quality Assurance Review System
Para. 15:
In accordance with the applicability framework, a mandatory quality
assurance review system shall be in place for firms performing audits of
financial statements.
In jurisdictions where coverage of all audits of financial statements (in
accordance with paragraphs 34 through 41) creates an undue burden, priority
shall be given to statutory audits and audits of financial statements of public
interest entities.
Nevertheless, all firms performing audits of financial statements shall be
subject to the possibility of selection for quality assurance review.
17. Scope of Quality Assurance Review System cont’d.
Para. 16:
Because the public places greater interest in audits of financial statements, it
is appropriate for mandatory quality assurance review systems to apply to at
least those engagements. It is desirable, however, for the largest range of
professional services performed by professional accountants to be subject to
quality assurance review systems that are commensurate with the nature of
the services.
Therefore, parties responsible for the quality assurance review system are
encouraged to extend their scope to cover as many professional services as
possible, including, for example, other assurance engagements, preparation
of financial statements, or internal audit services.
18. IAASB PRONOUNCEMENTSCONT’D
Pronouncement Application
International Standards on Auditing (ISA) Audit of historical financial information
International Standards on Review Engagements (ISRE) Review of historic financial information
International Standards on Assurance Engagements (ISAE) Assurance engagements dealing with subject matter other than
historic financial information
International Standards on Related Services (ISRS) Compilation engagements, engagements to apply agreed upon
procedures to information and other related services
engagements
International Standards on Quality Control (lSQC) All services falling under ISAs, ISAEs and ISRSs
International Auditing Practice Statements (IAPS) Provide interpretive guidance and practical assistance to
professional accountants in implementing ISAs and to promote
good practice
OTHER RELEVANT IAASB PRONOUNCEMENTS
19. Scope of Quality Assurance Review System cont’d.
Para. 17:
Criteria, or risk factors, shall be
established and published for evaluating
all other engagements to determine
whether they shall be included in the
scope of the system.
Any engagements meeting these criteria
shall be included in the scope of the
quality assurance review.
20. Scope of Quality Assurance Review System cont’d.
Para. 18:
Criteria for extending the scope of engagements that will be subject to a
quality assurance review include:
• the number and range of stakeholders who may make decisions based on
the engagement result;
• the extent to which the subject matter and the engagement results are of
public interest, or may affect the public’s confidence in public institutions
or public administration;
• the identification of unusual circumstances or risks in an engagement or
class of the identification of unusual circumstances or risks in an
engagement or class of engagement; and
• laws and regulations requiring inclusion of specific engagements in the
scope of the quality assurance review system.
