Auditing - Standard on Quality Control & Peer Review

1. SQC
Standard on Quality Control
- Vakharia Vaibhav A.

2. Other Assurance
Services
Framework of Assurance
Engagement
Related
Services
Assurance
Services
SQC
Standards on
Quality Control
[1 to 90]
Assurance
Services
Audit & Review of Historical
Financial Information
SA
Standards on
Auditing
[100 to 900]
SAE
Standards on
Assurance
Engagements
[3000 to 3699]
SRS
Standards on
Related
services
[4000 to 4699]
Related
Services
Structure of Standards issued by AASB
Other Assurance
Services
SRE
Standards on
Review
Engagement
[2000 to 2699]
Framework of Assurance
Engagement

3. Assurance
Engagement
Related Engagement
SA, SRE & SAE SRS
SQC

4. SQC 1
SQC-1 : Quality Control for Firms that perform Audits
& Reviews of Historical Financial Information and
Other Assurance & Related Services Engagements

5. Applicability
● applies to all firms
● in respect of services falling under the
Engagement Standards issued by AASB
● w.e.f. 01/04/2009

6. Factors for Applicability
Nature of the policies and procedures
developed by firms to comply with SQC 1
will depend on various factors such as:
● size,
● operating characteristics of the firm, and
● whether it is part of a network or not

7. Elements of Quality Control System
1. Leadership responsibilities
2. Ethical requirements incl. Independence
3. Client acceptance / continuance criteria
4. Human resource management
5. Engagement performance
6. Monitoring process

8. 1. Leadership responsibilities for quality
- Establishment of policies & procedures to:
i. Promote culture of quality within firm
ii. Ensure that commercial considerations do
not override quality
iii. Demonstrate overall commitment to
quality
- Managing Partner / CEO should assume ultimate
responsibility for implementation of above policies
& procedures

9. 2. Ethical requirements
- Requirements as per Code of Ethics:
i. Integrity
ii. Objectivity
iii. Professional competence & due care
iv. Confidentiality
v. Professional Behaviour
- Set up internal procedures for ethical compliance

10. Threats to independence
- Principal threats to independence:
i. Self - interest threat
ii. Self - review threat
iii. Advocacy threat
iv. Familiarity threat
v. Intimidation threat
- Withdrawal if any threat to independence
- Written confirmations to maintain independence

11. Safeguards to demonstrate independence
- Effective safeguards to eliminate following risks:
i. Financial interest
ii. Employment relationship
iii. Business relationship
iv. Long association
v. Gifts / Hospitality
vi. Significant earnings
vii. Conflict of interest

12. 3. Acceptance & continuance of client relationship
- Criteria of client's relationship should encompass:
i. Client's integrity
ii. Firm's competence to perform engagement
iii. Ethical restraints
- Obtain understanding for services to be performed.
- Documentation of issued raised & solutions thereof.
- Policies & procedures w.r.t. acceptance / continuance /
withdrawal from any engagement.

13. 4. Human resource management
- Steps taken while hiring personnel.
- Processes to determine appropriateness of the
engagement team.
- Considerations taken while assigning responsibility
to any partner / professional.

14. 5. Engagement performance
- Establish policies / procedures to comply with:
i. Professional standards
ii. Laws & regulations
- Essential elements of engagement performance:
i. Time frame for engagement
ii. Review & supervision
iii. Consultation
iv. Engagement quality control review
v. Documentation

15. Engagement quality control review
- Engagement quality control review involves review:
i. by other partner of firm, or
ii. by a technical expert
- Important aspects for qulaity control review :
i. Criteria for engaging QC reviewer
ii. Nature, timing & extent of QCR
iii. Documentation

16. 6. Monitoring
- Monitoring procedure should reasonably assure
that Quality Control policies & procedures are:
i. Relevant
ii. Adequate
iii. Operating efficiently
iv. Complied with in practice
- Selective inspection of completed engagements.
- Communicating deficiencies & recommendations.
- Adequate documentation to ensure monitoring.

17. Peer Review
Peer Review means review of work done by a
professional, by another professional of
similar standing.

18. - Submission of duly filled in Questionnaire
- Notes on policies & procedures followed for:
i. Maintaining independence
ii. Carrying out assurance services
iii. Second person review
iv. Staff supervision & development
- Review of attestation work:
i. List of clients
ii. Selection of samples
iii. Review of samples
- Report to Peer Review Board
- Certificate of Peer Review
Process of Peer Review

19. - Statement on Peer Review
- Code of Ethics
- Guidance Note on Independence
- Implementation guide to SQC
Resources for Peer Review

20. Thank You
- Vaibhav