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Published by Marcos Felice

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Published by: Marcos Felice on Aug 10, 2011
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03/18/2013

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ISQC 1.43–.44 states:

43.The frm shall establish policies and procedures for dealing with and resolving diferences of opinion
within the engagement team, with those consulted and, where applicable, between the engagement
partner and the engagement quality control reviewer. (Ref: Para. A52–A53)

44.Such policies and procedures shall require that:

(a) Conclusions reached be documented and implemented; and

(b) The report not be dated until the matter is resolved.

No encompassing rules and procedures can easily and completely address dispute resolution in advance.
Firm policy can only establish general steps to follow, which can assist in dealing with signifcant disputes or
diferences of opinion.

It is suggested that the frm and its partners and staf take any steps necessary, according to frm and
professional standards, to adequately identify, consider, document, and resolve diferences of opinion that
may arise in a wide range of circumstances. The more common circumstances in practice include:

• Diferences of opinion on interpretations and applications of IFRSs and ISAs;

• Diferences of opinion on ethics-related matters and/or the requirements in the IESBA Code;12

• Disagreements on the economic substance of a transaction or series of transactions, or the levels of
detail required in the documentation for engagement fles;

12

Or member body code of ethics

• The need to qualify the report for the current year;

• A proposed restatement of prior-year fnancial statements;

• A signifcant third-party claim against the client and the frm;

• Signifcant, complex and/or new accounting or auditing treatment;

• Trouble in the industry or industry segment;

• A change in key members of management;

• Accounting or auditing issues arising from an environmental risk;

• Substantial reorganization of the client’s business; and

• A plan to become a listed entity.

42

5. Engagement Performance

• Diferences of opinion resulting from the engagement and quality control review process;

• Change and resistance to change in frm practices, policies, and structures; and

• Diferences of opinion on the suitability and competencies of engagement personnel.

It is desirable that all partners and staf strive to be objective, conscientious, open-minded, and reasonable
in assisting, facilitating, or reaching a timely and non-confrontational resolution of any disputes or
diferences of opinion.

It is suggested that anyone who is party to a dispute or diference of opinion attempt to resolve the matter
in a timely, professional, respectful, and courteous manner through discussion, research, and consultation
with the other individual(s).

If the matter cannot be resolved or there is uncertainty over what action should be taken, the parties would
normally refer the matter to a more senior engagement team member or the engagement partner.

It is advised that if the issue involves a specifc area of professional oversight or practice administration
within the frm, it be referred to the partner responsible for this area, preferably by the engagement partner.
The engagement partner, or the partner responsible for the specifc area, would consider the matter and
decide, through consultation with the parties, how to resolve it. It is suggested that the partner then inform
the parties of the decision and the reasons behind it.

If a dispute or diference of opinion remains, or one or more of the individuals involved is not satisfed with
the decision(s), the individual(s) may consider whether the matter is enough of a quality control concern or
may be of sufcient impact to warrant referral to the highest level of authority within the frm.

It is proposed that the frm policy developed protect all partners and staf from any form of retribution,
career limitation, or punitive actions for bringing attention to a legitimate and signifcant issue, in good faith
and with the true interests of the public, client, frm, or co-worker in mind.

It is important for partners and staf to understand that referring a matter beyond an engagement team or
engagement partner level is serious and must not be minimized since it will likely require substantial partner
time to address. The referral can be verbal if highly sensitive or confdential (although the practice of verbal
referrals is discouraged), or in writing. In all cases, the nature and scope of, and conclusions resulting from,
consultations undertaken during the course of the engagement shall be documented. It is suggested that
the party to whom the matter is referred consider the issue, and if it is determined to be signifcant and with
merit, to consult with other partners and inform the parties involved of the frm’s decision.

If the individual is still not satisfed with the matter’s resolution and no further recourse is available within
the frm, the individual will need to consider the matter’s signifcance, along with his or her professional
responsibilities and position or continuing employment with the frm.

Disputes or diferences of opinion should be documented in the same way as consultations for any matter
involving an assurance engagement. In all instances, the engagement report must not be dated until the
matter is resolved.

43

5. Engagement Performance

It is suggested that written partnership agreements set out dispute resolution and partnership dissolution
policies to follow when the disagreement proves too difcult to settle amicably.

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