Comparison of the Financial Statement Audit

performed by the Commission on Audit

and External Audit Firm

Our Lady of the Pillar College Cauayan

College of Accountancy
BSA 3

Group 5
Cassandra Dazelle Batallones
Aireen Faye Leongson
Precious Ann Foronda
Vernard Franz Mejia
Clarisse Joy Rivera
 QUALITY CONTROL REVIEW

To preserve and maintain quality, standards prescribed a structure that will manage the achievement of
quality objectives. A system of quality control consists of policies designed to achieve the objectives of
compliance with professional standards and issuance of appropriate reports and procedures necessary to
implement and monitor compliance with those policies.

COA EXTERNAL AUDIT

QUALITY CONTROL

Provides reasonable assurance that the audit engagement is performed in compliance with professional
standards and applicable legal and regulatory requirements, and the audit report is appropriate in the
circumstances

RESPONSIBILITY FOR QUALITY CONTROL SYSTEM

The Supreme Audit Institution has an obligation to The firm has an obligation to establish and maintain a
establish and maintain a system of quality control to system of quality control to provide reasonable
provide reasonable assurance that: assurance that:
a. The SAI and its personnel comply with a. The firm and its personnel comply with
professional standards and applicable legal professional standards and applicable legal and
and regulatory requirements; and regulatory requirements; and
b. Reports issued by the Auditors are b. Reports issued by the Auditors are appropriate
appropriate in the circumstances. in the circumstances.

Different firms have different quality control

procedures.

RESPONSIBILITY FOR QUALITY CONTROL PROCEDURES

The audit teams are responsible for:
a. Implementing quality control procedures
that are applicable to the audit engagement
b. Provide the Supreme Audit Institution with
relevant information to ensure that quality
controls relating to independence are
functional.
The engagement teams are responsible for:
a. Implementing quality control procedures that
are applicable to the audit engagement
b. Provide the firm with relevant information to
enable the functioning of that part of the firm’s
system of quality control relating to
independence.
c. Are entitled to rely on the firm’s system’s
unless information provided by the firm or
other parties suggest otherwise.
 ELEMENTS OF A SYSTEM OF QUALITY CONTROL (HEAL ME Doc)

Conducted in accordance with ISQC 1 Conducted in accordance with PSQC

1. Leadership Responsibilities
➢ Establish policies and procedures designed to promote internal culture.
➢ Engagement partner should take responsibility for the overall quality on each audit
engagement
➢ What are the things that we should do:
-Performance Evaluation
-Assignment of Management Responsibilities
-Provision of Sufficient Resources

COA EXTERNAL AUDIT

It does not include incentive systems Demonstrate its commitment to quality by
As salaries are fixed based having policies and procedures addressing
. their performance evaluation, compensation
and promotion (including incentive systems)

2. Relevant Ethical Requirements

The firm and its personnel comply with the ethical requirements, which include:
➢ Integrity,
➢ Objectivity
➢ Professional competence and due care
➢ Confidentiality
➢ Professional behavior
➢ Includes independence

Independence

 Policies and procedures on  Establish policies and procedures on

independence do not include experts
of the firm as COA itself has its own
experts within its jurisdiction.
 Cannot withdraw from the
engagement.
 Take action on threats that are not at
an acceptable level.
 Personnel are hired based on high
qualification and skills who are
experienced in their respective fields.
independence that includes experts contracted
by the firm
 Withdrawal from the engagement when there
are threats in independence
 Take action regarding identified threats to
independence by eliminating them or reducing
them to an acceptable level
 Provides independence education to personnel
who are required to be independent.
 3. Acceptance and Continuance of Client
Relationships and Specific Engagements
Information affecting conclusion include:
a. Integrity of those charged with
governance
b. Competence of the engagement team
c. Compliance with relevant ethical
requirements
d. Significant matters that have arisen
during the current or previous audit
engagements.
3. Acceptance and Continuance of Client
Relationships and Specific Engagements
Information affecting conclusion include:
a. Integrity of those charged with
governance
b. Competence of the engagement team
c. Compliance with relevant ethical
requirements
d. Consider the aggressive concerns of the
client regarding the maintenance of its
firm's fees that are as low as possible

Acceptance and Continuance of Client Relationships and Specific Engagements

Only undertake or continue where the firm:

 Is competent, capable and has resources to perform the engagement.

 Can comply with ethical requirements
 Consider the integrity of the client

Note! There should be an agreement on the terms of the engagement. It cannot start without the engagement
letter.

4. Human Resources
The audit team must have appropriate competence and capabilities such as experience with audit
engagements of a similar nature, understanding of professional standards and applicable legal and
regulatory requirements, technical expertise, and ability to apply professional judgment.

Such policies and procedures address the following personnel issues:

 Recruitment;
 Performance evaluation;
 Capabilities;
 Competence;
 Career development;
 Promotion;
 Compensation; and
 The estimation of personnel needs

5. Engagement Performance
The engagement partner should take responsibility for the direction, supervision, review and overall
performance of the audit engagement.
a. Directions
b. Supervisions
c. Review
d. Consultation
 e. Appropriateness of Audit Report
The engagement shall have:
 Procedures to promote consistency in quality.
 Supervision responsibilities
 Review Responsibilities

Note: The work of less experienced team members is reviewed by more experienced engagement team
members

 Engagement Quality Control Review

1.Discussion of significant matters with the engagement partner

2.Review of subject mater information and proposed report
3.Review of significant judgments and conclusions reached
4.Evaluation of appropriateness of audit report.

Note! Complete quality control review before audit report

 Qualified and Objective reviewer

 Documentation of quality control review
 Differences of Opinion

 Document and implement conclusion

 Resolution before audit report

 Engagement Documentation

 Timely completion of the assembly of engagement files

 Confidentiality, safe custody, integrity, accessibility, retrievability. -Retention of engagement
documentation -Engagement documentation is the property of the firm.

6. Monitoring
Policies and procedures must be adopted to provide reasonable assurance that the system of quality
control are relevant, adequate, and operating effectively.

A. Inspection-evidence of compliance to the quality control system

-At least one for each engagement partner
-It includes neither the engagement partner and engagement quality control reviewer

A. Deficiencies
-Not necessarily insufficient quality control system
-Systemic, repetitive or other systemic deficiencies

C. Policies for complaints and allegations

-Non-compliance to professional standards and regulatory requirements.
-Non-compliance to the firm's system of quality control.

Documentation
The firm should establish policies and procedures requiring appropriate documentation to provide
evidence of the operation of each element of its system of quality control.
 QUALITY CONTROL REVIEW PROCESS

Outputs prepared Reviewed and signed Outputs Reviewed and

by by prepared by signed by
Audit Team Engagement Team Engagement
Audit Team Leader
Member Member Senior-in-charge

Audit Team Leader Supervising Auditor Engagement Engagement

Senior-in-charge Manager
Supervising Cluster/Regional Engagement Engagement
Auditor Director Manager Partner

QUALITY CONTROL REVIEW PERTAINING

TO PROFESSION

The government thru Professional Board of

Accountancy (BOA) has required all CPA
firms and individual CPAs in public practice to
obtain a certificate of accreditation to practice
public accountancy.

The PRC has created a Quality Review

Committee (QRC) which shall conduct quality
control review on
a. Applicants for registration to practice
public accountancy
b. Recommend revocation of certificate of
registrations of CPA
 QUALITY CONTROL DOCUMENTS

Auditor’s Declaration of Independence and The auditor must prepare documentation in connection
Compliance with Other Ethical Standards with each engagement conducted pursuant to the
- Preliminary Engagement Phase, it is signed standards. Also, the documentation should be
by all members of the team, confirmed by appropriately organized to provide a clear link to the
the SA/RSA during Execution Phase and significant findings or issues.
concurred by the CD/RD serves as an
assurance that the audit is performed by a
team composed of competent and
professional auditors.

Ethical standard
- Professionalism Ethical standard
- Competence - Professional behavior
- Confidentiality and transparency - Objectivity
- Integrity - Professional competence and due care
- Independence - Confidentiality
- Political neutrality and partisan politics - Integrity
- Responsiveness to the public - Independence
- Nationalism and patriotism
- Commitment to democracy
- Simple living
- Work dedication and commitment in the
highest degree
- Commitment to public interest
- Justness and sincerity

Engagement Letter
- COA formally informs the Auditee of its Engagement Letter
audit requirements well ahead of time as a - Preferably before the commencement of the
matter of professional courtesy and engagement, to help in avoiding
engagement direction. misunderstandings with respect to the
Person responsible: engagement.
Cluster Director/ Supervising Auditor/Audit Person responsible:
Team Leader/ Audit Team Member (CD/ Auditor
SA/ATL/ATM)
-
 Written representations Management letter
Prepared and By appropriate level of management (e.g. By the auditor
signed CEO and CFO)
Addressee Auditor Client's management
Required Yes. Required to be obtained by the No. Optional and no standard format or
preparation auditor approach
Date Concurrent with the auditor's report date As timely as practicable

Content Confirmation of various representations May Include recommendations that are

made by management to the auditor and
reduces the possibility of
misunderstanding between the client and
the auditor
Importance Reminder of management of its primary
responsibility for the financial statements
intended to help the client operate its
business effectively
Encourage a better relationship between
the auditor and the management

Can serve as audit evidence when such Suggest additional tax and management
representation may be the only evidence services that the auditor can provide.
that can reasonably be expected to be
available

Engagement Planning Memorandum

- Serves as supervision and monitoring tool for the SA/RSA and the CD/RD.
- The progress of work by the team members, the audit procedures performed and the timing of audit
activities can be kept track through the Plan.

QUALITY CONTROL REVIEW DOCUMENTS

Completion Compliance Checklist There’s no specific format followed by the external

- Enables the SA/RSA and the CD/RD to
check that all the required key, sign-off and
quality control procedures from the
Preliminary Engagement Phase to the
Reporting Phase were performed.
An Auditee Feedback Sheet
- Designed to assess the audit team’s
performance in the field. It should be sent
directly by the CD/RD to the Auditee.
- This Sheet should be addressed to the
Agency Head who is requested to respond
within a given timeframe.
audit but the firm is required to provide appropriate
documentation as an evidence of the operation of each
element of its system of quality control.
Compliance Review Checklists
 It is for the Audit firm to check and review
whether the firm complies with its system of
quality control.
The client’s audit committee assess the performance of
the external auditor (engagement partner) whereas the
engagement partner is responsible in evaluating the
performance of its audit team as to whether they
comply with the applicable standards and established
policies and procedures.
Director’s Evaluation Form
- The Audit Team’s performance and the
SA/RSA will be assessed based on the
Completion Compliance Checklist and the
Auditee Feedback Sheet by the CD/RD with
the assessment evaluation to the Assistant
Commissioner concerned.
- This allows the CD/RD and the Assistant
Commissioner to have a reasonable basis for
taking appropriate action to ensure the
quality of financial audit performed by the
audit teams.

Financial Management Performance Rating

- This assesses the quality of an Auditee’s
financial management performance using
the results of the audit performed, including
internal control review.
 Multiple Choice Test Answer Key.

1. The Supervising Auditor/ Regional Supervising Auditor is responsible for the following, except

a. Ensuring that all necessary audit procedures have been completed, reviewed, and sufficiently
and appropriately documented.

b. Ensuring that all significant changes made to the audit strategy and audit plan are justified and
appropriately documented and approved.

c. Ensuring that all significant changes made to the audit strategy, engagement letter and
audit plan are reviewed by the management

d. Reviewing audit conclusions, recommendations, and professional judgments made by the

audit team.

2. This serves as a tool to ensure COA’s commitment to quality service through quality staff. It is designed to
assess audit team’s performance in the field.

a. Director’s Evaluation Form

b. Audit Team’s Feedback Sheet

c. Auditee Evaluation Form

d. Auditee Feedback Sheet

3. S1: The responsibility for quality of an audit and resulting Audit report rests with the Audit Team Leader

S2: BOA formally informs the Auditee of its audit requirements well ahead of time as a matter of
professional courtesy and engagement direction.

S3: The progress of work by the team members, the audit procedures performed and the timing of audit
activities can be kept track through the Engagement Letter

S4: While Quality Control and Quality Assurance are used interchangeably, there is a clear difference.

a. All statements are true

b. 3 statements are true

c. 2 statements are true

d. Only 1 statement is true

4. Within the context of the SAI’s system of quality control, who are responsible for implementing quality
control procedures that are applicable to the audit engagement and provide the SAI with relevant information to
ensure that quality controls relating to independence are functional?

a. Commission On Audit

b. Audit Teams

c. Management

d. Senior Supervising Auditor/ Regional Supervising Auditor

5. It is implemented by the Supreme Audit Institution to ensure that audit results, as well as the means to
achieve them, are within the desired level of quality. Both Quality Control and Quality Assurance operate
within this approach

a. Quality Management approach

b. Quality Assurance Approach

c. Quality Engagement Approach

d. Quality Audit Approach

6. Following the Revised Guidelines in the Implementation of the Unified Audit Approach, there are three
levels of quality control review implemented in all the phases of the audit, except

a. Outputs prepared by Audit team member are reviewed and signed by Audit Team Leader

b. Outputs prepared by Audit Team Leader are reviewed and signed by Cluster Director/
Regional Director

c. Outputs prepared by Supervising Auditor/ Regional Supervising Auditor are reviewed and
signed by Cluster Director/ Regional Director

d. Outputs prepared by Audit Team Leader are reviewed and signed by Supervising Auditor/
Regional Supervising Auditor
7. Quality control policies and procedures are relevant, adequate, and operating effectively. This statement
defines the quality control element of

a. Relevant ethical requirements

b. Leadership responsibilities for quality

c. Monitoring

d. Engagement performance

8. Quality controls are established at what phase of the audit

a. Planning Phase

b. Quality Control Review Phase

c. Reporting Phase

d. All phases of the audit

9. What level of Quality Control Review when review should sufficiently satisfy the requirements that the
audit documentation contains adequate evidence of the work done and conclusions reached, and provide a
reasonable basis for an opinion.

a. Audit team member level

b. Audit Team Level

c. Supervising Auditor/ Regional Supervising Auditor level

d. Cluster Director/ Regional Director

10. The Supreme Audit institution has an obligation to establish and maintain a system of quality control to
provide reasonable assurance that:

S1: The Supreme Audit institution and its personnel comply with professional standards and applicable legal
and regulatory requirements

S2: The continued adequacy and operational effectiveness of quality control policies and procedures are to be
observed and documented
S3:Reports issued by the Auditors are appropriate in the circumstances.

S4: There is sufficient direction performed at all levels to meet the appropriate standard of quality

a. All statements are true

b. Only S1 and S2 are true

c. Only S2 and S3 are true

d. Only S1 and S3 are true

11. S1: Management shall take responsibility for the overall quality of audit

S2: Fundamental principles of professional ethics are integrity, objectivity, professional competence and
due care, confidence, and professional behavior.

S3: The audit team must have appropriate competence and capabilities such as experience with audit
engagements of a similar nature, understanding of professional standards and applicable legal and
regulatory requirements, technical expertise, and ability to apply professional judgment.

S4: Direction of the engagement team involves discussion with all members of the team, appropriate
teamwork and training, and supervision.

a. All statements are true

b. 3 statements are true

c. 2 statements are true

d. Only 1 statement is true

12. This quality control review tool allows the CD/RD and the Assistant Commissioner to have a reasonable
basis for taking appropriate action to ensure the quality of financial audit performed by the audit teams.

a. Director’s Evaluation Form

b. Auditee Feedback Sheet

c. Director’s Feedback Sheet

d. Auditee Evaluation Form

13. It involves policies and procedures through which a SAI ensures that the audit is carried out in compliance
with the SAI auditing standards, rules and procedures in line with the best international practices while quality
assurance is a process through which a SAI monitors and ensures that quality control is working effectively.

a. Quality Assurance

b. Quality Control

c. Internal Control

d. None of the above

14. S1: It is important to seek explanation of the audit team on negative feedback to make them aware of
actions considered unprofessional and/or unethical by the Auditee.

S2: The accomplished Completion Compliance Checklist serves as basis for the CD/RD in rating the
performance of the audit team along with the Auditee performance rating on the audit team.

S3: Auditee Feedback Sheet should be addressed to the Agency Head who is requested to respond
within a given timeframe.

S4: When necessary, the results of Financial Management Performance Rating may be provided to the
Department of Budget and Management as one of the bases for reviewing the Auditee’s performance.

a. All statements are true

b. 3 statements are true

c. 2 statements are true

d. Only 1 statement is true

15. In auditee feedback sheet, the results especially for audit teams receiving negative feedback should be
acted upon by

a. Audit Team Leader

b. Commission on Audit

c. Cluster Director/Regional Director

d. Supervising Auditor