Quality Control for Audit

Work
Quality control- a process to provide the firm with
reasonable assurance that its personnel comply with
applicable professional standards and the firm’s
standard of quality.
 
Audit Firm Quality control Procedures
The firm should adopt the following procedures.
1. Documentation
2. Monitoring
3. Acceptance and Continuance
4. Ethical requirements
5 Leadership responsibilities
6 Human Resources
Documentation
ISQC1 Requires firms to establish, maintain and
document both policies and procedures in respect of
the various areas included e.g. the establishment of
the procedure manual
Monitoring
The monitoring process is designed to provide the
firm with reasonable assurance that its policies and
procedures relating to the system of quality control
are relevant and been followed.
Ethical requirement
The firm should act ethically and professionally, firm
should ensure that all audit partners and staff have
appropriate and tailored training on ethical matters.
The evaluate circumstance and relationship that
create threat to independence
Acceptance and Continuance
The firm should only accept those engagements
where the firm is confident it can provide a service in
compliance with requirements with particular
emphasis on Integrity and Competencies.
Leadership responsibilities
Leadership should have to lead from the top. The
firm’s leadership and the example it sets (“ tone at the
top”) should significantly influence the internal
culture of the firm.
Human Resources
A firm should have to recruit, develop and support
capable and competent staff giving due attention to
the firm’s human resources policies and procedures.
Individual level quality control
Individual should obtain professional clearance from
the previous auditors.
Individual should consider any conflict of interest.
ISA 560: Subsequent events

Definition: an event that occurs after the date of the

financial report, which points to something which
happened during the financial period and which could
be useful for decision making.
: Events occurring between the date of the financial
statements and the date of the auditor’s report, and
facts that become known to the auditor after the date
of the auditor’s report.
Types of Subsequent events

Events that provide evidence of conditions that

existed “at the date” of the financial report
Events that provide evidence of conditions that arose
“after the date” of the financial report.
According to IAS 10

 Subsequent Events are those events favourable and unfavourable that occur
between the end of the reporting period and the date when the financial
statements are authorised for issue.
 Adjusting Events
 Those that provide evidence of conditions that existed at the end of the
reporting period
 Events which shed light that affects the way the financial statements were
presented
 Such events render the information in the financial statements incorrect or
insufficient because not all information was known.
 These relate to events that result in or require changes in financial figures
(monetary changes in the financial statements usually)
Cont…
Non Adjusting Events
Those that are indicative of conditions that arose after the
reporting period
These do not affect anything about the condition of the
financial statements.
Subsequent events do not render the financial statements
incorrect or invalid but they require stakeholders to be
informed.
These relate to items that only require to be disclosed or
to do nothing
To Determine the Type of Event

An auditor must obtain sufficient and appropriate

evidence about whether events occurring between the
date of the financial report and the auditor’s report
that require of, or disclosure in, the financial report
are appropriately reflected in that financial report in
accordance with the applicable financial reporting
framework; and
To respond appropriately to facts that become known
to the auditor after the date of the auditor’s report, that
had they been known to the auditor at that date, may
have caused the auditor to amend the auditor’s report.
Going Concern Aspects

This is the question that can the company still engage

in trade in the foreseeable future
If the company cannot trade anymore the statements
can be prepared on a going concern basis but there has
to be a strong disclosure about the fact that they are no
longer a going concern, or change the financial
statements to a liquidating basis.
If something comes to light in relation to the going
concern of the company, the financial statements
should be adjusted even though it is an event that is
happening after year end and is coming to light after
Elements comprising Auditor’s report

Title:
Addressee
Responsibility of the Management and Auditor
Scope paragraph
Opinion paragraph
Date of the report
Auditor's address
Auditor's signature.
2. Qualified Report
Qualified audit report is the report that auditors give a qualified
opinion on financial statements. It is given when an auditor isn’t
confident about any specific process or transaction that prevents
them from issuing an unqualified, or clean, report, the auditor
may choose to issue a qualified opinion.

Auditors express that there is a problem in financial statements

but the problem is not too serious. The problem, in this case,
can be either:
Auditors find that there is a material misstatement in accounts
or balances of financial statements, or
Auditors cannot obtain sufficient appropriate evidence to
ensure certain account or balance is free from material
1.Unqualified Opinion

It is an audit report that is issued when an auditor

determines that each of the financial records provided
by the business is free of any misrepresentations,
that it is presenting the true and fair value of the
business operation.

This type of report indicates that the auditors are

satisfied with the company’s financial reporting. The
auditor believes that the company’s operations are in
good compliance with governance principles and
applicable laws.
Unqualified Opinion with modification
This will indicate that the auditor is satisfied that the
overall financial statements are stated fairly except for
certain aspect of them. The introductory paragraph is
similar to the unqualified opinion whereas a
slight modification is done in the scope and the
opinion paragraphs.
4. Adverse Report
An adverse opinion means that the auditor has
obtained sufficient audit evidence and concludes that
misstatements in the financial statements are both
material and pervasive. An adverse opinion is the
worst possible outcome for a company financial
statements. 
3. Disclaimer of Opinion-Disclaimer Report
Auditors issue disclaimer reports when they have
excused themselves from providing an opinion about
a company's financials.
A disclaimer of opinion is expressed when the
appointed auditor is unable to obtain sufficient
appropriate audit evidence on which to base the
opinion (that is, a limitation in scope)