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Chapter 5

Terms in this set (13)

necessary for an audit to fulfill its purpose of enhancing
the confidence that intended users have in financial statements

the basis of customer satisfaction and business success

the prerequisite for prevention of damages (incl. reputational)

the prerequisite for the retention of the license as a regulated audit firm
What is audit quality?
Claims Risk / Legal Liability Considerations => claims and insurance costs

Reputational Risk - Public exposure / brand & reputational damage

Commercial Risk

Regulatory Risk - More regulators, more frequent sanctions, higher penalties
What costs do occur when quality in auditing is low?
There is the ISQC 1 that states that audit firms have to establish and maintain a quality control system that provides reasonable assurance that the firm and its employees comply with legal requirements, standards and policies, and that they are appropriate. (firm-level)

The ISA 220 has additional standards for the way auditors provide reports on financial statements (file-level)
What are the regulations for audit quality that audit firms have to follow?
Monitoring
Tone at the top
Ethical requirements
Client & Engagement & Accepetance & Continuance
Recruitment, development & assignment of personnel
Effective engagement performance
What are the elements of a system of quality control (ISQC1)?
Inputs (values, ethics, knowledge, skills)
Processes (quality control procedures)
Outputs (externally visible/non-visible; audit report)
Key interaction within the financial reporting supply chain
Contextual factors (laws, regulations)
What are the factors that contribute to audit quality according to IAASB?
Information systems
corporate governance
litigation environment
audit regulation
attracting talent
broader cultural factors
What are some contextual factors?
Independence training programs
Partner rotation system
disciplinary measures
defined roles and responsibilities
independence check process
allowed services list
What is there to say about ethic requirements and inependence in the ISQC1 framework?
Select clients within risk tolerance
Client portfolio management
appropriate audit responses to risk
What is there to say about Comprehensive Client & Engagement Acceptance & Continuance ("CEAC") procedures?
Capabilities and resource management
assignment of team members
recognition and reward for quality work
development of core competencies, skills, and qualities
What are some recruitment, development and assignment issues concerning the ISCQ1 framework?
Clear standards and robust audit tools
Commitment to technical excellence & quality service delivery
Performance of effective and efficient audits
What are some issues concerning the effective engagement performance?
Quality Performance review (QPR)
Risk Compliance program (RCP)
Global compliance review (GCR)
What are some issues concerning quality monitoring?
Problem definition
Data collection
determination of root causes
remediation
Monitoring and reporting
How does the root cause analysis work?
Focused
relevant
concise
add value
more is not always better
What is there to say about the quality of Key audit matters?
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