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1012 Audit quality, including roles and responsibilities for audit quality
All staff have a role to play to contribute to a quality-oriented culture in the Office and ensure that we produce audits that meet the highest professional standards. Principals, acting in the role of engagement leaders, assume primary responsibility for overall audit quality.
This section presents an introduction to audit quality, as well as the senior roles and responsibilities for audit quality.
CPA Canada Assurance Standards
Performance Audit, Special Examination, and Other Assurance Engagements
CSQC 1.17 The firm shall document its policies and procedures and communicate them to the firm’s personnel. (Ref: Para. A2-A3)
CSQC 1.A2 In general, communication of quality control policies and procedures to firm personnel includes a description of the quality control policies and procedures and the objectives they are designed to achieve, and the message that each individual has a personal responsibility for quality and is expected to comply with these policies and procedures. Encouraging firm personnel to communicate their views or concerns on quality control matters recognizes the importance of obtaining feedback on the firm’s system of quality control.
CSQC 1.18 The firm shall establish policies and procedures designed to promote an internal culture recognizing that quality is essential in performing engagements. Such policies and procedures shall require the firm’s chief executive officer (or equivalent) or, if appropriate, the firm’s managing board of partners (or equivalent), to assume ultimate responsibility for the firm’s system of quality control. (Ref: Para. A4-A5)
CSQC 1.A4 The firm’s leadership and the examples it sets significantly influence the internal culture of the firm. The promotion of a quality-oriented internal culture depends on clear, consistent and frequent actions and messages from all levels of the firm’s management that emphasize the firm’s quality control policies and procedures, and the requirement to:
(a) perform work that complies with professional standards and applicable legal and regulatory requirements; and
(b) issue reports that are appropriate in the circumstances.
Such actions and messages encourage a culture that recognizes and rewards high quality work. These actions and messages may be communicated by, but are not limited to, training seminars, meetings, formal or informal dialogue, mission statements, newsletters, or briefing memoranda. They may be incorporated in the firm’s internal documentation and training materials, and in partner and staff appraisal procedures such that they will support and reinforce the firm’s view on the importance of quality and how, practically, it is to be achieved.
CSQC 1.A5 Of particular importance in promoting an internal culture based on quality is the need for the firm’s leadership to recognize that the firm’s business strategy is subject to the overriding requirement for the firm to achieve quality in all the engagements that the firm performs. Promoting such an internal culture includes:
(a) Establishment of policies and procedures that address performance evaluation, compensation, and promotion (including incentive systems) with regard to its personnel, in order to demonstrate the firm’s overriding commitment to quality;
(b) Assignment of management responsibilities so that commercial considerations do not override the quality of work performed; and
(c) Provision of sufficient resources for the development, documentation and support of its quality control policies and procedures.
CSQC 1.19 The firm shall establish policies and procedures such that any person or persons assigned operational responsibility for the firm’s system of quality control by the firm’s chief executive officer or managing board of partners has sufficient and appropriate experience and ability, and the necessary authority, to assume that responsibility. (Ref: Para. A6)
CSQC 1.A6 Sufficient and appropriate experience and ability enables the person or persons responsible for the firm’s system of quality control to identify and understand quality control issues and to develop appropriate policies and procedures. Necessary authority enables the person or persons to implement those policies and procedures.
CAS 220.8 The engagement partner shall take responsibility for the overall quality on each audit engagement to which that partner is assigned. (Ref: Para. A3)
CAS 220.A3 The actions of the engagement partner and appropriate messages to the other members of the engagement team, in taking responsibility for the overall quality on each audit engagement, emphasize:
(a) The importance to audit quality of:
(i) Performing work that complies with professional standards and applicable legal and regulatory requirements;
(ii) Complying with the firm’s quality control policies and procedures as applicable;
(iii) Issuing auditor’s reports that are appropriate in the circumstances; and
(iv) The engagement team’s ability to raise concerns without fear of reprisals; and
(b) The fact that quality is essential in performing audit engagements.
CSAE 3001.35. The engagement partner shall:
(a) Be a member of a firm that applies CSQC 1, or other professional requirements, or requirements in law or regulation, that are at least as demanding as CSQC 1; (Ref: Para. A59-A65).
The Auditor General (AG) has ultimate responsibility for the Office’s system of quality control. The AG provides the leadership to promote an internal culture focused on quality through clear, consistent, and frequent actions and messages to all audit professional staff in the Office and the establishment of operational priorities emphasizing the quality of the work performed. [Nov-2011]
The Assistant Auditor General, Audit Services, is assigned operational responsibility for the Office’s system of quality control and has the necessary authority to assume that responsibility. [Nov-2011]
The engagement leader shall ensure that audits are carried out in compliance with Office policies, professional standards, and the Office’s system of quality control. [Nov-2011]
The Office shall monitor its system of quality control to determine, with reasonable assurance, whether the policies and procedures relating to the Office’s system of quality control are relevant, adequate and operating effectively. [Nov-2011]
The Office shall communicate annually the results of the monitoring of its system of quality control to the Auditor General, the Executive Committee and engagement leaders. The communication shall include any deficiencies and recommendations for appropriate remedial action and it shall be sufficient to enable the Office and individuals to take prompt and appropriate action where necessary in accordance with their defined roles and responsibilities. [Nov-2011]
Canadian Standards on Quality Control (CSQCs) apply to all firms regarding their responsibilities for their systems of quality control for audits and reviews of financial statements and other assurance engagements. The authority of the CSQCs is set out in the introduction to CSQC1. The CSQCs are to be read in conjunction with relevant rules of professional conduct and codes of ethics. The rules of professional conduct and code of ethics of the accounting profession, for example, require that members engaged in the practice of public accounting perform their professional services in accordance with the generally accepted standards of practice of the profession, including the standards and guidance contained in the CPA Canada Handbooks. While not part of assurance standards (which include Canadian generally accepted auditing standards), the CSQCs form part of generally accepted standards of practice of the auditing and assurance profession.
The Office documents and communicates its audit quality control policies and procedures primarily via two product line audit manuals (the Annual Audit Manual and Direct Engagement Manual) and engagement procedures in the audit working paper software. In addition, the Office presents its system of quality control, including elements not documented in its audit manuals, via an Intranet collection available to Office staff. The office Code of Values, Ethics and Professional Conduct consolidates in detail the values and ethical, professional, and other standards that guide all staff on a daily basis in their work for the Office.
The Office strives to communicate its audit quality control policies and procedures to audit staff in a manner that includes a description of the quality control policies and procedures and the objectives they are designed to achieve. Objectives are often found in the professional standards accompanying a policy or procedure.
All staff have a role to play to contribute to a quality-oriented culture in the Office and ensure that they produce audits that meet the highest professional standards. Each auditor has a personal responsibility for quality and is expected to comply with Office policies and procedures.
Assistant auditors general and the Commissioner of the Environment and Sustainable Development (AAGs/CESD) collaborate to oversee the Office’s audit practices/product lines (annual audits and direct engagements) to which they are assigned as outlined in the Audit Operations—Senior Management Roles and Responsibilities. This oversight includes providing product line strategic direction and leadership. In addition, they have an important leadership role in promoting an internal culture of audit quality. The role of an assistant auditor general and the Commissioner of the Environment and Sustainable Development is further defined in OAG Audit 3066.
Audit principals, are typically the “engagement partner” for the purposes of the professional standards set out in the CPA Canada Handbook, and are typically the “engagement leader” responsible for ensuring that audits are carried out in compliance with Office policies, the Office system of quality control, and professional standards. The role of an engagement leader is further defined in OAG Audit 3062.
Quality reviewers provide an objective evaluation, throughout the audit process and on or before the date of the assurance engagement report, of the significant judgments the audit team made and the conclusions it reached in formulating the report by, among other things,
- being engaged on a timely basis throughout the audit process;
- reviewing the planning, examination, and reporting documentation necessary to achieve their objective and as directed by Office guidance and templates;
- bringing to the engagement leader identified issues that the audit team has not addressed to the satisfaction of the quality reviewer;
- ensuring any differences of opinion are appropriately resolved on a timely basis in accordance with the Office’s policies and guidance for resolving differences of opinion; and
- documenting their involvement and review.
The role of a quality reviewer is further defined in OAG Audit 3063.
Audit Services teams
- provide consultation advice to staff, including audit team members, quality reviewers, and subject matter experts on the interpretation and application of audit methodology and the application professional standards;
- perform quality assurance reviews concerning engagement reports and the accompanying subject matter (for attestation engagements) with the goal of achieving consistent and appropriate application of professional accounting and reporting standards and Office policies; and
- provide support to the assistant auditors general overseeing the Office’s product lines.
Further information on the role of the Office’s Audit Services teams is available on the OAG INTRAnet.
The individual assigned operational responsibility for the Office’s System of Quality Control
- identifies and understands quality control issues;
- develops appropriate policies and procedures;
- implements approved policies and procedures by disseminating manuals, practice advisories, and methodological guidance and tools, and by providing input to training and being consulted on relevant human resources issues; and
- monitors the implementation and compliance with approved policies and procedures by conducting evaluations of the audit quality control system, including a periodic inspection of a selection of completed audits.
The Office encourages audit staff to communicate their views or concerns on quality control matters as it recognizes the importance of obtaining feedback on the Office’s system of quality control. Auditors may discuss views or concerns on quality control matters with their principal, an assistant auditor general of the applicable practice, or any member of Audit Services, who will further communicate the view or concern as appropriate. Auditors may also refer to the Office’s Complaints and Allegations policy (see OAG Audit 1091) where necessary.