Quality Control

Current Status Next Steps

Exposure draft being developed.

Second half of 2018 – Exposure draft to be approved.

OBJECTIVE AND SCOPE OF THIS PROJECT

Auditors must effectively manage audit quality, both at the firm and the engagement level, with high-quality audits supporting financial stability.

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Through consultations with stakeholders, the International Auditing and Assurance Standards Board (IAASB) identified a need to strengthen standards addressing quality control.

Therefore, the IAASB is proposing revisions to:

  • ISQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements; and
  • ISA 220, Quality Control for an Audit of Financial Statements.

The IAASB proposals includes revisions to these standards to:

  • strengthen and improve a firms’ management of quality for all engagements by more explicitly incorporating a quality management approach, fostering the ability of the standards to be applied to a wide range of circumstances; and
  • focus on identifying, assessing and responding to quality risks in a broad range of engagement circumstances.

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PROJECT NEWS & DECISION SUMMARIES

AASB Decision Summary – September 14-15, 2017
The Board provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project to revise ISQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements. Key issues discussed included:

  • whether to retain the requirement to have an engagement quality control review for all audits of financial statements of listed entities, or whether such reviews should be required only for audits of general purpose financial statements of listed entities;
  • whether the proposed requirement for the firm to establish policies and procedures to select other engagements to have an engagement quality control review will result in the appropriate selection of high-risk engagements; and
  • the eligibility and appointment of the engagement quality control reviewer, including specific considerations for small and medium-sized practitioners.

AASB Decision Summary – June 12-13, 2017
The Board provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project to revise ISQC 1, International Standard on Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and ISA 220, Quality Control for an Audit of Financial Statements. Key issues discussed relating to ISQC 1 included the:

  • need for further considerations for small and medium-sized practitioners in the proposed revisions;
  • potential challenge of setting out the public interest role of firms in the standard;
  • how the proposed components of quality management and, in particular, the quality management process, would be applied in practice; and
  • need for a more a principles-based approach in making revisions.

Key issues discussed relating to ISA 220 included the:

  • interaction of ISA 220 with ISQC 1 and other relevant ISAs;
  • objective of the auditor under ISA 220;
  • four-step approach proposed by the IAASB Task Force in addressing quality management at the engagement level; and
  • impact of a proposed requirement regarding information sharing and communication between the firm and the engagement team. 

AASB Decision Summary – March 6-7, 2017
The AASB provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project to revise ISQC 1, International Standard on Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and ISA 220, Quality Control for an Audit of Financial Statements. Key issues discussed included:

  • considerations for small and medium-sized practitioners;
  • overlap with topics addressed in the International Ethics Standards Board for Accountants’ Code of Ethics;
  • the authority and eligibility of the engagement quality control reviewer; and
  • the firm’s approach to selecting the engagement quality control reviewer.

AASB Decision Summary – November 28-29, 2016
The AASB provided input to the CPA Canada nominee on the IAASB on issues related to the IAASB’s project proposal addressing quality control and group audits. The AASB expressed concerns with the lack of detail in the project proposal related to group audits. However, the AASB supports these projects and intends to set up two advisory groups to assist staff and provide input on Canadian issues.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.