2009 Handbook of International Standard on Audit

8/11/2019 2009 Handbook of International Standard on Audit

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International Federation of Accountants 545 Fifth Avenue, 14th

Floor New York, New York 10017 USA

his !u"lication was !re!ared "# the International Federation of Accountants $IFA%&' Its (ission is to

serve the !u"lic interest, stren)then the worldwide accountanc# !rofession and contri"ute to thedevelo!(ent of stron) international econo(ies "# esta"lishin) and !ro(otin) adherence to hi)h *ualit#

!rofessional standards, furtherin) the international conver)ence of such standards and s!eakin) out on

!u"lic interest issues where the !rofession+s e!ertise is (ost relevant'

his !u"lication (a# "e downloaded free-of-char)e fro( the IFA% we"site htt!.//www'ifac'or)' he

a!!roved tet is !u"lished in the n)lish lan)ua)e'

IFA% welco(es an# co((ents #ou (a# have re)ardin) this hand"ook' %o((ents (a# "e sent to the

address a"ove or e(ailed to IAAS!u"s2ifac'or)'

%o!#ri)ht 3 A!ril 00 "# the International Federation of Accountants $IFA%&' All ri)hts reserved'

6er(ission is )ranted to (ake co!ies of this work !rovided that such co!ies are for use in acade(ic

classroo(s or for !ersonal use and are not sold or disse(inated and !rovided that each co!# "ears the

followin) credit line: Copyright April 2009 by the International Federation of Accountants (IFAC) All

rights reser!ed "sed #ith per$ission of IFAC Contact per$issions%ifacorg for per$ission to reproduce&

store& or trans$it this docu$ent'therwise, written !er(ission fro( IFA% is re*uired to re!roduce, store,

or trans(it, or to (ake other si(ilar uses of, this docu(ent, ece!t as !er(itted "# law' %ontact

!er(issions2ifac'or)'

ISN. 78-1-9477--7

HANDBOOK OF INTERNATIONAL STANDARDS ON AUDITING AND

QUALITY CONTROL

2009 EDITION

Scope of thi H!"#$oo%

his hand"ook "rin)s to)ether all the International Standards on Auditin) and the International Standard on

:ualit# %ontrol that have "een redrafted "# the International Auditin) and Assurance Standards oard

$IAAS& to i(!rove their clarit# $%larit# !ro;ect&' It also includes a


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his hand"ook re!laces 6art II of the 008 edition of the IFA% -andboo. of International tandards on

Auditing& Assurance& and /thics ronounce$ents'

6art I of the 008 edition of the hand"ook will re(ain in effect durin) 00' It contains !ronounce(ents on

auditin), review, other assurance, and related services issued "# the IAAS as of >anuar# 1, 008' It also

includes the Code of /thics for rofessional Accountants , issued "# the International thics Standards

oard for Accountants' he !ronounce(ents on auditin) will re(ain in effect u! to =ece("er

14, 00? thereafter the# will "e re!laced "# those contained in this hand"ook'

Ho& thi H!"#$oo% i A''!"(e#

he contents of this hand"ook are arran)ed "# section as follows.

%han)es of Su"stance fro( 6arts I and II of the 008 dition of the @and"ook

and ecent =evelo!(ents '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 1

ack)round Infor(ation on the International Federation ofAccountants '''''''''''''

4

6reface to the International Standards on :ualit# %ontrol, Auditin), eview,

ther Assurance and elated Services ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 11

anuar# 1, 008'

Ch!"(e to *!'t I of the 200+ E#itio" of the IFAC H!"#$oo%

6art I of the 008 edition of the IFA% @and"ook will 'e.!i" i" effect #-'i"( 2009' hat !u"lication

contains !ronounce(ents on auditin), review, other assurance, and related services issued "# the


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IAAS as of >anuar# 1, 008' he !ronounce(ents on auditin) and *ualit# control will re(ain in

effect u! to =ece("er 14, 00' It also includes the Code of /thics for rofessional Accountants,

issued "# the International thics Standards oard for Accountants'

6ara)ra!hs 15 and 18 of the International Standard on eview n)a)e(ents $IS& 410, Ceview of

Interi( Financial Infor(ation 6erfor(ed "# the Inde!endent Auditor of the ntit#D have "een

a(ended as a result of ISA 00, Cverall ";ectives of the Inde!endent Auditor and the %onduct of an

Audit in Accordance with International Standards on Auditin)D issued in cto"er 008' he

a(end(ents "eco(e effective on =ece("er 15, 00'

1 %@AN


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%@AN


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BACKGROUND INFOR)ATION ON THE INTERNATIONAL FEDERATION

OF ACCOUNTANTS

The O'(!"i;!tio"

he International Federation of Accountants $IFA%& is the worldwide or)aniJation for the accountanc#

!rofession' Founded in 177, its (ission is Cto serve the !u"lic interest, IFA% will continue to stren)then

the worldwide accountanc# !rofession and contri"ute to the develo!(ent of stron) international econo(ies

"# esta"lishin) and !ro(otin) adherence to hi)h-*ualit# !rofessional standards, furtherin) the internationalconver)ence of such standards and s!eakin) out on !u"lic interest issues where the !rofession+s e!ertise is

(ost relevant'D

IFA%+s )overnin) "odies, staff and volunteers are co((itted to the values of inte)rit#, trans!arenc# and

e!ertise' IFA% also seeks to reinforce !rofessional accountants+ adherence to these values, which are

reflected in the IFA% Code of /thics for rofessional Accountants

*'i.!'/ Actiitie

Se'i"( the *-$ic I"te'et

IFA% !rovides leadershi! to the worldwide accountanc# !rofession in servin) the !u"lic interest "#.

% G =evelo!in), !ro(otin) and (aintainin) )lo"al !rofessional standards and a Code of

/thics for rofessional Accountantsof a consistentl# hi)h-*ualit#?

% G Activel# encoura)in) conver)ence of !rofessional standards, !articularl#, auditin),

assurance, ethics, education, and !u"lic and !rivate sector financial re!ortin) standards?

% G Seekin) continuous i(!rove(ents in the *ualit# of auditin) and financial (ana)e(ent?

% G 6ro(otin) the values of the accountanc# !rofession to ensure that it continuall# attracts

hi)h cali"er entrants?

% G 6ro(otin) co(!liance with (e("ershi! o"li)ations? and

% G Assistin) develo!in) and e(er)in) econo(ies, in coo!eration with re)ional accountin)

"odies and others, in esta"lishin) and (aintainin) a !rofession co((itted to *ualit# !erfor(anceand to servin) the !u"lic interest'

Co"t'i$-ti"( to the Efficie"c/ of the Go$! Eco"o./

IFA% contri"utes to the efficient functionin) of the international econo(# "#.

% G I(!rovin) confidence in the *ualit# and relia"ilit# of financial re!ortin)?

% G ncoura)in) the !rovision of hi)h-*ualit# !erfor(ance infor(ation $financial and non-

financial& within or)aniJations?

IFA% 4

% G 6ro(otin) the !rovision of hi)h-*ualit# services "# all (e("ers of the worldwide

accountanc# !rofession? and


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% G 6ro(otin) the i(!ortance of adherence to the Code of /thics for rofessional

Accountants"# all (e("ers of the accountanc# !rofession, includin) (e("ers in industr#,co((erce, the !u"lic sector, the not-for-!rofit sector, acade(ia, and !u"lic !ractice'

*'oi#i"( Le!#e'hip !"# Spo%e.!"hip

IFA% is the !ri(ar# s!okes!erson for the international !rofession and s!eaks out on !u"lic !olic# issues,es!eciall# those where the !rofession+s e!ertise is (ost relevant, as well as on re)ulator# issues related toauditin) and financial re!ortin)' his is acco(!lished, in !art, throu)h outreach to nu(erous or)aniJationsthat rel# on or have an interest in the activities of the international accountanc# !rofession and throu)h theissuance of !u"lic !olic# !ositions'

)e.$e'hip

IFA% is co(!rised of 158 (e("ers and associates in 19 countries worldwide, re!resentin) a!!roi(atel#

'5 (illion accountants in !u"lic !ractice, industr# and co((erce, the !u"lic sector, and education' No

other accountanc# "od# in the world and few other !rofessional or)aniJations have the "road-"ased

international su!!ort that characteriJes IFA%'

IFA%+s stren)ths derive not onl# fro( its international re!resentation, "ut also fro( the su!!ort andinvolve(ent of its individual (e("er "odies, which are the(selves dedicated to !ro(otin) inte)rit#,trans!arenc#, and e!ertise in the accountanc# !rofession, as well as fro( the su!!ort of re)ionalaccountanc# "odies'

St!"#!'#


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IFA% activel# su!!orts conver)ence to ISAs and other standards develo!ed "# IFA%+s inde!endent

standard-settin) "oards and the International Accountin) Standards oard'

A-#iti"( !"# A-'!"ce Se'ice

he IAAS develo!s ISAs and International Standards on eview n)a)e(ents, which deal with the audit

and review of historical financial state(ents, and International Standards on Assurance n)a)e(ents,

which deal with assurance en)a)e(ents other than the audit or review of historical financial infor(ation'he IAAS also develo!s related !ractice state(ents' hese standards and state(ents serve as the

"ench(ark for hi)h-*ualit# auditin) and assurance standards and state(ents worldwide' he# esta"lish

standards and !rovide )uidance for auditors and other !rofessional accountants, )ivin) the( the tools to

co!e with the increased and chan)in) de(ands for re!orts on financial infor(ation, and !rovide )uidance

in s!ecialiJed areas'

In addition, the IAAS develo!s *ualit# control standards for fir(s and en)a)e(ent tea(s in the !racticeareas of audit, assurance and related services'

Ethic

he Code of /thics for rofessional Accountants $the %ode&, develo!ed "# the ISA, esta"lishes ethicalre*uire(ents for !rofessional accountants and !rovides a conce!tual fra(ework for all !rofessional

accountants to ensure co(!liance with the five funda(ental !rinci!les of !rofessional ethics' hese!rinci!les are inte)rit#, o";ectivit#, !rofessional co(!etence and due care, confidentialit#, and !rofessional"ehavior' Under the fra(ework, all !rofessional accountants are re*uired to identif# threats to thesefunda(ental !rinci!les and, if there are threats, a!!l# safe)uards to ensure that the !rinci!les are notco(!ro(ised' A (e("er "od# of IFA% or fir( conductin) an audit usin) ISAs (a# not a!!l# lessstrin)ent standards than those stated in the %ode'

*-$ic Secto' Acco-"ti"(

IFA%+s International 6u"lic Sector Accountin) Standards oard $I6SAS& focuses on the develo!(ent of

hi)h-*ualit# financial re!ortin) standards for use "# !u"lic sector entities around the world' It has

develo!ed a co(!rehensive "od# of I6SASs settin) out the re*uire(ents for financial re!ortin) "#

)overn(ents and other !u"lic sector or)aniJations' he I6SASs re!resent international "est !ractice in

financial re!ortin) "# !u"lic sector entities' In (an# ;urisdictions, the a!!lication of the re*uire(ents ofI6SASs will enhance the accounta"ilit# and trans!arenc# of the financial re!orts !re!ared "# )overn(ents

and their a)encies'

IFA% B

he I6SASs are contained in the 008 edition of the IFA%-andboo. of International ublic ectorAccounting ronounce$entsand are also availa"le fro( the IFA% we"site at htt!.//www'ifac'or)' Frenchand S!anish translations of the I6SASs are also availa"le for download fro( the IFA% we"site'

E#-c!tio"

Lorkin) to advance accountin) education !ro)ra(s worldwide, IFA%+s International Accountin)

ducation Standards oard $IAS& develo!s International ducation Standards $ISs&, settin) the"ench(arks for the education of (e("ers of the accountanc# !rofession' All IFA% (e("er "odies are

re*uired to co(!l# with those standards, which address the education !rocess leadin) to *ualification as a

!rofessional accountant, as well as the on)oin) continuin) !rofessional develo!(ent of !rofessional

accountants, and the co(!etence re*uire(ents of audit !rofessionals' he IAS also develo!s

International ducation 6ractice State(ents $I6Ss& and other )uidance to assist (e("er "odies and

accountin) educators i(!le(ent and achieve )ood !ractice in accountin) education'

he ISs and I6Ss are contained in the 00 edition of IFA%+s @and"ook of International ducation6ronounce(ents and are also availa"le fro( the IFA% we"site at htt!.//www'ifac'or)'


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S-ppo't fo' *'ofeio"! Acco-"t!"t i" B-i"e

oth IFA% and its (e("er "odies face the challen)e of (eetin) the needs of an increasin) nu("er ofaccountants e(!lo#ed in "usiness and industr#, the !u"lic sector, education, and the not-for-!rofit sector'hese accountants now co(!rise (ore than 50 !ercent of the (e("ershi! of (e("er "odies' IFA%+s6rofessional Accountants in usiness $6AI& %o((ittee develo!s )ood !ractice )uidance and otherresources, and facilitates the echan)e of knowled)e a(on) its (e("er "odies' hese address a wide ran)eof !rofessional issues, encoura)e hi)h-*ualit# !erfor(ance "# !rofessional accountants in "usiness, and"uild !u"lic awareness and understandin) of the roles these individuals !la# in their or)aniJations' Eoreinfor(ation on the work of the co((ittee can "e o"tained at htt!.//www'ifac'or)/!ai"'

S.!< !"# )e#i-.


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to deter(ine how (e("ers and associates have (et their o"li)ations with res!ect to *ualit# assurance and

investi)ation and disci!linar# !ro)ra(s for their (e("ers as set out in IFA%+s State(ents of Ee("ershi!

"li)ations $SEs&' he SEs serve as the foundation of the %o(!liance 6ro)ra( and !rovide clear

"ench(arks to current and !otential (e("er "odies to assist the( in ensurin) hi)h-*ualit# !erfor(ance "#

!rofessional accountants'

his hand"ook does not contain the SEs, which are availa"le fro( the IFA% we"site at

htt!.//www'ifac'or)' Eore infor(ation on the work of the advisor# !anel can "e o"tained athtt!.//www'ifac'or)/co(!liance!ro)ra('

Re(-!to'/ F'!.e&o'%

In Nove("er 009, IFA%, with the stron) su!!ort of (e("er "odies and international re)ulators, a!!roved

a series of refor(s to increase confidence that the activities of IFA% are !ro!erl# res!onsive to the !u"lic

interest and will lead to the esta"lish(ent of hi)h-*ualit# standards and !ractices in auditin) and assurance'

he refor(s !rovide for the followin). (ore trans!arent standard-settin) !rocesses, )reater !u"lic and

re)ulator# in!ut into those !rocesses, re)ulator# (onitorin), !u"lic interest oversi)ht, and on)oin)

dialo)ue "etween re)ulators and the accountanc# !rofession' his is acco(!lished throu)h the followin)

structures.

Public Interest Oversight Board (PIOB)sta"lished in Fe"ruar# 005, the 6I oversees IFA%+sstandard-settin) activities in the areas of auditin) and assurance,

IFA% 8

ethics K includin) inde!endence K and education, as well as the IFA% Ee("er od# %o(!liance 6ro)ra('

he 6I is co(!rised of ten re!resentatives no(inated "# international re)ulators and institutions'

Monitoring Group (MG)he E< co(!rises international re)ulators and related or)aniJations' Its role is

to u!date the 6I re)ardin) si)nificant events in the re)ulator# environ(ent' It is also the vehicle for

dialo)ue "etween re)ulators and the international accountanc# !rofession'

IFAC Regulator !iaison Group (IR!G)he IM< includes the IFA% 6resident, =e!ut# 6resident,%hief ecutive fficer, three (e("ers desi)nated "# the IFA% oard, the %hair of the Foru( of Fir(s,

and si (e("ers desi)nated "# the fir(s' his )rou! works with the E< and addresses issues related to there)ulation of the !rofession'

IFAC St'-ct-'e !"# Ope'!tio"


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to the !u"lications on IFA%+s we"site' he IFA% 6olic# State(ent, er$issions olicy for ublications

Issued by the International Federation of Accountants&outlines its !olic# with re)ard to co!#ri)ht'

IFA% reco)niJes that it is i(!ortant that !re!arers and users of financial state(ents, auditors, re)ulators,

law#ers, acade(ia, students, and other interested )rou!s in non-n)lish s!eakin) countries have access to

its standards in their native lan)ua)e' he IFA% 6olic# State(ent, 1ranslation of tandards and uidance

Issued by the International Federation of Accountants&outlines its !olic# with re)ard to translation of its

standards'

IFA%

his hand"ook does not contain these !olic# state(ents' @owever, the# are availa"le fro( the IFA%

we"site at htt!.//www'ifac'or)/translations' he we"site also features additional infor(ation a"out IFA%+s

structure and activities'


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IFA% 10

*REFACE TO THE INTERNATIONAL STANDARDS ON QUALITY CONTROL4

AUDITING4 RE,IE=4 OTHER ASSURANCE AND RELATED SER,ICES

$ffective as of =ece("er 15, 00&

CONTENTS

6ara)ra!h

Introduction ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 1-

he IAAS+s 6ronounce(ents heAuthorit# Attachin) to InternationalStandards Issued "# the

'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 9

International Auditin) and Assurance Standards oard ''''''''''''''''''''''''''' 4-

International Standards on Auditin) '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 10

International Standards on :ualit# %ontrol '''''''''''''''''''''''''''''''''''''''''''''''''''''' 11

ther International Standards ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 1-14

6rofessional >ud)(ent '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 15

A!!lica"ilit# of the International Standards ''''''''''''''''''''''''''''''''''''''''''''''''''''' 1B-17

he Authorit# Attachin) to 6ractice State(ents Issued "# the InternationalAuditin) and Assurance Standards oard '''''''''''''''''''''''''''''''''''''''''''''''' 18-1


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ther 6a!ers 6u"lished "# the International Auditin) and AssuranceStandards oard '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 0

Man)ua)e ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 1

11 6FA%

I"t'o#-ctio"

1. 1' his !reface to the International Standards on :ualit# %ontrol, Auditin), eview, ther

Assurance and elated Services $International Standards or IAAS+s Standards& is issued tofacilitate understandin) of the sco!e and authorit# of the !ronounce(ents the InternationalAuditin) and Assurance Standards oard $IAAS& issues, as set forth in the IAAS+s er(s of

eference'2. ' he IAAS is co((itted to the )oal of develo!in) a set of International Standards which

are )enerall# acce!ted worldwide' IAAS (e("ers act in the co((on interest of the !u"lic atlar)e and the worldwide accountanc# !rofession' his could result in their takin) a !osition on a(atter that is not in accordance with current !ractice in their countr# or fir( or not in accordancewith the !osition taken "# those who !ut the( forward for (e("ershi! of the IAAS'

The IAASB> *'o"o-"ce.e"t

9' he IAAS+s !ronounce(ents )overn audit, review, other assurance and related services

en)a)e(ents that are conducted in accordance with International Standards' he# do not override

the local laws or re)ulations that )overn the audit of historical financial state(ents or assurance

en)a)e(ents on other infor(ation in a !articular countr# re*uired to "e followed in accordance

with that countr#+s national standards' In the event that local laws or re)ulations differ fro(, or

conflict with, the IAAS+s Standards on a !articular su";ect, an en)a)e(ent conducted in

accordance with local laws or re)ulations will not auto(aticall# co(!l# with the IAAS+s

Standards' A !rofessional accountant should not re!resent co(!liance with the IAAS+s

Standards unless the !rofessional accountant has co(!lied full# with all of those relevant to the

en)a)e(ent'

The A-tho'it/ Att!chi"( to I"te'"!tio"! St!"#!'# I-e# $/ the I"te'"!tio"!

A-#iti"( !"# A-'!"ce St!"#!'# Bo!'#


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1. 4' International Standards on Auditin) $ISAs& are to "e a!!lied in the audit of historical

financial infor(ation'

2. 5' International Standards on eview n)a)e(ents $ISs& are to "e a!!lied in the review

of historical financial infor(ation'

3. B' International Standards on Assurance n)a)e(ents $ISAs& are to "e a!!lied in

assurance en)a)e(ents other than audits or reviews of historical financial infor(ation'

4. 7' International Standards on elated Services $ISSs& are to "e a!!lied to co(!ilationen)a)e(ents, en)a)e(ents to a!!l# a)reed u!on !rocedures to infor(ation and other relatedservices en)a)e(ents as s!ecified "# the IAAS'

6FA% 1

1. 8' ISAs, ISs, ISAs and ISSs are collectivel# referred to as the IAAS+s n)a)e(ent

Standards'

2. ' International Standards on :ualit# %ontrol $IS:%s& are to "e a!!lied for all services

fallin) under the IAAS+s n)a)e(ent Standards'

I"te'"!tio"! St!"#!'# o" A-#iti"(

10' ISAs are written in the contet of an audit of financial state(ents1"# an inde!endent auditor' he#

are to "e ada!ted as necessar# in the circu(stances when a!!lied to audits of other historicalfinancial infor(ation' he authorit# of ISAs is set out in ISA 00'

I"te'"!tio"! St!"#!'# o" Q-!it/ Co"t'o

11' IS:%s are written to a!!l# to fir(s in res!ect of all their services fallin) under the IAAS+s

n)a)e(ent Standards' he authorit# of IS:%s is set out in the introduction to the IS:%s'

Othe' I"te'"!tio"! St!"#!'#

1. 1' he International Standards identified in !ara)ra!hs 5-7 contain "asic !rinci!les and

essential !rocedures $identified in "old t#!e letterin) and "# the word CshouldD& to)ether withrelated )uidance in the for( of e!lanator# and other (aterial, includin) a!!endices' he "asic!rinci!les and essential !rocedures are to "e understood and a!!lied in the contet of the

e!lanator# and other (aterial that !rovides )uidance for their a!!lication' It is thereforenecessar# to consider the entire tet of a Standard to understand and a!!l# the "asic !rinci!les andessential !rocedures'

2. 19' he "asic !rinci!les and essential !rocedures of a Standard are to "e a!!lied in all cases

where the# are relevant in the circu(stances of the en)a)e(ent' In ece!tional circu(stances,however, a !rofessional accountant (a# ;ud)e it necessar# to de!art fro( a relevant essential!rocedure in order to achieve the !ur!ose of that !rocedure' Lhen such a situation arises, the!rofessional accountant is re*uired to docu(ent how alternative !rocedures !erfor(ed achieve the!ur!ose of the !rocedure and, unless otherwise clear, the reasons for the de!arture' he need forthe !rofessional accountant to de!art fro( a relevant essential !rocedure is e!ected to arise onl#where, in the s!ecific circu(stances of the en)a)e(ent, that !rocedure would "e ineffective'

1 Unless otherwise stated, Cfinancial state(entsD (ean financial state(ents

co(!risin) historical financial infor(ation'

ISA 00, Cverall ";ectives of the Inde!endent Auditor and the %onduct of an Audit in Accordance with International

Standards on Auditin)'D

19 6FA%

14' A!!endices, which for( !art of the a!!lication (aterial, are an inte)ral !art of a Standard' he

!ur!ose and intended use of an a!!endi are e!lained in the "od# of the related Standard or


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within the title and introduction of the a!!endi itself'

*'ofeio"! ?-#(.e"t

15' he nature of the International Standards re*uires the !rofessional accountant to eercise

!rofessional ;ud)(ent in a!!l#in) the('

Appic!$iit/ of the I"te'"!tio"! St!"#!'#

1. 1B' he sco!e, effective date and an# s!ecific li(itation of the a!!lica"ilit# of a s!ecific

International Standard is (ade clear in the Standard' Unless otherwise stated in the InternationalStandard, the !rofessional accountant is !er(itted to a!!l# an International Standard "efore theeffective date s!ecified therein'

1. 17' International Standards are relevant to en)a)e(ents in the !u"lic sector' Lhen

a!!ro!riate, additional considerations s!ecific to !u"lic sector entities are included.

2. $a& Lithin the "od# of an International Standard in the case of ISAs and IS:%s? or

3. $"& In a 6u"lic Sector 6ers!ective $6S6& a!!earin) at the end of other International

Standards'

The A-tho'it/ Att!chi"( to *'!ctice St!te.e"t I-e# $/ the I"te'"!tio"!

A-#iti"( !"# A-'!"ce St!"#!'# Bo!'#

1. 18' International Auditin) 6ractice State(ents $IA6Ss& are issued to !rovide inter!retive

)uidance and !ractical assistance to !rofessional accountants in i(!le(entin) ISAs and to!ro(ote )ood !ractice' International eview n)a)e(ent 6ractice State(ents $I6Ss&,International Assurance n)a)e(ent 6ractice State(ents $IA6Ss& and International elatedServices 6ractice State(ents $IS6Ss& are issued to serve the sa(e !ur!ose for i(!le(entation ofISs, ISAs and ISSs res!ectivel#'

1. 1' 6rofessional accountants should "e aware of and consider 6ractice State(ents a!!lica"le

to the en)a)e(ent' A !rofessional accountant who does not consider and a!!l# the )uidanceincluded in a relevant 6ractice State(ent should "e !re!ared to e!lain how.

2. $a& he re*uire(ents in the ISAs? or

3. $"& he "asic !rinci!les and essential !rocedures in the IAAS+s other n)a)e(ent

Standard$s&, addressed "# the 6ractice State(ent, have "een co(!lied with'

6FA% 14

Othe' *!pe' *-$ihe# $/ the I"te'"!tio"! A-#iti"( !"# A-'!"ce

St!"#!'# Bo!'#

0' ther !a!ers, for ea(!le =iscussion 6a!ers, are !u"lished9

to !ro(ote discussion or de"ate on

auditin), review, other assurance and related services and *ualit# control issues affectin) the

accountin) !rofession, !resent findin)s, or descri"e (atters of interest relatin) to auditin), review,

other assurance, related services and *ualit# control issues affectin) the accountin) !rofession'

he# do not esta"lish an# "asic !rinci!les or essential !rocedures to "e followed in audit, review,

other assurance or related services en)a)e(ents'

L!"(-!(e

1' he sole authoritative tet of an e!osure draft, International Standard, 6ractice State(ent or other

!a!er is that !u"lished "# the IAAS in the n)lish lan)ua)e'


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he IAAS %hair will a!!oint a review )rou! of four IAAS (e("ers to consider whether a draft !a!er has sufficient (erit to

"e added to the IAAS+s literature' he draft !a!er (a# co(e fro( an# source and the IAAS need not have s!ecificall#

co((issioned it' If the review )rou! "elieves that the !a!er has sufficient (erit, it reco((ends to the IAAS that the !a!er "e

!u"lished and added to its literature'

15 6FA%

GLOSSARY OF TER)S1

$Fe"ruar# 00&

Access controls6rocedures desi)ned to restrict access to on-line ter(inal devices, !ro)ra(s and data'

Access controls consist of Cuser authenticationD and Cuser authoriJation'D CUser authenticationD t#!icall#

atte(!ts to identif# a user throu)h uni*ue lo)on identifications, !asswords, access cards or "io(etric data'

CUser authoriJationD consists of access rules to deter(ine the co(!uter resources each user (a# access'

S!ecificall#, such !rocedures are desi)ned to !revent or detect.

OAccounting esti$ateAn a!!roi(ation of a (onetar# a(ount in the a"sence of a !recise (eans of

(easure(ent' his ter( is used for an a(ount (easured at fair value where there is esti(ation uncertaint#,

as well as for other a(ounts that re*uire esti(ation' Lhere ISA 540addresses onl# accountin) esti(ates

involvin) (easure(ent at fair value, the ter( Cfair value accountin) esti(atesD is used'

OAccounting recordshe records of initial accountin) entries and su!!ortin) records, such as checks and

records of electronic fund transfers? invoices? contracts? the )eneral and su"sidiar# led)ers, ;ournal entries

and other ad;ust(ents to the financial state(ents that are not reflected in for(al ;ournal entries? and records

such as work sheets and s!readsheets su!!ortin) cost allocations, co(!utations, reconciliations and

disclosures'

Agreed3upon procedures engage$entAn en)a)e(ent in which an auditor is en)a)ed to carr# out those

!rocedures of an audit nature to which the auditor and the entit# and an# a!!ro!riate third !arties have

a)reed and to re!ort on factual findin)s' he reci!ients of the re!ort for( their own conclusions fro( the

re!ort "# the auditor' he re!ort is restricted to those !arties that have a)reed to the !rocedures to "e

!erfor(ed since others, unaware of the reasons for the !rocedures (a# (isinter!ret the results'

O =enotes a ter( defined in the ISAs'

P =enotes a ter( defined in IS:% 1' 1

In the case of !u"lic sector en)a)e(ents, the ter(s in this )lossar# should "e read as referrin) to their !u"lic sector e*uivalents'

Lhere accountin) ter(s have not "een defined in the !ronounce(ents of the International Auditin) andAssurance Standards oard, reference should "e (ade to the


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and, where a!!ro!riate, those char)ed with )overnance in the !re!aration of the financial state(ents that is

acce!ta"le in view of the nature of the entit# and the o";ective of the financial state(ents, or that is

re*uired "# law or re)ulation'

he ter( Cfair !resentation fra(eworkD is used to refer to a financial re!ortin) fra(ework that re*uires

co(!liance with the re*uire(ents of the fra(ework and.

he ter( Cco(!liance fra(eworkD is used to refer to a financial re!ortin) fra(ework that re*uires

co(!liance with the re*uire(ents of the fra(ework, "ut does not contain the acknowled)e(ents in $a& or

$"& a"ove'

Application controls in infor$ation technology Eanual or auto(ated !rocedures that t#!icall# o!erate at

a "usiness !rocess level' A!!lication controls can "e !reventative or detective in nature and are desi)ned to

ensure the inte)rit# of the accountin) records' Accordin)l#, a!!lication controls relate to !rocedures used to

initiate, record, !rocess and re!ort transactions or other financial data'

OApplied criteria (in the conte4t of IA 5607)he criteria a!!lied "# (ana)e(ent in the !re!aration of

the su((ar# financial state(ents'

OAppropriateness (of audit e!idence)he (easure of the *ualit# of audit evidence? that is, its relevance

and its relia"ilit# in !rovidin) su!!ort for the conclusions on which the auditor+s o!inion is "ased'

ISA 810, Cn)a)e(ents to e!ort on Su((ar# Financial State(ents'D

17


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Assurance engage$ent ris.he risk that the !ractitioner e!resses an ina!!ro!riate conclusion when the

su";ect (atter infor(ation is (ateriall# (isstated'

OAudit docu$entationhe record of audit !rocedures !erfor(ed, relevant audit evidence o"tained, and

conclusions the auditor reached $ter(s such as Cworkin) !a!ersD or Cwork!a!ersD are also so(eti(es

used&'

OAudit e!idenceInfor(ation used "# the auditor in arrivin) at the conclusions on which the auditor+so!inion is "ased' Audit evidence includes "oth infor(ation

n)a)e(ent circu(stances include the ter(s of the en)a)e(ent, includin) whether it is a reasona"le assurance en)a)e(ent or a

li(ited assurance en)a)e(ent, the characteristics of the su";ect (atter, the criteria to "e used, the needs of the intended users,

relevant characteristics of the res!onsi"le !art# and its environ(ent, and other (atters, for ea(!le events, transactions,

conditions and !ractices, that (a# have a si)nificant effect on the en)a)e(ent'


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ISA 00, Cverall ";ectives of the Inde!endent Auditor and the %onduct of an Audit in Accordance with InternationalStandards on Auditin),D !ara)ra!h 19$f&, defines the ter( Cfinancial state(ents'D

B

C6artnerD and Cfir(D should "e read as referrin) to their !u"lic sector e*uivalents where relevant'

1 uesA!!lications of auditin) !rocedures usin) the co(!uter as an audittool $also known as %AAs&'

Control acti!itieshose !olicies and !rocedures that hel! ensure that (ana)e(ent directives are carried

out' %ontrol activities are a co(!onent of internal control'

Control en!iron$entIncludes the )overnance and (ana)e(ent functions and the attitudes, awareness and

actions of those char)ed with )overnance and (ana)e(ent concernin) the entit#+s internal control and its

i(!ortance in the entit#' he control environ(ent is a co(!onent of internal control'

OControl ris.$see+is. of $aterial $isstate$ent&

Corporate go!ernance$see o!ernance&


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criteria for the sa(e su";ect (atter' Suita"le criteria are re*uired for reasona"l# consistent evaluation or

(easure(ent of a su";ect (atter within the contet of !rofessional ;ud)(ent'

uitable criteriahi"it the followin) characteristics.

O?ate of appro!al of the financial state$entshe date on which all the state(ents that co(!rise the

financial state(ents, includin) the related notes, have "een !re!ared and those with the reco)niJed

authorit# have asserted that the# have taken res!onsi"ilit# for those financial state(ents'

P?ate of report (in relation to >uality control)he date selected "# the !ractitioner to date the re!ort'

O?ate of the auditor8s reporthe date the auditor dates the re!ort on the financial state(ents in

accordance with ISA 700'7

O?ate of the financial state$entshe date of the end of the latest !eriod covered "# the financial

state(ents'

ISA 700, CFor(in) an !inion and e!ortin) on Financial State(ents'D

1 uality control re!ie#A !rocess desi)ned to !rovide an o";ective evaluation, on or "efore

the date of the re!ort, of the si)nificant ;ud)(ents the en)a)e(ent tea( (ade and the conclusions it

reached in for(ulatin) the re!ort' he en)a)e(ent *ualit# control review !rocess is for audits of financial

state(ents of listed entities and those other en)a)e(ents, if an#, for which the fir( has deter(ined an


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en)a)e(ent *ualit# control review is re*uired'

OP/ngage$ent >uality control re!ie#erA !artner, other !erson in the fir(, suita"l# *ualified eternal

!erson, or a tea( (ade u! of such individuals, none of who( is !art

8

ISA 805, CS!ecial %onsiderationsAudits of Sin)le Financial State(ents and S!ecific le(ents,

Accounts or Ite(s of a Financial State(ent'D

Cn)a)e(ent !artner,D C!artner,D and Cfir(D should "e read as referrin) to their !u"lic sector e*uivalents where relevant'


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O/4pertiseSkills, knowled)e and e!erience in a !articular field'

O/4ternal confir$ationAudit evidence o"tained as a direct written res!onse to the auditor fro( a third

!art# $the confir(in) !art#&, in !a!er for(, or "# electronic or other (ediu('

OFair presentation fra$e#or. $see Applicable financial reporting fra$e#or. and eneral purpose

fra$e#or.&

OFinancial state$entsA structured re!resentation of historical financial infor(ation, includin) related

notes, intended to co((unicate an entit#+s econo(ic resources or o"li)ations at a !oint in ti(e or the

chan)es therein for a !eriod of ti(e in accordance with a financial re!ortin) fra(ework' he related notes

ordinaril# co(!rise a su((ar# of si)nificant accountin) !olicies and other e!lanator# infor(ation' he

ter( Cfinancial state(entsD ordinaril# refers to a co(!lete set of financial state(ents as deter(ined "# the

re*uire(ents of the a!!lica"le financial re!ortin) fra(ework, "ut it can also refer to a sin)le financial

state(ent'

OPFir$A sole !ractitioner, !artnershi! or cor!oration or other entit# of !rofessional accountants'

Forecast6ros!ective financial infor(ation !re!ared on the "asis of assu(!tions as to future events which

(ana)e(ent e!ects to take !lace and the actions (ana)e(ent e!ects to take as of the date the

infor(ation is !re!ared $"est-esti(ate assu(!tions&'

OFraudAn intentional act "# one or (ore individuals a(on) (ana)e(ent, those char)ed with)overnance, e(!lo#ees, or third !arties, involvin) the use of dece!tion to o"tain an un;ust or ille)al

advanta)e'

OFraud ris. factorsvents or conditions that indicate an incentive or !ressure to co((it fraud or !rovide

an o!!ortunit# to co((it fraud'

Fraudulent financial reportingInvolves intentional (isstate(ents, includin) o(issions of a(ounts or

disclosures in financial state(ents, to deceive financial state(ent users'


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Oroup audithe audit of )rou! financial state(ents'

Oroup audit opinionhe audit o!inion on the )rou! financial state(ents'

Oroup engage$ent partnerhe !artner or other !erson in the fir( who is res!onsi"le for the )rou!

audit en)a)e(ent and its !erfor(ance, and for the auditor+s re!ort on the )rou! financial state(ents that is

issued on "ehalf of the fir(' Lhere ;oint auditors conduct the )rou! audit, the ;oint en)a)e(ent !artners

and their en)a)e(ent tea(s collectivel# constitute the )rou! en)a)e(ent !artner and the )rou!en)a)e(ent tea('

Oroup engage$ent tea$6artners, includin) the )rou! en)a)e(ent !artner, and staff who esta"lish the

overall )rou! audit strate)#, co((unicate with co(!onent auditors,

ISA 00, !ara)ra!h 19$a&'

5


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As defined in the IFA% Code of /thics for rofessional Accountants'

uiryIn*uir# consists of seekin) infor(ation of knowled)ea"le !ersons, "oth financial and non-

financial, within the entit# or outside the entit#'

Inspection (as an audit procedure)a(inin) records or docu(ents, whether internal or eternal, in

!a!er for(, electronic for(, or other (edia, or a !h#sical ea(ination of an asset'

OPInspection (in relation to >uality control)In relation to co(!leted en)a)e(ents, !rocedures desi)ned to

!rovide evidence of co(!liance "# en)a)e(ent tea(s with the fir(+s *ualit# control !olicies and

!rocedures'

Intended usershe !erson, !ersons or class of !ersons for who( the !ractitioner !re!ares the assurance

re!ort' he res!onsi"le !art# can "e one of the intended users, "ut not the onl# one'

Interi$ financial infor$ation or state$entsFinancial infor(ation $which (a# "e less than a co(!lete set

of financial state(ents as defined a"ove& issued at interi( dates $usuall# half-#earl# or *uarterl#& in res!ect

of a financial !eriod'

OInternal audit functionAn a!!raisal activit# esta"lished or !rovided as a service to the entit#' Its

functions include, a(on)st other thin)s, ea(inin), evaluatin) and (onitorin) the ade*uac# andeffectiveness of internal control'

OInternal auditorshose individuals who !erfor( the activities of the internal audit function' Internal

auditors (a# "elon) to an internal audit de!art(ent or e*uivalent function'

OInternal controlhe !rocess desi)ned, i(!le(ented and (aintained "# those char)ed with )overnance,

(ana)e(ent and other !ersonnel to !rovide reasona"le assurance a"out the achieve(ent of an entit#+s

o";ectives with re)ard to relia"ilit# of financial re!ortin), effectiveness and efficienc# of o!erations, and

co(!liance with a!!lica"le laws and re)ulations' he ter( CcontrolsD refers to an# as!ects of one or (ore

of the co(!onents of internal control'

OInternational Financial +eporting tandardshe International Financial e!ortin) Standards issued "#

the International Accountin) Standards oard'

In!estigateIn*uire into (atters arisin) fro( other !rocedures to resolve the('

I1 en!iron$enthe !olicies and !rocedures that the entit# i(!le(ents and the I infrastructure

$hardware, o!eratin) s#ste(s, etc'& and a!!lication software that it uses to su!!ort "usiness o!erations and

achieve "usiness strate)ies'

i$ited assurance engage$ent$seeAssurance engage$ent&

OPisted entityAn entit# whose shares, stock or de"t are *uoted or listed on a reco)niJed stock echan)e,

or are (arketed under the re)ulations of a reco)niJed stock echan)e or other e*uivalent "od#'

O


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O


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O,ther infor$ationFinancial and non-financial infor(ation $other than the financial state(ents and the

auditor+s re!ort thereon& which is included, either "# law, re)ulation, or custo(, in a docu(ent containin)

audited financial state(ents and the auditor+s re!ort thereon'

O,ther


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1. $a& @#!othetical assu(!tions a"out future events and (ana)e(ent actions which are not

necessaril# e!ected to take !lace, such as when so(e entities are in a startu! !hase or areconsiderin) a (a;or chan)e in the nature of o!erations? or

2. $"& A (iture of "est-esti(ate and h#!othetical assu(!tions'

rospecti!e financial infor$ationFinancial infor(ation "ased on assu(!tions a"out events that (a#

occur in the future and !ossi"le actions "# an entit#' 6ros!ective financial infor(ation can "e in the for( ofa forecast, a !ro;ection or a co("ination of "oth' $seeForecastandroection&

ublic sectorNational )overn(ents, re)ional $for ea(!le, state, !rovincial, territorial& )overn(ents,

local $for ea(!le, cit#, town& )overn(ents and related )overn(ental entities $for ea(!le, a)encies,

"oards, co((issions and enter!rises&'

OP+easonable assurance (in the conte4t of assurance engage$ents& including audit engage$ents& and

>uality control)A hi)h, "ut not a"solute, level of assurance'

+easonable assurance engage$ent$seeAssurance engage$ent&

+ecalculation%onsists of checkin) the (athe(atical accurac# of docu(ents or records'

O+elated partyA !art# that is either.

1. $a& A related !art# as defined in the a!!lica"le financial re!ortin) fra(ework? or

1. $"& Lhere the a!!lica"le financial re!ortin) fra(ework esta"lishes (ini(al or no related

!art# re*uire(ents.

2. $i& A !erson or other entit# that has control or si)nificant influence, directl# or indirectl#

throu)h one or (ore inter(ediaries, over the re!ortin) entit#?

3. $ii& Another entit# over which the re!ortin) entit# has control or si)nificant influence,

directl# or indirectl# throu)h one or (ore inter(ediaries? or

IS:% 1, C:ualit# %ontrol for Fir(s that 6erfor( Audits and eviews of Financial State(ents, and ther Assurance and elated

Services n)a)e(ents'D

uire$entsthical re*uire(ents to which the en)a)e(ent tea( and en)a)e(ent

*ualit# control reviewer are su";ect, which ordinaril# co(!rise 6arts A and of the International

Federation of Accountants+ Code of /thics for rofessional Accountants $IFA% %ode& to)ether withnational re*uire(ents that are (ore restrictive'

+eperfor$ancehe auditor+s inde!endent eecution of !rocedures or controls that were ori)inall#

!erfor(ed as !art of the entit#+s internal controls'

O+eport on the description and design of controls at a ser!ice organiBation (referred to in IA 0218

as a

type 6 report)A re!ort that co(!rises.

1. $a& A descri!tion, !re!ared "# (ana)e(ent of the service or)aniJation, of the service

or)aniJation+s s#ste(, control o";ectives and related controls that have "een desi)ned and


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i(!le(ented as at a s!ecified date? and

2. $"& A re!ort "# the service auditor with the o";ective of conve#in) reasona"le assurance that

includes the service auditor+s o!inion on the descri!tion of the service or)aniJation+s s#ste(,control o";ectives and related controls and the suita"ilit# of the desi)n of the controls to achievethe s!ecified control o";ectives'

O+eport on the description& design& and operating effecti!eness of controls at a ser!ice organiBation(referred to in IA 02 as a type 2 report)A re!ort that co(!rises.

1$a&A descri!tion, !re!ared "# (ana)e(ent of the service or)aniJation, of the service or)aniJation+s

s#ste(, control o";ectives and related controls, their desi)n and i(!le(entation as at a s!ecifieddate or throu)hout a s!ecified !eriod and, in so(e cases, their o!eratin) effectiveness throu)hout as!ecified !eriod? and

2$"&A re!ort "# the service auditor with the o";ective of conve#in) reasona"le assurance that includes.

3$i& he service auditor+s o!inion on the descri!tion of the service or)aniJation+s s#ste(, control

o";ectives and related controls, the suita"ilit#

ISA 40, CAudit %onsiderations elatin) to an ntit# Usin) a Service r)aniJation'D

99 uality control)A!!raisin) the *ualit# of the work !erfor(ed and conclusionsreached "# others'

+e!ie# engage$enthe o";ective of a review en)a)e(ent is to ena"le an auditor to state whether, on the

"asis of !rocedures which do not !rovide all the evidence that would "e re*uired in an audit, an#thin) has

co(e to the auditor+s attention that causes the auditor to "elieve that the financial state(ents are not

!re!ared, in all (aterial res!ects, in accordance with an a!!lica"le financial re!ortin) fra(ework'

+e!ie# procedureshe !rocedures dee(ed necessar# to (eet the o";ective of a review en)a)e(ent,

!ri(aril# in*uiries of entit# !ersonnel and anal#tical !rocedures a!!lied to financial data'

O+is. assess$ent procedureshe audit !rocedures !erfor(ed to o"tain an understandin) of the entit# and

its environ(ent, includin) the entit#+s internal control, to identif# and assess the risks of (aterial

(isstate(ent, whether due to fraud or error, at the financial state(ent and assertion levels'

O+is. of $aterial $isstate$enthe risk that the financial state(ents are (ateriall# (isstated !rior toaudit' his consists of two co(!onents, descri"ed as follows at the assertion level.

1. $a& Inherent riskhe susce!ti"ilit# of an assertion a"out a class of transaction, account

"alance or disclosure to a (isstate(ent that could "e (aterial, either individuall# or whena))re)ated with other (isstate(ents, "efore consideration of an# related controls'

2. $"& %ontrol riskhe risk that a (isstate(ent that could occur in an assertion a"out a class

of transaction, account "alance or disclosure and that could "e (aterial, either individuall# orwhen a))re)ated with other (isstate(ents, will not "e !revented, or detected and corrected, on a


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ti(el# "asis "# the entit#+s internal control'

Oa$pling$seeAudit sa$pling&


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2. $v& Few levels of (ana)e(ent with res!onsi"ilit# for a "road ran)e of controls? or

3. $vi& Few !ersonnel, (an# havin) a wide ran)e of duties'

hese *ualitative characteristics are not ehaustive, the# are not eclusive to s(aller entities, and

s(aller entities do not necessaril# dis!la# all of these characteristics'

Opecial purpose financial state$entsFinancial state(ents !re!ared in accordance with a s!ecial !ur!osefra(ework'

Opecial purpose fra$e#or.A financial re!ortin) fra(ework desi)ned to (eet the financial infor(ation

needs of s!ecific users' he financial re!ortin) fra(ework (a# "e a fair !resentation fra(ework or a

co(!liance fra(ework'1

OPtaff6rofessionals, other than !artners, includin) an# e!erts the fir( e(!lo#s'

Otatistical sa$plingAn a!!roach to sa(!lin) that has the followin) characteristics.

1. $a& ando( selection of the sa(!le ite(s? and

2. $"& he use of !ro"a"ilit# theor# to evaluate sa(!le results, includin) (easure(ent of

sa(!lin) risk'

A sa(!lin) a!!roach that does not have characteristics $a& and $"& is considered non-statistical sa(!lin)'

Otratificationhe !rocess of dividin) a !o!ulation into su"-!o!ulations, each of which is a )rou! of

sa(!lin) units which have si(ilar characteristics $often (onetar# value&'

ubect $atter infor$ationhe outco(e of the evaluation or (easure(ent of a su";ect (atter' It is the

su";ect (atter infor(ation a"out which the !ractitioner )athers

1 ISA 00, !ara)ra!h 19$a&'


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Ou$$ary financial state$ents (in the conte4t of IA 560)@istorical financial infor(ation that is derived

fro( financial state(ents "ut that contains less detail than the financial state(ents, while still !rovidin) a

structured re!resentation consistent with that !rovided "# the financial state(ents of the entit#+s econo(ic

resources or o"li)ations at a !oint in ti(e or the chan)es therein for a !eriod of ti(e'0

=ifferent

;urisdictions (a# use different ter(inolo)# to descri"e such historical financial infor(ation'

upple$entary infor$ationInfor(ation that is !resented to)ether with the financial state(ents that is not

re*uired "# the a!!lica"le financial re!ortin) fra(ework used to !re!are the financial state(ents, nor(all#

!resented in either su!!le(entar# schedules or as additional notes'

1esthe a!!lication of !rocedures to so(e or all ite(s in a !o!ulation'

O1ests of controlsAn audit !rocedure desi)ned to evaluate the o!eratin) effectiveness of controls in

!reventin), or detectin) and correctin), (aterial (isstate(ents at the assertion level'

ISA 00, !ara)ra!h 19$f&'

97


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1

For discussion of the diversit# of )overnance structures, see !ara)ra!hs A1-A8 of ISA B0, C%o((unicationwith hose %har)ed with


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ISA B0, Usin) the Lork of an Auditor+s !ert ' '' '' '' '' '' '' '' '' '' ''' '' '' '' '' '' '' '' '' ''' '' '' '' '' B4

00


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@u(an esources ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' A4-A91

n)a)e(ent 6erfor(ance ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' A9-AB9

Eonitorin) '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' AB4-A7

=ocu(entation of the S#ste( of :ualit# %ontrol '''''''''''''''''''''''''''''''''''''''' A79-A75

International Standard on :ualit# %ontrol $IS:%& 1 C:ualit# %ontrol for Fir(s that 6erfor( Audits andeviews of Financial State(ents and ther Assurance and elated Services n)a)e(entsD should "e readin con;unction with ISA 00 Cverall ";ectives of the Inde!endent Auditor and the %onduct of an Audit inAccordance with International Standards on Auditin)'D

IS:% 1 4

I"t'o#-ctio" Scope of thi ISQC

1. 1' his International Standard on :ualit# %ontrol $IS:%& deals with a fir(+s res!onsi"ilities

for its s#ste( of *ualit# control for audits and reviews of financial state(ents, and other assuranceand related services en)a)e(ents' his IS:% is to "e read in con;unction with relevant ethicalre*uire(ents'


36/700

2. ' ther !ronounce(ents of the International Auditin) and Assurance Standards oard

$IAAS& set out additional standards and )uidance on the res!onsi"ilities of fir( !ersonnel

re)ardin) *ualit# control !rocedures for s!ecific t#!es of en)a)e(ents' ISA 0,1for ea(!le,

deals with *ualit# control !rocedures for audits of financial state(ents'

3. 9' A s#ste( of *ualit# control consists of !olicies desi)ned to achieve the o";ective set out

in !ara)ra!h 11 and the !rocedures necessar# to i(!le(ent and (onitor co(!liance with those

!olicies'

A-tho'it/ of thi ISQC

1. 4' his IS:% a!!lies to all fir(s of !rofessional accountants in res!ect of audits and

reviews of financial state(ents, and other assurance and related services en)a)e(ents' he natureand etent of the !olicies and !rocedures develo!ed "# an individual fir( to co(!l# with thisIS:% will de!end on various factors such as the siJe and o!eratin) characteristics of the fir(, andwhether it is !art of a network'

2. 5' his IS:% contains the o";ective of the fir( in followin) the IS:%, and re*uire(ents

desi)ned to ena"le the fir( to (eet that stated o";ective' In addition, it contains related )uidancein the for( of a!!lication and other e!lanator# (aterial, as discussed further in !ara)ra!h 8, andintroductor# (aterial that !rovides contet relevant to a !ro!er understandin) of the IS:%, and

definitions'1. B' he o";ective !rovides the contet in which the re*uire(ents of this IS:% are set, and is

intended to assist the fir( in.

1. G Understandin) what needs to "e acco(!lished? and

2. G =ecidin) whether (ore needs to "e done to achieve the o";ective'

3. 7' he re*uire(ents of this IS:% are e!ressed usin) Cshall'D

4. 8' Lhere necessar#, the a!!lication and other e!lanator# (aterial !rovides further

e!lanation of the re*uire(ents and )uidance for carr#in) the( out' In !articular, it (a#.

ISA 0, C:ualit# %ontrol for an Audit of Financial State(ents'D

49 IS:% 1

1. G !lain (ore !recisel# what a re*uire(ent (eans or is intended to cover? and

2. G Include ea(!les of !olicies and !rocedures that (a# "e a!!ro!riate in the

circu(stances'

Lhile such )uidance does not in itself i(!ose a re*uire(ent, it is relevant to the !ro!er

a!!lication of the re*uire(ents' he a!!lication and other e!lanator# (aterial (a# also !rovide

"ack)round infor(ation on (atters addressed in this IS:%' Lhere a!!ro!riate, additional

considerations s!ecific to !u"lic sector audit or)aniJations or s(aller fir(s are included within the

a!!lication and other e!lanator# (aterial' hese additional considerations assist in the

a!!lication of the re*uire(ents in this IS:%' he# do not, however, li(it or reduce the

res!onsi"ilit# of the fir( to a!!l# and co(!l# with the re*uire(ents in this IS:%'

' his IS:% includes, under the headin) C=efinitions,D a descri!tion of the (eanin)s attri"uted to

certain ter(s for !ur!oses of this IS:%' hese are !rovided to assist in the consistent a!!licationand inter!retation of this IS:%, and are not intended to override definitions that (a# "eesta"lished for other !ur!oses, whether in law, re)ulation or otherwise' he


37/700

10' S#ste(s of *ualit# control in co(!liance with this IS:% are re*uired to "e esta"lished "#

=ece("er 15, 00'

O$1ectie

11' he o";ective of the fir( is to esta"lish and (aintain a s#ste( of *ualit# control to !rovide it with

reasona"le assurance that.

1. $a& he fir( and its !ersonnel co(!l# with !rofessional standards and a!!lica"le le)al and

re)ulator# re*uire(ents? and

2. $"& e!orts issued "# the fir( or en)a)e(ent !artners are a!!ro!riate in the circu(stances'

Defi"itio"

1' In this IS:%, the followin) ter(s have the (eanin)s attri"uted "elow.

1. $a& =ate of re!ort K he date selected "# the !ractitioner to date the re!ort'

2. $"& n)a)e(ent docu(entation K he record of work !erfor(ed, results o"tained, and

conclusions the !ractitioner reached $ter(s such as Cworkin) !a!ersD or Cwork!a!ersD areso(eti(es used&'

3. $c& n)a)e(ent !artnerK he !artner or other !erson in the fir( who is res!onsi"le for the

en)a)e(ent and its !erfor(ance, and for the re!ort that is issued on "ehalf of the fir(, andwho, where re*uired, has the a!!ro!riate authorit# fro( a !rofessional, le)al or re)ulator#"od#'

4. $d& n)a)e(ent *ualit# control review K A !rocess desi)ned to !rovide an o";ective

evaluation, on or "efore the date of the re!ort, of the si)nificant ;ud)(ents the en)a)e(enttea( (ade and the conclusions it reached in for(ulatin) the re!ort' he en)a)e(ent *ualit#control review !rocess is for audits of financial state(ents of listed entities, and those otheren)a)e(ents, if an#, for which the fir( has deter(ined an en)a)e(ent *ualit# control reviewis re*uired'

5. $e& n)a)e(ent *ualit# control reviewer K A !artner, other !erson in the fir(, suita"l#

*ualified eternal !erson, or a tea( (ade u! of such individuals, none of who( is !art of theen)a)e(ent tea(, with sufficient and a!!ro!riate e!erience and authorit# to o";ectivel#

evaluate the si)nificant ;ud)(ents the en)a)e(ent tea( (ade and the conclusions it reachedin for(ulatin) the re!ort'

6. $f& n)a)e(ent tea( K All !artners and staff !erfor(in) the en)a)e(ent, and an# individuals

en)a)ed "# the fir( or a network fir( who !erfor( !rocedures on the en)a)e(ent' hisecludes eternal e!erts en)a)ed "# the fir( or a network fir('

7. $)& Fir( K A sole !ractitioner, !artnershi! or cor!oration or other entit# of !rofessional

accountants'

8. $h& Ins!ection K In relation to co(!leted en)a)e(ents, !rocedures desi)ned to !rovide

evidence of co(!liance "# en)a)e(ent tea(s with the fir(+s *ualit# control !olicies and!rocedures'

9. $i& Misted entit# K An entit# whose shares, stock or de"t are *uoted or listed on a reco)niJed

stock echan)e, or are (arketed under the re)ulations of a reco)niJed stock echan)e or othere*uivalent "od#'

10. $;& Eonitorin) K A !rocess co(!risin) an on)oin) consideration and evaluation of the fir(+s

s#ste( of *ualit# control, includin) a !eriodic ins!ection of a selection of co(!leteden)a)e(ents, desi)ned to !rovide the fir( with reasona"le assurance that its s#ste( of*ualit# control is o!eratin) effectivel#'

2. $k& Network fir( K A fir( or entit# that "elon)s to a network'

1. $l& Network K A lar)er structure.

2. $i& hat is ai(ed at coo!eration, and

3. $ii& hat is clearl# ai(ed at !rofit or cost-sharin) or shares co((on ownershi!, control or


38/700

(ana)e(ent, co((on *ualit# control !olicies and !rocedures, co((on "usiness strate)#, theuse of a co((on "rand na(e, or a si)nificant !art of !rofessional resources'

3. $(& 6artner K An# individual with authorit# to "ind the fir( with res!ect to the !erfor(ance of a

!rofessional services en)a)e(ent'

4. $n& 6ersonnel K 6artners and staff'

5. $o& 6rofessional standards K IAAS n)a)e(ent Standards, as defined in the IAAS+sreface to

the International tandards on *uality Control& Auditing& +e!ie#& ,ther Assurance and +elateder!ices, and relevant ethical re*uire(ents'

6. $!& easona"le assurance K In the contet of this IS:%, a hi)h, "ut not a"solute, level of

assurance'

7. $*& elevant ethical re*uire(ents K thical re*uire(ents to which the en)a)e(ent tea( and

en)a)e(ent *ualit# control reviewer are su";ect, which ordinaril# co(!rise 6arts A and of theInternational Federation of Accountants+ Code of /thics for rofessional Accountants $IFA%%ode& to)ether with national re*uire(ents that are (ore restrictive'

8. $r& Staff K 6rofessionals, other than !artners, includin) an# e!erts the fir( e(!lo#s'

9. $s& Suita"l# *ualified eternal !erson K An individual outside the fir( with the co(!etence

and ca!a"ilities to act as an en)a)e(ent !artner, for ea(!le a !artner of another fir(, or ane(!lo#ee $with a!!ro!riate e!erience& of either a !rofessional accountanc# "od# whose

(e("ers (a# !erfor( audits and reviews of historical financial infor(ation, or other assurance orrelated services en)a)e(ents, or of an or)aniJation that !rovides relevant *ualit# control services'

IS:% 1 44 Cn)a)e(ent !artner,D C!artner,D and Cfir(D should "e read as referrin) to their

!u"lic sector e*uivalents where relevant'

45 IS:% 1

Re-i'e.e"t App/i"(4 !"# Co.p/i"( &ith4 Ree!"t Re-i'e.e"t

19' 6ersonnel within the fir( res!onsi"le for esta"lishin) and (aintainin) the fir(+s s#ste( of *ualit#

control shall have an understandin) of the entire

IS:% 1 4Btet of this IS:%, includin) its a!!lication and other e!lanator# (aterial, to understand its

o";ective and to a!!l# its re*uire(ents !ro!erl#'

1. 14' he fir( shall co(!l# with each re*uire(ent of this IS:% unless, in the circu(stances of

the fir(, the re*uire(ent is not relevant to the services !rovided in res!ect of audits and reviewsof financial state(ents, and other assurance and related services en)a)e(ents' $ef. 6ara' A1&

2. 15' he re*uire(ents are desi)ned to ena"le the fir( to achieve the o";ective stated in this

IS:%' he !ro!er a!!lication of the re*uire(ents is therefore e!ected to !rovide a sufficient"asis for the achieve(ent of the o";ective' @owever, "ecause circu(stances var# widel# and allsuch circu(stances cannot "e antici!ated, the fir( shall consider whether there are !articular(atters or circu(stances that re*uire the fir( to esta"lish !olicies and !rocedures in addition tothose re*uired "# this IS:% to (eet the stated o";ective'

Ee.e"t of ! S/te. of Q-!it/ Co"t'o

11B' he fir( shall esta"lish and (aintain a s#ste( of *ualit# control that includes !olicies

and !rocedures that address each of the followin) ele(ents.

2$a& Meadershi! res!onsi"ilities for *ualit# within the fir('

3$"& elevant ethical re*uire(ents'

4$c& Acce!tance and continuance of client relationshi!s and s!ecific en)a)e(ents'

5$d& @u(an resources'


39/700

6$e& n)a)e(ent !erfor(ance'

7$f& Eonitorin)'

2. 17' he fir( shall docu(ent its !olicies and !rocedures and co((unicate the( to the fir(+s

!ersonnel' $ef. 6ara' A-A9&

Le!#e'hip Repo"i$iitie fo' Q-!it/ &ithi" the Fi'.

1. 18' he fir( shall esta"lish !olicies and !rocedures desi)ned to !ro(ote an internal culture

reco)niJin) that *ualit# is essential in !erfor(in) en)a)e(ents' Such !olicies and !roceduresshall re*uire the fir(+s chief eecutive officer $or e*uivalent& or, if a!!ro!riate, the fir(+s(ana)in) "oard of !artners $or e*uivalent& to assu(e ulti(ate res!onsi"ilit# for the fir(+s s#ste(of *ualit# control' $ef. 6ara' A4-A5&

2. 1' he fir( shall esta"lish !olicies and !rocedures such that an# !erson or !ersons assi)ned

o!erational res!onsi"ilit# for the fir(+s s#ste( of *ualit# control "# the fir(+s chief eecutiveofficer or (ana)in) "oard of !artners has sufficient and a!!ro!riate e!erience and a"ilit#, and thenecessar# authorit#, to assu(e that res!onsi"ilit#' $ef. 6ara' AB&

47 IS:% 1

Ree!"t Ethic! Re-i'e.e"t

0' he fir( shall esta"lish !olicies and !rocedures desi)ned to !rovide it with reasona"le assurance

that the fir( and its !ersonnel co(!l# with relevant ethical re*uire(ents' $ef. 6ara' A7-A10&

Independence

1. 1' he fir( shall esta"lish !olicies and !rocedures desi)ned to !rovide it with reasona"le

assurance that the fir(, its !ersonnel and, where a!!lica"le, others su";ect to inde!endencere*uire(ents $includin) network fir( !ersonnel& (aintain inde!endence where re*uired "#relevant ethical re*uire(ents' Such !olicies and !rocedures shall ena"le the fir( to. $ef.6ara' A10&

2. $a& %o((unicate its inde!endence re*uire(ents to its !ersonnel and, where a!!lica"le,

others su";ect to the(? and

3. $"& Identif# and evaluate circu(stances and relationshi!s that create threats to inde!endence,and to take a!!ro!riate action to eli(inate those threats or reduce the( to an acce!ta"le level"# a!!l#in) safe)uards, or, if considered a!!ro!riate, to withdraw fro( the en)a)e(ent,where withdrawal is !ossi"le under a!!lica"le law or re)ulation'

4. ' Such !olicies and !rocedures shall re*uire. $ef. 6ara' A10&

5. $a& n)a)e(ent !artners to !rovide the fir( with relevant infor(ation a"out client

en)a)e(ents, includin) the sco!e of services, to ena"le the fir( to evaluate the overalli(!act, if an#, on inde!endence re*uire(ents?

6. $"& 6ersonnel to !ro(!tl# notif# the fir( of circu(stances and relationshi!s that create a

threat to inde!endence so that a!!ro!riate action can "e taken? and

7. $c& he accu(ulation and co((unication of relevant infor(ation to a!!ro!riate !ersonnel so

that.

8. $i& he fir( and its !ersonnel can readil# deter(ine whether the# satisf# inde!endencere*uire(ents?

9. $ii& he fir( can (aintain and u!date its records relatin) to inde!endence? and

10. $iii& he fir( can take a!!ro!riate action re)ardin) identified threats to inde!endence that are

not at an acce!ta"le level'

2. 9' he fir( shall esta"lish !olicies and !rocedures desi)ned to !rovide it with reasona"le

assurance that it is notified of "reaches of inde!endence re*uire(ents, and to ena"le it to takea!!ro!riate actions to resolve such


40/700

IS:% 1 48

situations' he !olicies and !rocedures shall include re*uire(ents for. $ef. 6ara' A10&

1$a& 6ersonnel to !ro(!tl# notif# the fir( of inde!endence "reaches of which the# "eco(e

aware?

1$"& he fir( to !ro(!tl# co((unicate identified "reaches of these !olicies and !rocedures to.

2$i& he en)a)e(ent !artner who, with the fir(, needs to address the "reach? and

3$ii& ther relevant !ersonnel in the fir( and, where a!!ro!riate, the network, and those

su";ect to the inde!endence re*uire(ents who need to take a!!ro!riate action? and

2$c&6ro(!t co((unication to the fir(, if necessar#, "# the en)a)e(ent !artner and the other

individuals referred to in su"!ara)ra!h 9$"&$ii& of the actions taken to resolve the (atter, so thatthe fir( can deter(ine whether it should take further action'

1. 4' At least annuall#, the fir( shall o"tain written confir(ation of co(!liance with its

!olicies and !rocedures on inde!endence fro( all fir( !ersonnel re*uired to "e inde!endent "#relevant ethical re*uire(ents' $ef. 6ara' A10-A11&

1. 5' he fir( shall esta"lish !olicies and !rocedures. $ef. 6ara' A10&

2. $a& Settin) out criteria for deter(inin) the need for safe)uards to reduce the fa(iliarit# threat

to an acce!ta"le level when usin) the sa(e senior !ersonnel on an assurance en)a)e(ent over

a lon) !eriod of ti(e? and

3. $"& e*uirin), for audits of financial state(ents of listed entities, the rotation of the

en)a)e(ent !artner and the individuals res!onsi"le for en)a)e(ent *ualit# control review,and where a!!lica"le, others su";ect to rotation re*uire(ents, after a s!ecified !eriod inco(!liance with relevant ethical re*uire(ents' $ef. 6ara' A1-A17&

Accept!"ce !"# Co"ti"-!"ce of Cie"t Re!tio"hip !"# Specific E"(!(e.e"t

B' he fir( shall esta"lish !olicies and !rocedures for the acce!tance and continuance of client

relationshi!s and s!ecific en)a)e(ents, desi)ned to !rovide the fir( with reasona"le assurance

that it will onl# undertake or continue relationshi!s and en)a)e(ents where the fir(.

1$a& Is co(!etent to !erfor( the en)a)e(ent and has the ca!a"ilities, includin) ti(e and

resources, to do so? $ef. 6ara' A18, A9&2$"& %an co(!l# with relevant ethical re*uire(ents? and

4 IS:% 1

$c& @as considered the inte)rit# of the client, and does not have infor(ation that would lead it

to conclude that the client lacks inte)rit#' $ef. 6ara' A1-A0, A9&

17' Such !olicies and !rocedures shall re*uire.

2$a& he fir( to o"tain such infor(ation as it considers necessar# in the circu(stances "efore

acce!tin) an en)a)e(ent with a new client, when decidin) whether to continue an eistin)en)a)e(ent, and when considerin) acce!tance of a new en)a)e(ent with an eistin) client'$ef. 6ara' A1, A9&

3$"& If a !otential conflict of interest is identified in acce!tin) an en)a)e(ent fro( a new oran eistin) client, the fir( to deter(ine whether it is a!!ro!riate to acce!t the en)a)e(ent'

4$c& If issues have "een identified, and the fir( decides to acce!t or continue the client

relationshi! or a s!ecific en)a)e(ent, the fir( to docu(ent how the issues were resolved'

58' he fir( shall esta"lish !olicies and !rocedures on continuin) an en)a)e(ent and the

client relationshi!, addressin) the circu(stances where the fir( o"tains infor(ation thatwould have caused it to decline the en)a)e(ent had that infor(ation "een availa"le earlier'Such !olicies and !rocedures shall include consideration of.

6$a& he !rofessional and le)al res!onsi"ilities that a!!l# to the circu(stances, includin)


41/700

whether there is a re*uire(ent for the fir( to re!ort to the !erson or !ersons who (ade thea!!oint(ent or, in so(e cases, to re)ulator# authorities? and

7$"& he !ossi"ilit# of withdrawin) fro( the en)a)e(ent or fro( "oth the en)a)e(ent and

the client relationshi!' $ef. 6ara' A-9&

H-.!" Reo-'ce

' he fir( shall esta"lish !olicies and !rocedures desi)ned to !rovide it with reasona"le assurance

that it has sufficient !ersonnel with the co(!etence, ca!a"ilities, and co((it(ent to ethical

!rinci!les necessar# to.

1$a& 6erfor( en)a)e(ents in accordance with !rofessional standards and a!!lica"le le)al and


2$"& na"le the fir( or en)a)e(ent !artners to issue re!orts that are a!!ro!riate in the circu(stances'

$ef. 6ara' A4-A&

Assign$ent of /ngage$ent 1ea$s

90' he fir( shall assi)n res!onsi"ilit# for each en)a)e(ent to an en)a)e(ent !artner and shall

esta"lish !olicies and !rocedures re*uirin) that.

IS:% 1 50

1$a& he identit# and role of the en)a)e(ent !artner are co((unicated to ke# (e("ers of

client (ana)e(ent and those char)ed with )overnance?

2$"& he en)a)e(ent !artner has the a!!ro!riate co(!etence, ca!a"ilities, and authorit# to

!erfor( the role? and

3$c& he res!onsi"ilities of the en)a)e(ent !artner are clearl# defined and co((unicated to

that !artner' $ef. 6ara' A90&

91' he fir( shall also esta"lish !olicies and !rocedures to assi)n a!!ro!riate !ersonnel with the

necessar# co(!etence, and ca!a"ilities to.

1. $a& 6erfor( en)a)e(ents in accordance with !rofessional standards and a!!lica"le le)al and

re)ulator# re*uire(ents? and2. $"& na"le the fir( or en)a)e(ent !artners to issue re!orts that are a!!ro!riate in the

circu(stances' $ef. 6ara' A91&

E"(!(e.e"t *e'fo'.!"ce

19' he fir( shall esta"lish !olicies and !rocedures desi)ned to !rovide it with reasona"le

assurance that en)a)e(ents are !erfor(ed in accordance with !rofessional standards anda!!lica"le le)al and re)ulator# re*uire(ents, and that the fir( or the en)a)e(ent !artnerissue re!orts that are a!!ro!riate in the circu(stances' Such !olicies and !rocedures shallinclude.

2$a& Eatters relevant to !ro(otin) consistenc# in the *ualit# of en)a)e(ent !erfor(ance?

$ef. 6ara' A9-A99&

3$"& Su!ervision res!onsi"ilities? and $ef. 6ara' A94&4$c& eview res!onsi"ilities' $ef. 6ara' A95&

2. 99' he fir(+s review res!onsi"ilit# !olicies and !rocedures shall "e deter(ined on the "asis

that work of less e!erienced tea( (e("ers is reviewed "# (ore e!erienced en)a)e(ent tea((e("ers'

Consultation



42/700

that.

1. $a& A!!ro!riate consultation takes !lace on difficult or contentious (atters?

2. $"& Sufficient resources are availa"le to ena"le a!!ro!riate consultation to take !lace?

3. $c& he nature and sco!e of, and conclusions resultin) fro(, such consultations are

docu(ented and are a)reed "# "oth the individual seekin) consultation and the individual

consulted? and

51 IS:% 1

$d& %onclusions resultin) fro( consultations are i(!le(ented' $ef. 6ara' A9B-A40&

/ngage$ent *uality Control +e!ie#

195' he fir( shall esta"lish !olicies and !rocedures re*uirin), for a!!ro!riate en)a)e(ents,

an en)a)e(ent *ualit# control review that !rovides an o";ective evaluation of the si)nificant;ud)(ents (ade "# the en)a)e(ent tea( and the conclusions reached in for(ulatin) there!ort' Such !olicies and !rocedures shall.

2$a& e*uire an en)a)e(ent *ualit# control review for all audits of financial state(ents of

listed entities?

3$"& Set out criteria a)ainst which all other audits and reviews of historical financial infor(ationand other assurance and related services en)a)e(ents shall "e evaluated to deter(ine whetheran en)a)e(ent *ualit# control review should "e !erfor(ed? and $ef. 6ara' A41&

4$c& e*uire an en)a)e(ent *ualit# control review for all en)a)e(ents, if an#, (eetin) the

criteria esta"lished in co(!liance with su"!ara)ra!h 95$"&'

2. 9B' he fir( shall esta"lish !olicies and !rocedures settin) out the nature, ti(in) and etent

of an en)a)e(ent *ualit# control review' Such !olicies and !rocedures shall re*uire that theen)a)e(ent re!ort not "e dated until the co(!letion of the en)a)e(ent *ualit# control review'$ef. 6ara' A4-A49&

197' he fir( shall esta"lish !olicies and !rocedures to re*uire the en)a)e(ent *ualit# control

review to include.

2$a&=iscussion of si)nificant (atters with the en)a)e(ent !artner?

3$"& eview of the financial state(ents or other su";ect (atter infor(ation and the !ro!osedre!ort?

4$c&eview of selected en)a)e(ent docu(entation relatin) to si)nificant ;ud)(ents the

en)a)e(ent tea( (ade and the conclusions it reached? and

5$d& valuation of the conclusions reached in for(ulatin) the re!ort and consideration of

whether the !ro!osed re!ort is a!!ro!riate' $ef. 6ara' A44&

3. 98' For audits of financial state(ents of listed entities, the fir( shall esta"lish !olicies and

!rocedures to re*uire the en)a)e(ent *ualit# control review to also include consideration of thefollowin).

$a& he en)a)e(ent tea(+s evaluation of the fir(+s inde!endence in relation to the s!ecific

en)a)e(ent?

IS:% 1 5

1$"& Lhether a!!ro!riate consultation has taken !lace on (atters involvin) differences of

o!inion or other difficult or contentious (atters, and the conclusions arisin) fro( thoseconsultations? and

2$c& Lhether docu(entation selected for review reflects the work !erfor(ed in relation to the

si)nificant ;ud)(ents and su!!orts the conclusions reached' $ef. 6ara' A45-A4B&

%riteria for the li)i"ilit# of n)a)e(ent :ualit# %ontrol eviewers


43/700

19' he fir( shall esta"lish !olicies and !rocedures to address the a!!oint(ent of

en)a)e(ent *ualit# control reviewers and esta"lish their eli)i"ilit# throu)h.

2$a& he technical *ualifications re*uired to !erfor( the role, includin) the necessar#

e!erience and authorit#? and $ef. 6ara' A47&

3$"& he de)ree to which an en)a)e(ent *ualit# control reviewer can "e consulted on the

en)a)e(ent without co(!ro(isin) the reviewer+s o";ectivit#' $ef. 6ara' A48&

2. 40' he fir( shall esta"lish !olicies and !rocedures desi)ned to (aintain the o";ectivit# ofthe en)a)e(ent *ualit# control reviewer' $ef. 6ara' A4A51&

3. 41' he fir(+s !olicies and !rocedures shall !rovide for the re!lace(ent of the en)a)e(ent

*ualit# control reviewer where the reviewer+s a"ilit# to !erfor( an o";ective review (a# "ei(!aired'

=ocu(entation of the n)a)e(ent :ualit# %ontrol eview

4' he fir( shall esta"lish !olicies and !rocedures on docu(entation of the en)a)e(ent *ualit#

control review which re*uire docu(entation that.

1$a& he !rocedures re*uired "# the fir(+s !olicies on en)a)e(ent *ualit# control review

have "een !erfor(ed?

2$"& he en)a)e(ent *ualit# control review has "een co(!leted on or "efore the date of there!ort? and

3$c& he reviewer is not aware of an# unresolved (atters that would cause the reviewer to

"elieve that the si)nificant ;ud)(ents the en)a)e(ent tea( (ade and the conclusions it reachedwere not a!!ro!riate'

?ifferences of ,pinion

49' he fir( shall esta"lish !olicies and !rocedures for dealin) with and resolvin) differences of

o!inion within the en)a)e(ent tea(, with those consulted and, where a!!lica"le, "etween the

en)a)e(ent !artner and the en)a)e(ent *ualit# control reviewer' $ef. 6ara' A5-A59&

59 IS:% 1

44' Such !olicies and !rocedures shall re*uire that.

1$a& %onclusions reached "e docu(ented and i(!le(ented? and

2$"& he re!ort not "e dated until the (atter is resolved'

/ngage$ent ?ocu$entation

%o(!letion of the Asse("l# of Final n)a)e(ent Files

45' he fir( shall esta"lish !olicies and !rocedures for en)a)e(ent tea(s to co(!lete the asse("l#

of final en)a)e(ent files on a ti(el# "asis after the en)a)e(ent re!orts have "een finaliJed' $ef.

6ara' A54-A55&

%onfidentialit#, Safe %ustod#, Inte)rit#, Accessi"ilit# and etrieva"ilit# of n)a)e(ent=ocu(entation

4B' he fir( shall esta"lish !olicies and !rocedures desi)ned to (aintain the confidentialit#, safe

custod#, inte)rit#, accessi"ilit# and retrieva"ilit# of en)a)e(ent docu(entation' $ef. 6ara' A5B-

A5&

etention of n)a)e(ent =ocu(entation

47' he fir( shall esta"lish !olicies and !rocedures for the retention of en)a)e(ent docu(entation for

a !eriod sufficient to (eet the needs of the fir( or as re*uired "# law or re)ulation' $ef. 6ara'


44/700

AB0-AB9&

)o"ito'i"(


45/700

$c& Lhere relevant, a descri!tion of s#ste(ic, re!etitive or other si)nificant deficiencies and of

the actions taken to resolve or a(end those deficiencies'

54' So(e fir(s o!erate as !art of a network and, for consistenc#, (a# i(!le(ent so(e of their

(onitorin) !rocedures on a network "asis' Lhere fir(s within a network o!erate under co((on

(onitorin) !olicies and !rocedures desi)ned to co(!l# with this IS:%, and these fir(s !lace

reliance on such a (onitorin) s#ste(, the fir(+s !olicies and !rocedures shall re*uire that.

1. $a& At least annuall#, the network co((unicate the overall sco!e, etent and results of the

(onitorin) !rocess to a!!ro!riate individuals within the network fir(s? and

2. $"& he network co((unicate !ro(!tl# an# identified deficiencies in the s#ste( of *ualit#

control to a!!ro!riate individuals within the relevant network fir( or fir(s so that the necessar#action can "e taken,

in order that en)a)e(ent !artners in the network fir(s can rel# on the results of the (onitorin)

!rocess i(!le(ented within the network, unless the fir(s or the network advise otherwise'

Co$plaints and Allegations


that it deals a!!ro!riatel# with.

1. $a& %o(!laints and alle)ations that the work !erfor(ed "# the fir( fails to co(!l# with

!rofessional standards and a!!lica"le le)al and re)ulator# re*uire(ents? and

2. $"& Alle)ations of non-co(!liance with the fir(+s s#ste( of *ualit# control'

As !art of this !rocess, the fir( shall esta"lish clearl# defined channels for fir( !ersonnel to raise

an# concerns in a (anner that ena"les the( to co(e forward without fear of re!risals' $ef. 6ara'

A70&

5B' If durin) the investi)ations into co(!laints and alle)ations, deficiencies in the desi)n or o!eration

of the fir(+s *ualit# control !olicies and !rocedures or non-co(!liance with the fir(+s s#ste( of

*ualit# control "# an individual or individuals are identified, the fir( shall take a!!ro!riate actions

as set out in !ara)ra!h 51' $ef. 6ara' A71-A7&

Doc-.e"t!tio" of the S/te. of Q-!it/ Co"t'o

57' he fir( shall esta"lish !olicies and !rocedures re*uirin) a!!ro!riate docu(entation to !rovide

evidence of the o!eration of each ele(ent of its s#ste( of *ualit# control' $ef. 6ara' A79-A75&

IS:% 1 5B

1. 58' he fir( shall esta"lish !olicies and !rocedures that re*uire retention of docu(entation

for a !eriod of ti(e sufficient to !er(it those !erfor(in) (onitorin) !rocedures to evaluate thefir(+s co(!liance with its s#ste( of *ualit# control, or for a lon)er !eriod if re*uired "# law orre)ulation'

2. 5' he fir( shall esta"lish !olicies and !rocedures re*uirin) docu(entation of co(!laints

and alle)ations and the res!onses to the('

OOO

Appic!tio" !"# Othe' E5p!"!to'/ )!te'i! App/i"(4 !"# Co.p/i"( &ith4 Ree!"t Re-i'e.e"t

Considerations pecific to $aller Fir$s $ef. 6ara' 14&

A1' his IS:% does not call for co(!liance with re*uire(ents that are not relevant, for ea(!le, in

the circu(stances of a sole !ractitioner with no staff' e*uire(ents in this IS:% such as those for

!olicies and !rocedures for the assi)n(ent of a!!ro!riate !ersonnel to the en)a)e(ent tea( $see


46/700

!ara)ra!h 91&, for review res!onsi"ilities $see !ara)ra!h 99&, and for the annual co((unication of

the results of (onitorin) to en)a)e(ent !artners within the fir( $see !ara)ra!h 59& are not

relevant in the a"sence of staff'

Ee.e"t of ! S/te. of Q-!it/ Co"t'o $ef. 6ara' 17&

A' In )eneral, co((unication of *ualit# control !olicies and !rocedures to fir( !ersonnel includes a

descri!tion of the *ualit# control !olicies and !rocedures and the o";ectives the# are desi)ned toachieve, and the (essa)e that each individual has a !ersonal res!onsi"ilit# for *ualit# and is

e!ected to co(!l# with these !olicies and !rocedures' ncoura)in) fir( !ersonnel to

co((unicate their views or concerns on *ualit# control (atters reco)niJes the i(!ortance of

o"tainin) feed"ack on the fir(+s s#ste( of *ualit# control'

Considerations pecific to $aller Fir$s

A9' =ocu(entation and co((unication of !olicies and !rocedures for s(aller fir(s (a# "e less

for(al and etensive than for lar)er fir(s'

Le!#e'hip Repo"i$iitie fo' Q-!it/ &ithi" the Fi'.

ro$oting an Internal Culture of *uality $ef. 6ara' 18&

A4' he fir(+s leadershi! and the ea(!les it sets si)nificantl# influence the internal culture of the

fir(' he !ro(otion of a *ualit#-oriented internal culture de!ends on clear, consistent and

fre*uent actions and (essa)es fro( all levels of the fir(+s (ana)e(ent that e(!hasiJe the fir(+s

*ualit# control !olicies and !rocedures, and the re*uire(ent to.

57 IS:% 1

1. $a& !erfor( work that co(!lies with !rofessional standards and a!!lica"le le)al and


2. $"& issue re!orts that are a!!ro!riate in the circu(stances'

Such actions and (essa)es encoura)e a culture that reco)niJes and rewards hi)h *ualit# work'

hese actions and (essa)es (a# "e co((unicated "#, "ut are not li(ited to, trainin) se(inars,

(eetin)s, for(al or infor(al dialo)ue, (ission state(ents, newsletters, or "riefin) (e(oranda'

he# (a# "e incor!orated in the fir(+s internal docu(entation and trainin) (aterials, and in

!artner and staff a!!raisal !rocedures such that the# will su!!ort and reinforce the fir(+s view on

the i(!ortance of *ualit# and how, !racticall#, it is to "e achieved'

A5' f !articular i(!ortance in !ro(otin) an internal culture "ased on *ualit# is the need for the

fir(+s leadershi! to reco)niJe that the fir(+s "usiness strate)# is su";ect to the overridin)

re*uire(ent for the fir( to achieve *ualit# in all the en)a)e(ents that the fir( !erfor(s'

6ro(otin) such an internal culture includes.

1. $a& sta"lish(ent of !olicies and !rocedures that address !erfor(ance evaluation,

co(!ensation, and !ro(otion $includin) incentive s#ste(s& with re)ard to its !ersonnel, in order

to de(onstrate the fir(+s overridin) co((it(ent to *ualit#?2. $"& Assi)n(ent of (ana)e(ent res!onsi"ilities so that co((ercial considerations do not

override the *ualit# of work !erfor(ed? and

3. $c& 6rovision of sufficient resources for the develo!(ent, docu(entation and su!!ort of its

*ualit# control !olicies and !rocedures'

Assigning ,perational +esponsibility for the Fir$8s yste$ of *uality Control$ef. 6ara' 1&

AB' Sufficient and a!!ro!riate e!erience and a"ilit# ena"les the !erson or !ersons res!onsi"le for the

fir(+s s#ste( of *ualit# control to identif# and understand *ualit# control issues and to develo!


47/700

a!!ro!riate !olicies and !rocedures' Necessar# authorit# ena"les the !erson or !ersons to

i(!le(ent those !olicies and !rocedures'

Ree!"t Ethic! Re-i'e.e"t

Co$pliance #ith +ele!ant /thical +e>uire$ents $ef. 6ara' 0&

A7' he IFA% %ode esta"lishes the funda(ental !rinci!les of !rofessional ethics, which include.

1. $c& 6rofessional co(!etence and due care?

2. $d& %onfidentialit#? and

3. $e& 6rofessional "ehavior'

A8' 6art of the IFA% %ode illustrates how the conce!tual fra(ework is to "e a!!lied in s!ecific

situations' It !rovides ea(!les of safe)uards that (a# "e a!!ro!riate to address threats to

co(!liance with the

2009 Handbook of International Standard on Audit

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Transcript of 2009 Handbook of International Standard on Audit