Audit Quality

There is no simple definition of audit quality because there is no one ‘correct’ way to audit. It is often a

matter of conducting an audit in line with the spirit as well as the letter of professional guidance.

Audit quality is not defined in law or through regulations, and neither do auditing standards provide a

simple definition. The question of what audit quality is and how it is achieved is addressed in the IAASB’s. Although each stakeholder in the audit will give a different meaning to audit quality, at its heart it is about delivering an appropriate professional opinion supported by the necessary evidence and judgments.

Many principles contribute to audit quality, including good leadership, experienced judgment, technical

competence, ethical values and appropriate client relationships, proper working practices and effective

quality control and monitoring review processes.

All quality control policies and procedures should be documented and communicated to the firm’s

perThe firm is responsible for the ongoing excellence of its staff, through continuing professional

development, education, work experience and coaching by more experienced staff.

Engagement teams

The assignment of engagement teams is an important matter in ensuring the quality of an individual

assignment. This responsibility is given to the audit engagement partner. The firm should have policies and procedures in place to ensure that:

• Key members of client staff and those charged with governance are aware of the identity of the

audit engagement partner.

• The engagement partner has appropriate capabilities, competence, authority and time to perform the role
• The engagement partner is aware of their responsibilities as engagement partner

Engagement performance

The firm should take steps to ensure that engagements are performed correctly, that is, in accordance

with standards and guidance. Firms often produce a manual of standard engagement procedures to give to all staff so that they know the standards they are working towards (ISQC 1: para. 32). These may be in an electronic format.

Ensuring good engagement performance involves a number of issues:

• Direction and Consultation
• Supervision
• Resolution of disputes

Monitoring

Firms must have policies in place to ensure that their quality control procedures are:

• Relevant
• Operating effectively
• Adequate
• Complied with

In other words, they must monitor their system of quality control. Monitoring activity should be reported to the management of the firm on an annual basis.

There are two types of monitoring activity, an ongoing evaluation of the system of quality control and

periodic inspection of a selection of completed engagements. An ongoing evaluation might include such

questions as, ‘have we kept up to date with regulatory requirements?’

A periodic inspection cycle would usually fall over a period such as three years, in which time at least one engagement per engagement partner would be reviewed.

The people monitoring the system are required to evaluate the effect of any deficiencies found. These

deficiencies might be one-offs. Monitors will be more concerned with systematic or repetitive deficiencies that require corrective action. When evidence is gathered that an inappropriate report might have been issued; the audit firm may want to take legal advice.

Corrective actions

• Remedial action with an individual
• Communication of findings with the training department
• Changes in the quality control policies and procedures
• Disciplinary action, if necessary