In its ongoing efforts to ensure high quality performance by the world's auditors, the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC) has issued an exposure draft (ED) containing a proposed International Standard on Quality Control (ISQC) 1, Quality Control for Audit, Assurance and Related Services Practices, and a proposed revised International Standard on Auditing (ISA) 220, Quality Control for Audit Engagements.
This ED, which also includes an explanatory memorandum, may be downloaded from the IFAC website (www.ifac.org/eds). Comments are requested by August 31, 2003.
“The new proposed standards clarify the overall quality control responsibilities and related activities at both firm and engagement levels. Together, they will enhance engagement quality in the public interest,” states Dietz Mertin, chairman of the IAASB.
The proposed ISQC 1 requires a firm to establish a system of quality control designed to provide it with reasonable assurance that the firm and its personnel comply with professional standards and applicable regulatory and legal requirements. It contains new proposed basic principles and procedures regarding leadership and responsibilities within the firm, including a requirement that the chief executive officer (or equivalent) of the firm has ultimate responsibility for the firm's system of quality control. Other areas addressed in the ED include ethics, partner rotation, acceptance and continuance of client relationships, engagement quality control review, and monitoring.
ISQC 1 represents the first in a series of International Quality Control Standards. The ultimate goal of the project is to establish quality control standards for all engagements falling within the scope of IAASB engagement standards.
The proposed revised ISA 220 establishes basic principles and essential procedures, and provides guidance on quality control procedures for audit engagements. These include requirements for an engagement quality control reviewer to perform an objective evaluation of the compliance with applicable professional standards. Guidance is specifically provided on leadership responsibilities, ethics, engagement performance, engagement quality control review, and monitoring.
It is proposed that the new guidance become effective January 1, 2005.