Accounting Q&A · Auditing · Topic 12
Practise ISQM 1, ISQM 2, ISA 220 and engagement quality. Try each answer before revealing it.
Worked example
A growing firm accepts complex clients without enough specialists. Review budgets, staffing and acceptance records. Arrange qualified resources or reconsider acceptance.
Core concepts
1. What should you know about iSQM 1?
Addresses a firm’s system of quality management.
2. What should you know about iSQM 2?
Addresses appointment, eligibility, performance and documentation of engagement quality reviews.
3. What should you know about iSA 220 Revised?
Addresses quality management at the financial statement audit engagement level.
4. What should you know about quality objective?
A desired outcome for an aspect of the quality management system.
5. What should you know about quality risk?
A risk with a reasonable possibility of occurring and adversely affecting a quality objective.
6. What should you know about response?
A policy or procedure designed to address a quality risk.
7. What should you know about monitoring?
Activity that provides information about design, implementation and operation of the system.
8. What should you know about remediation?
Actions addressing identified deficiencies and their causes.
9. What should you know about consultation?
Seeking appropriate expertise on difficult or contentious matters.
10. What should you know about engagement quality review?
An objective evaluation of significant judgements and conclusions for applicable engagements.
Case 1
A growing firm accepts complex clients without enough specialists.
11. Which audit concept is central here?
Resources and acceptance.
12. What is the main objective?
Assess whether teams have appropriate competence and time.
13. What evidence or procedure would you use?
Review budgets, staffing and acceptance records.
14. What limitation should you consider?
Training alone may not resolve immediate shortages.
15. What should happen next?
Arrange qualified resources or reconsider acceptance.
Case 2
File inspections repeatedly find missing evidence reviews.
16. Which audit concept is central here?
Monitoring and remediation.
17. What is the main objective?
Determine the root cause and effectiveness of responses.
18. What evidence or procedure would you use?
Inspect workflow, supervision and deadlines.
19. What limitation should you consider?
A reminder may fail if workload caused the problem.
20. What should happen next?
Set corrective action and retest operation.
Case 3
A required engagement quality review is incomplete on report day.
21. Which audit concept is central here?
Engagement quality review.
22. What is the main objective?
Ensure required review is completed before dating the report.
23. What evidence or procedure would you use?
Confirm outstanding judgements and reviewer sign-off.
24. What limitation should you consider?
A planned later review does not meet the timing requirement.
25. What should happen next?
Delay report dating until the requirement is met.
Professional standards reference. For statutory duties, confirm the rules in the relevant jurisdiction.