Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
completion of such reviews occurred before the audit report was dated,
– Communication has been made <strong>to</strong> the appropriate personnel about deficiencies that have been
identified, and
– Appropriate follow-up has been made <strong>to</strong> ensure that identified deficiencies in quality have been
addressed on a timely basis.
• Cyclical completed file inspections
The ongoing consideration and evaluation of the firm’s system of quality control includes a cyclical
inspection of at least one completed engagement file for each partner. This is required <strong>to</strong> ensure
compliance with professional/legal requirements, and that assurance reports being issued are
appropriate in the circumstances. Cyclical inspections help <strong>to</strong> identify deficiencies and training needs,
and enable the firm <strong>to</strong> make necessary changes, on a timely basis.
Upon completion of the review, the moni<strong>to</strong>r would prepare a report that, after discussion with the partners,
would be communicated <strong>to</strong> all managers and professional staff along with the action steps <strong>to</strong> be taken.
Who can be appointed as moni<strong>to</strong>r?
• Moni<strong>to</strong>ring of firm-level policies
The review of compliance with the firm’s policies would be performed by a suitably qualified person who
ideally is not also responsible for managing or developing quality control within the firm. However, ISQC 1
recognizes that this may not always be possible in smaller firms, so self-moni<strong>to</strong>ring is acceptable. Alternatively,
an individual external <strong>to</strong> the firm, with the competence and capabilities <strong>to</strong> act as an engagement partner,
could be appointed. This would enhance the independence and objectivity of the firm.
• Completed file inspections
The person appointed <strong>to</strong> inspect completed engagement files must be suitably qualified, and must not
have been involved in performing the engagement or the engagement quality control review on the file.
4.8 Compliance with Relevant ISAs
Paragraph #
Relevant Extracts from ISAs
200.18 The audi<strong>to</strong>r shall comply with all ISAs relevant <strong>to</strong> the audit. An ISA is relevant <strong>to</strong> the audit when
the ISA is in effect and the circumstances addressed by the ISA exist. (Ref: Para. A53-A57)
200.22 Subject <strong>to</strong> paragraph 23, the audi<strong>to</strong>r shall comply with each requirement of an ISA unless, in
the circumstances of the audit:
(a) The entire ISA is not relevant; or
(b) The requirement is not relevant because it is conditional and the condition does not exist.
(Ref: Para. A72-A73)
200.23 In exceptional circumstances, the audi<strong>to</strong>r may judge it necessary <strong>to</strong> depart from a relevant
requirement in a ISA. In such circumstances, the audi<strong>to</strong>r shall perform alternative audit
procedures <strong>to</strong> achieve the aim of that requirement. The need for the audi<strong>to</strong>r <strong>to</strong> depart from
a relevant requirement is expected <strong>to</strong> arise only where the requirement is for a specific
procedure <strong>to</strong> be performed and, in the specific circumstances of the audit, that procedure
would be ineffective in achieving the aim of the requirement. (Ref: Para. A74)
230.12 If, in exceptional circumstances, the audi<strong>to</strong>r judges it necessary <strong>to</strong> depart from a relevant
requirement in an ISA, the audi<strong>to</strong>r shall document how the alternative audit procedures performed
achieve the aim of that requirement, and the reasons for the departure. (Ref: Para. A18-A19)