Page 346 - CA Inter Audit PARAM

CA Ravi Taori

QNO— Whether Independence Policies Are Breached New Course – (SM25)
SQC.50 Bhaskar CNO - SQC.020
How does SQC 1 ensure that independence in engagements is not breached by an audit firm?
Answer ➢ ELEMENTS OF A SYSTEM OF QUALITY CONTROL:
The firm’s system of quality control should include policies and procedures addressing each of the
following elements:
Leadership responsibilities for quality within the firm.
Human resources.
Ethical requirements.
Acceptance and continuance of client relationships and specific engagements.
Engagement performance.
Monitoring.

QNO-- SQC 01 - Leadership Responsibilities New Course – (S24M)
SQC.60 Bhaskar CNO – SQC.040

SQC 1 requires assumption of leadership responsibilities for quality within firm. Are such leadership
responsibilities required for audit engagements only? Who assumes such leadership responsibilities
within firm? How it is important for audit quality?
Answer SQC 1 requires firms to establish policies and procedures designed to promote an internal culture based on
the recognition that quality is essential in performing engagements. Therefore, such leadership
responsibilities are required for all engagements and not for audit engagements only.

Such policies and procedures should require the firm’s chief executive officer or the firm’s managing partners
to assume ultimate responsibility for the firm’s system of quality control. The example set by firm’s
leadership encourages an inner culture that recognizes high quality audit work. Further, persons assigned
operational responsibilities for the firm’s quality control system by the firm’s chief executive officer or
managing partners should have sufficient and appropriate experience, ability and the necessary authority to
assume that responsibility.

QNO— Considering the Integrity of a Client New Course – (SM25/S24R)
SQC.100 Bhaskar CNO - SQC.080
CA PK Nair is offered appointment as auditor of a company engaged in providing tourism services.
While making due diligence of the proposed client, he comes to know that there have been raids on
premises of the company and residences of its directors by National Investigation Agency (NIA) on
suspicion of links with terror outfits. It has been followed up with searches by Enforcement Directorate
hunting for illicit money trail. There is a strong suspicion of tourism services provided by company being
façade of terror funds. Should proposed offer be accepted by him?
OR
ABC & Associates, an audit firm, has been approached by a prospective company client that has been
in business for about 10 years to conduct an audit of its financial statements. Before accepting the
audit engagement, the firm wants to access the integrity of prospective client. With regard to the
assessment of integrity, which matters should be considered by the audit firm?
Answer Integrity of principal owners has to be considered before accepting an audit engagement in accordance
with SA 220. In this regard, SA 220 states requirements on lines of SQC 1. Following should be considered
for Integrity of Client.

Considering the Integrity of a Client:
With regard to the integrity of a client, matters that the firm considers include, for example:
(Shortcut: FAIR OCR)

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