1. Compliance with Framework of Quality Control - General & Specific Controls CA Vimal Chopra, Ex Chairman of CIRC of ICAI

2. Peer Review It is automatic route of benchmarking.
It is an opportunity and not a burden.
It is for sharing the best practices.
It is a platform to review attest functions in contemporary sense.

3. Scope of Peer Review Assurance Services
Assurance Engagement Records for three completed financial years
Focus
Compliance with Technical, Professional and Ethical Standards
Quality of Reporting
Office Systems and Procedures
Training Programme for Staff

4. Technical and Professional Standards Accounting Standards
Auditing and Assurance Standards
Framework for the Accounting, Auditing and Related Standards
Ethical Standards
Professional Standards
Statements
Guidance Notes
Notifications/Directions, including those of a self-regulatory nature
Relevant Statutes and Regulations
Framework for the Preparation and presentation of financial statements, Standard on Assurance Engagements, Standards on Quality Control and Guidance Notes on related services issued and framework for assurance engagements

5. General Controls Independence Maintenance of Skills
Outside consultation
Staff supervision and Development
Office Administration

6. Specific Controls Audit Record Administration
Review and Evaluation of System of Internal Controls
Substantive Tests
Financial Statement Presentation
Audit Conclusion and
Audit Report

7. Does the PU have a system of quality control for attestation services?
Question 1
Task
Does the PU have a system of quality control for attestation services?
Assess based on completed questionnaire developed by the Peer Review Board and initial meeting with PU

8. Question 2
Tasks
Is it designed to ensure compliance with Technical Standards and maintenance of quality attestation work?
Review of general controls: Independence Maintenance of Professional skills and Outside consultation Staff supervision and development Office administration

9. Was it effective during the review period?
Question 3
Task
Was it effective during the review period?
Review of records: Compliance approach Substantive approach
SIX KEY CONTROLS
Audit Record Administration
Review & Evaluation of System of Internal Controls
Substantive Tests
Financial Statement Presentation
Audit Conclusion and
Audit Report

10. Compliance Review of General Controls

11. Independence Independence policies and procedures
Communication thereof
Designation of Independence Officer
Monitoring independence

12. Maintenance of Professional Skills & Standards
Guidelines and requirements for CPE
In-house mechanism for CPE
Monitoring CPE

13. Consultation
Access to reference libraries and other authoritative sources
Literature
Consulting firms/individuals
Availability of expertise for consultation
Maintenance of records
Documenting resolution of differences of opinion

14. Staff Supervision & Development
Orientation for new hires
System of scheduling and staffing
Monitoring personnel training and development

15. Office Administration
Scheduling related to skill and competence
Review of work and guidance
Monitoring progress of engagement

16. Evaluation and Purpose
Reviewer may ask other questions
Size of PU to be considered
Review to be mainly by Interview
Gives overall assessment – for engagement sample selection
Reviewer to identify controls on which he may rely

17. Procedure Selection of Engagements for Review Review of Records
Which
Approach ?
Compliance Approach
Substantive Approach
Do reliable
controls exist ? No
Do not rely on controls
and do an intermediate
level of substantive testing
Yes
Rely on controls and
do basic level of
substantive testing
Reporting

18. Controls Testing - Areas
Records of following key controls to be reviewed to ensure compliance with technical standards:
Audit record administration
Financial statement presentation
Review and evaluation of system of internal controls
Substantive tests
Audit conclusion
Audit report

19. Controls Testing and Evaluation
Documentation is of critical importance
Smaller PUs may have a lower level of documentation – tailored to their clients, provided circumstances therefore are justified to reviewer

20. Substantive Testing - 1 Appointment of auditor Terms of engagement
Accounting records available
Composition of management
Book-keepers & authorized signatories
Memorandum/Articles, Prospectus, Partnership Deed

21. Substantive Testing - 2 Understand the client’s business
Understand the controls environment
Understand the accounting systems
Past financial statements & reports of internal/statutory auditors
Evaluate audit risk using professional judgment
Design procedures to mitigate risk

22. Substantive Testing - 3 Perform preliminary analytical procedures to:
Identify key account balances
Highlight unusual/unexpected amounts and relationships
Design appropriate testing procedures
Obtain sufficient audit assurance for reducing/eliminating detail testing

23. Substantive Testing - 4
Determine materiality estimate for the audit engagement
Plan for account balances to be tested and sampling methodology
Selection of samples
Perform controls testing and conclude on controls reliability
Communicate control weaknesses to management

24. Substantive Testing - 5 Perform substantive analytical testing
Perform substantive tests of detail
Ensure prevalence of fundamental accounting assumptions – consistency, going concern, accrual accounting
Examine and report changes in accounting policies and their impact
Branch audit reports – qualifications, scope limit reservations

25. Substantive Testing - 6
Working papers (WPs) to have adequate audit evidence for assertions made in financial statements
WPs to agree with books of account, financials and are cross-referenced
Perform financial statements review
Complete lead schedules
Prepare audit summary memorandum
Review assistants’ work

26. Substantive Testing - 7 Ensure updation of Audit documentation file
Review individual and aggregate effect of unadjusted errors
Check compliance with legal and regulatory requirements
Check compliance with ICAI Accounting Standards
Subsequent Events Review

27. Substantive Testing - 8 Final discussion points Draft audit opinion
Prepare Management Letter
Compare budgeted hours to actuals and analyze variances
Debriefing meetings with client/staff
Complete staff evaluation
Start next year’s planning

28. Reviewer’s Procedure
Analysis of completed questionnaire followed by on-site visit; and
Compliance review of general controls, namely,
Independence
Maintenance of Professional Skills and Standards
Outside Consultation
Staff Supervision & Development
Office Administration
Selection of Engagements for Review
Review of Records
Compliance Approach - Attestation Services Engagements
Substantive Approach - Attestation Services Engagements
Reporting

29. Concluding Observations

30. Some Issues Confidentiality Level of Firms
Level of Technical Standards
Reviewers’ Qualification
Selection of Reviewer by PU
Cost Aspect
Action on the Report of Reviewer

31. The Goal Everybody Wins
Quality in the performance of attestation engagements by members
Whereby
Everybody Wins

32. Thanks