1. Quality Management at the Engagement Level Proposed ISA 220 (Revised)
Megan Zietsman, Task Force Chair
IAASB Meeting, New York, USA
Agenda Item 4
September 21, 2018

2. Issue 1: ISA 220 Objective
The objective of the auditor is to manage quality at the engagement level to obtain reasonable assurance that quality has been achieved, such in that: (a) The auditor has fulfilled the auditor’s responsibilities, and has conducted the audit [in the public interest], in accordance with and has achieved the objectives of, applicable professional standards and applicable legal and regulatory requirements; and (aa) In doing so, the significant judgments made and conclusions reached by the auditor are appropriate, given the nature and circumstances of the engagement; and (b) The auditor’s report issued is appropriate in the circumstances.

3. Issue 2: Use of “Sufficiently and Appropriately” Involved
TF Recommendation: Option 1: “sufficiently and appropriately involved”
…In doing so, the engagement partner shall be sufficiently and appropriately involved throughout the audit engagement to provide the basis for the engagement partner to determine whether the significant judgments made and the conclusions reached are appropriate given the nature and circumstances of the engagement.

4. Issue 2: Use of “Sufficiently and Appropriately” Involved
Pros
These are easily understood terms in the English language
These terms are used throughout the ISAs (e.g., proposed ISA 315 Revised)
The definition of these terms in the glossary are in the context of audit evidence; it is clear that this definition does not apply to the use of the terms under different contexts
Clarifies that the involvement of the EP flexes
The loss of the “bar” created by the use of the terms “sufficiently and appropriately” may lead to bad behavior; EPs may feel that they meet the requirement by being superficially involved
Cons
Some think that “sufficient appropriate” are only defined in the context of audit evidence and therefore using the terms here would pull in related requirements for ISA 500 (e.g., relevance and reliability
Sky to add the actual references in 315 for Megan notes

5. Issue 2: Use of “Sufficiently and Appropriately” Involved
Other Options Considered by the Task Force
Option 2: Appropriate only
Option 3: Delete the phrase completely
Option 4: Nature, timing and extent

7. Issue 2: Use of “Sufficiently and Appropriately” Involved
Option 2: Appropriate only
…In doing so, the engagement partner shall be appropriately involved throughout the audit engagement to provide the basis for the engagement partner to determine whether the significant judgments made and the conclusions reached are appropriate given the nature and circumstances of the engagement.
With application material to indicate that “appropriately” in this context involves an element of sufficiency.
Pros:
Solves the “significant appropriate” problem
The “bar” is implicit in the language, “such that the engagement has the basis for…”
Cons:
The bar is implicit, rather than explicit

8. Issue 2: Use of “Sufficiently and Appropriately” Involved
Option 3: Delete the phrase completely
…In doing so, the engagement partner shall be involved throughout the audit engagement to provide the basis for the engagement partner to determine whether the significant judgments made and the conclusions reached are appropriate given the nature and circumstances of the engagement.
Pros:
Solves the “significant appropriate” problem
The “bar” is implicit in the language, “such that the engagement has the basis for…”
Cons:
The bar is implicit, rather than explicit

9. Issue 2: Use of “Sufficiently and Appropriately” Involved
Option 4: Nature, timing and extent
…In doing so, the nature timing and extent of involvement of the engagement partner throughout the audit engagement shall provide a basis for the engagement partner to determine whether the significant judgments made and the conclusions reached are appropriate given the nature and circumstances of the engagement.
Pros:
Solves the “significant appropriate” problem
Clarifies that the involvement of the EP flexes
The “bar” is implicit in the language, “such that the engagement has the basis for…”
Cons:
The bar is implicit, rather than explicit
Some may feel that “nature timing and extent” apply only in the context of procedures