1. Proposed ISA 220, Quality Management for an Audit of Financial Statements (ED-220)
Lyn Provost, IAASB Member and Task Force Chair
IAASB Meeting
September 18, 2019
Agenda Item 8

2. Objectives of this session are to:
Introduction
Objectives of this session are to:
Provide an overview of the feedback received on ED-220
Obtain views on three key issues
And potentially two other issues
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3. Respondents by Stakeholder Groups
Overview of Responses on ED-220
Respondents by Region
Respondents by Stakeholder Groups
Global: 22
Europe: 26
North America: 17
Asia Pacific: 13
Middle East and Africa: 8
South America: 5
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4. Overall Feedback Received
Comments were generally positive, but raised some issues
Key issues will be discussed in this session
Other issues will be discussed at future meetings:
Professional skepticism
Modern auditing environment
Documentation
Other matters e.g. the objective, stand-back provision, terminology, shared service centers, more guidance, overlaps, and editorial comments

5. Analysis of Key Issues to be Discussed at this Meeting
1. Engagement partner’s responsibility for managing and achieving audit quality
2. Engagement team definition
3. Scalability
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6. Question 1 of the Explanatory Memorandum (EM) to ED-220 asked:
Do you support the focus on the sufficient and appropriate involvement of the engagement partner (see particularly paragraphs 11–13 and 37 of ED-220)?
Does the proposed ISA appropriately reflect the role of other senior members of the engagement team? other partners?
Engagement Partner’s Responsibility for Audit Quality
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7. What We Heard in Responses to ED-220 (Q1)
Engagement Partner’s Responsibility for Audit Quality (Cont.)
What We Heard in Responses to ED-220 (Q1)
Overall support across stakeholder groups
Challenges in fulfilling the requirements ‒ “upward scalability” and whether it was feasible for the EP to perform all the requirements
Paragraph 13 is neither clear nor feasible
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8. What We Heard from the CAG
Engagement Partner’s Responsibility for Audit Quality (Cont.)
What We Heard from the CAG
Support for the engagement partner’s overall responsibility for audit quality
Concerns that the table in Appendix 6 might undermine that overall responsibility
Support for the indicative wording in Appendix 5
No support for notion of “shared responsibility” raised by some respondents
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9. Task Force’s Preliminary Views
Engagement Partner’s Responsibility for Audit Quality (Cont.)
Task Force’s Preliminary Views
Amend requirements on “leadership responsibilities” (Appendix 5)
Clarify which requirements the engagement partner may assign to other engagement team members (Appendix 6 of issues paper)
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10. Engagement Partner’s Responsibility for Audit Quality (Cont.)
Indicative Wording for Paragraph 13
13. If the engagement partner assigns procedures, tasks or actions to other members of the engagement team to assist the engagement partner in complying with the requirements of this ISA, the engagement partner shall continue to take overall responsibility for managing and achieving quality on the audit engagement, and remains accountable for managing and achieving quality on the engagement through direction and supervision of members of the engagement team, and review of their work, as required by paragraph 27 . When assigning procedures, tasks or actions to other members of the engagement team, the engagement partner shall: (Ref: Para. A30)
(a) Appropriately inform assignees about the nature of their responsibilities and authority, the scope of the work being assigned, the objectives thereof and any other necessary instructions and relevant information; and
(b) Monitor the performance of the work of assignees and review selected related documentation in order to evaluate the conclusions reached.
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11. Matters for IAASB Consideration
Engagement Partner’s Responsibility for Audit Quality (Cont.)
Matters for IAASB Consideration
1. Does the IAASB support the proposed changes to paragraph 13 set out in Appendix 5?
2. Does the IAASB agree with the Task Force’s assessment (in Appendix 6), of the requirements in ED-220:
(a) That the engagement partner must personally perform; and
(b) Those procedures, tasks or actions that the engagement partner may assign to other members of the engagement team to assist the engagement partner in complying with the requirement?
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12. Question 4 of the EM to ED-220 asked:
Engagement Team Definition
Question 4 of the EM to ED-220 asked:
Does ED-220 deal adequately with the modern auditing environment, including the use of different audit delivery models and technology?
(Note: This discussion will focus on the engagement team definition in addressing ADMs.)
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13. Engagement Team Definition (Cont.)
What we heard in responses to ED-220 on the Engagement Team Definition (ADM part of Q4)
Consistency with the IESBA code
Clarity of the definition
Practical implications of the definition
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14. What We Heard from the CAG
Support for retaining the engagement team definition
Assigning responsibilities to engagement team members does not absolve engagement partner of overall responsibility for audit quality
Engagement Team Definition (Cont.)
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15. Task Force’s Preliminary Views
Engagement Team Definition (Cont.)
Task Force’s Preliminary Views
Retain component auditors in the revised definition in ED- 220
Address the practical issues
Coordinate with IESBA on the engagement team definition
Coordinate with the ISA 600 Task Force
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16. Matters for IAASB Consideration
Engagement Team Definition (Cont.)
Matters for IAASB Consideration
3. Does the IAASB agree, in light of the responses and analysis in Appendix 7, and subject to further input from the IESBA representatives, that the engagement team definition should include component auditors as they perform audit procedures on the engagement?
4. Does the IAASB agree with the Task Force’s proposals to clarify the scope of the definition with additional application material?
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17. Question 7 of the EM to ED-220 asked:
Scalability
Question 7 of the EM to ED-220 asked:
Is ED-220 appropriately scalable to engagements of different sizes and complexity, including through the focus on the nature and circumstances of the engagement in the requirements?
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18. What We Heard in Responses to ED-220 (Q7)
Scalability (Cont.)
What We Heard in Responses to ED-220 (Q7)
Positive responses overall
Questions about whether the engagement partner can personally fulfil all requirements (“upward scalability”)
Closely linked to other key issues
Desire for appendix on LCE scalability to be in the ISA
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19. What We Heard from the CAG
Scalability (Cont.)
What We Heard from the CAG
Important to retain a principles-based approach
Need to retain a balance between appropriate assignment of procedures, tasks or actions to engagement team members and overall responsibility for audit quality
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20. Task Force’s Preliminary Views
Scalability (Cont.)
Task Force’s Preliminary Views
Clarify responsibilities the engagement partner may assign to other engagement team members
For audits of less complex entities (LCEs), put current guidance in a prominent and accessible place
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21. Matter for IAASB Consideration
Scalability (Cont.)
Matter for IAASB Consideration
5. Does the IAASB agree with the Task Force’s proposals improving the upward scalability of ED‑220 for larger, more complex engagements?
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22. Other Matters
4. Direction, supervision and review
5. Ability to depend on a firm’s system of quality management
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23. Direction, Supervision and Review
Question 5 of the EM to ED-220 asked:0 have appropriate linkages with the ISQMs? Do you support the requirements to follow the firm’s
Do you support the revised requirements and guidance on direction, supervision and review? (See paragraphs 27–31 and A68–A80 of ED-220)
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24. What We Heard in Responses to ED-220 (Q5)
Direction, Supervision and Review (Cont.)
What We Heard in Responses to ED-220 (Q5)
Positive responses overall
Support for level of specificity
Represent a significant enhancement to extant ISA 220
Support high-quality audits
Practical issues linked to engagement team definition
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25. Task Force’s Preliminary Views
Direction, Supervision and Review (Cont.)
Task Force’s Preliminary Views
Consider an explicit requirement for the engagement partner to set out planned level of direction, supervision and review
Clarify responsibilities the engagement partner may assign to other engagement team members
Consider application material related to the definition of the engagement team
Coordinate with ISA 600 Task Force on the application of the requirements in group audits
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26. Question 2 of the EM to ED-220 asked:
Ability to Depend on the Firm’s System of Quality Management
Question 2 of the EM to ED-220 asked:
Does ED-220 have appropriate linkages with the ISQMs? Do you support the requirements to follow the firm’s Does ED-220 have appropriate linkages with the ISQMs?
Do you support the requirements to follow the firm’s policies and procedures and the material referring to when the engagement partner may depend on the firm’s policies or procedures?
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27. What We Heard in Responses to ED-220 (Q2)
Ability to Depend on the Firm’s SOQM (Cont.)
What We Heard in Responses to ED-220 (Q2)
Positive responses overall
Agreement that the engagement partner should not “blindly rely” on the firm’s system of quality management
Clarity sought on, among other matters:
Interaction between group auditor and component auditor
Factors the engagement partner may take into account in determining reliance
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28. Task Force’s Preliminary Views
Ability to Depend on the Firm’s SOQM (Cont.)
Task Force’s Preliminary Views
Provide guidance on factors the engagement partner may take into account in determining reliance on the firm’s system of quality management
Clarify that quality management is implemented throughout the audit engagement (i.e., single entity or group entity)
Consider developing application material to set out interaction of group auditor and component auditor
Coordinate with ISA 600 Task Force
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29. Matters for IAASB Consideration
Other Matters
Matters for IAASB Consideration
6. Do you agree with the Task Force’s preliminary thoughts on direction, supervision and review; and the engagement partner’s ability to depend on the firm’s policies or procedures before the Task Force develops them further for the December 2019 IAASB meeting?
7. Are there any other significant matters in the comment letters related to the topics addressed that the Task force should address?
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30. The Way Forward 1st full draft of post ED-220
Q4 2019
Q3 2019
1st full draft of post ED-220
Coordination with IESBA representatives and other IAASB Task Forces (ISQM 1, ISQM 2 and ISA 600)
Analysis of stakeholders’ comments and identification of key issues
Coordination with IESBA representatives and other IAASB Task Forces
Q2 2020
Penultimate board agreement for ISA 220 (Revised)
Coordination with IESBA representatives and other IAASB Task Forces
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31. IAASB Agenda Item 6
March 2014
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