We are a Dallas, Texas CPA firm specializing in audit, review, compilation, and agreed upon procedures services for Texas businesses in a wide range of industries and sizes.
"The engagement partner should take responsibility for the following:
The direction, supervision, and performance of the audit engagement in compliance with professional standards, applicable legal and regulatory requirements, and the firm's policies and procedures (Ref: par. .A12–.A14 and .A19)
The auditor's report being appropriate in the circumstances"
The engagement partner should inform the engagement team about their responsibilities to comply with relevant ethical requirements and plan and perform the audit with professional skepticism, as required by AU-C Section 200.
A discussion with the engagement team should involve:
The objectives of the work to be performed
The nature of the entity's business
Risk-related issues
Problems that may arise
The detailed approach to the performance of the engagement
Supervision of the engagement team should include the following:
Tracking the progress of the audit engagement
Considering the competence and capabilities of individual members of the engagement team
Addressing significant findings or issues arising during the audit engagement
Identifying matters for consultation or consideration by qualified engagement team members during the audit engagement
".16 The engagement partner should be satisfied that the engagement team and any auditor's external specialists, collectively, have the appropriate competence and capabilities to
perform the audit engagement in accordance with professional standards and applicable legal and regulatory requirements and
enable an auditor's report that is appropriate in the circumstances to be issued. (Ref: par. .A9–.A11)"
The engagement partner has a responsibility to ensure that the engagement team members are competent and experienced enough to perform the audit engagement and issue an appropriate audit report.
In order to determine whether he has selected the appropriate engagement team, the engagement partner should make sure the engagement team has
understanding of, and practical experience with, audit engagements of a similar nature and complexity through appropriate training and participation.
understanding of professional standards and applicable legal and regulatory requirements.
technical expertise, including expertise with relevant IT and specialized areas of accounting or auditing.
knowledge of relevant industries in which the entity operates.
ability to apply professional judgment.
understanding of the firm's quality control policies and procedures.
".18 The engagement partner should take responsibility for reviews being performed in accordance with the firm's review policies and procedures. (Ref: par. .A15–.A16 and .A19) .19 On or before the date of the auditor's report, the engagement partner should, through a review of the audit documentation and discussion with the engagement team, be satisfied that sufficient appropriate audit evidence has been obtained to support the conclusions reached and for the auditor's report to be issued. (Ref: par. .A17–.A19)"
QC Section 10 recommends that suitably experienced team members review the work of other team members. As such, the engagement partner may delegate part of the review responsibility to other members of the engagement team.
A review consists of consideration of whether, for example
the work has been performed in accordance with professional standards and applicable legal and regulatory requirements;
significant findings or issues have been raised for further consideration;
appropriate consultations have taken place and the resulting conclusions have been documented and implemented;
the nature, timing, and extent of the work performed is appropriate and without need for revision;
the work performed supports the conclusions reached and is appropriately documented;
the evidence obtained is sufficient and appropriate to support the auditor's report; and
the objectives of the engagement procedures have been achieved.
Timely reviews by the engagement partner should the following items are appropriately addressed:
Critical areas of judgment
Significant risks
Other areas that the engagement partner considers important
The engagement partner need not review all audit documentation; however, he must document
the extent and timing of the reviews as required by AU-C Section 230.
An engagement partner taking over an audit during the engagement may review the work performed to the date of the change in order to assume the responsibilities of an engagement partner.
These direction, supervision, and review responsibilities are also required when the engagement team includes a member with expertise in a specialized area of accounting or auditing. For example the engagement partner might
Agree with that member upon the nature, scope, and objectives of that member's work and the respective roles of, and the nature, timing, and extent of communication between, that member and other members of the engagement team
Evaluate the adequacy of that member's work, including the relevance and reasonableness of that member's findings or conclusions and the consistency of those findings or conclusions with other audit evidence
".14 The engagement partner should be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and audit engagements have been followed and should determine that conclusions reached in this regard are appropriate. (Ref: par. .A7–.A8) .15 If the engagement partner obtains information that would have caused the firm to decline the audit engagement had that information been available earlier, the engagement partner should communicate that information promptly to the firm so that the firm and the engagement partner can take the necessary action. (Ref: par. .A8)"
The engagement partner is responsible for ensuring that the acceptance and continuance procedures are followed in accordance with AU-C Section 210. And if he later obtains information that would have caused the firm to decline the audit engagement, he should communicate that information to the firm so they can take the appropriate action.
According to QC Section 10, The following information is helpful for the engagement partner to access whether to accept or decline an audit engagement:
The integrity of the principal owners, key management, and those charged with governance of the entity
Whether the engagement team is competent to perform the audit engagement and has the necessary capabilities, including time and resources
Whether the firm and the engagement team can comply with relevant ethical requirements
Significant findings or issues that have arisen during the current or previous audit engagement and their implications for continuing the relationship
".11 Throughout the audit engagement, the engagement partner and other members of the engagement team should remain alert for evidence of noncompliance with relevant ethical requirements by members of the engagement team. (Ref: par. .A4) .12 If matters come to the engagement partner's attention, through the firm's system of quality control or otherwise, that indicate that members of the engagement team have not complied with relevant ethical requirements, the engagement partner, in consultation with others in the firm as appropriate, should determine that appropriate action has been taken.
Independence
.13 The engagement partner should form a conclusion on compliance with independence requirements that apply to the audit engagement. In doing so, the engagement partner should
obtain relevant information from the firm and, when applicable,
network firms to identify and evaluate circumstances and relationships
that create threats to independence;
evaluate information on identified breaches, if any, of the firm's
independence policies and procedures to determine whether they create a
threat to independence for the audit engagement; and
take appropriate action to eliminate such threats or reduce them to
an acceptable level by applying safeguards or, if considered
appropriate, to withdraw from the audit engagement when withdrawal is
possible under applicable law or regulation.The engagement partner
should promptly report to the firm any inability to resolve the matter
so that the firm may take appropriate action. (Ref: par. .A5–.A6)"
The engagement partner should constantly be on alert that the firm's ethical requirements are being met. This includes the engagement team's duty to
Fulfill its responsibilities
act in the public interest
act with integrity
be objective and independent;
and act with due care
A more detailed discussion of relevant ethics requirements were included in AU-C Section 200.16. If a member of the engagement team has not complied with a relevant ethical requirement, the engagement partner should take appropriate action.
The engagement partner should also determine whether the engagement is in compliance with independence rules by doing the following:
obtain information from the firm in order to identify relationships and threats to independence
identify any breaches to independence policies, if any, that would impair the independence of the engagement
take actions to eliminate threats to independence or reduce them to an acceptable level
A more detailed discussion of independence requirements were included in AU-C Section 200.15.
"The engagement partner should take responsibility for the overall quality on each audit engagement to which that partner is assigned. In fulfilling this responsibility, the engagement partner may delegate the performance of certain procedures to, and use the work of, other members of the engagement team and may rely upon the firm's system of quality control."
First, let's define a few terms noted in this requirement:
The engagement partner is the partner or other person in the firm who is responsible for the audit engagement and its performance and for the auditor's report that is issued on behalf of the firm and who, when required, has the appropriate authority from a professional, legal, or regulatory body.
A partner is any individual with authority to bind the firm with respect to the performance of a professional services engagement. For purposes of this definition, partner may include an employee with
this authority who has not assumed the risks and benefits of ownership.
Firms may use different titles to refer to individuals with this
authority.
A firm is a form of organization permitted by law or regulation whose
characteristics conform to resolutions of the Council of the AICPA and
that is engaged in public practice.
The engagement team is all partners and staff performing the engagement and any individuals engaged by the firm or a network firm who perform audit procedures on the engagement. This excludes an auditor's external specialist engaged by the firm or a network firm. The term engagement team
also excludes individuals within the client's internal audit function
who provide direct assistance on an audit engagement when the external
auditor complies with the requirements of section 610, Using the Work of
Internal Auditors.
Staff are professionals, other than partners, including any specialists that the firm employs.
A network firm is a firm or other entity that belongs to a network, as defined in ET section 0.400. A network is an association of entities, as defined in ET section 0.400, Definitions.
Leadership responsibilities are the tone at the top; for example, the engagement partner's communications and actions should emphasize:
the importance to audit quality of
performing work that complies with professional standards and applicable legal and regulatory requirements;
complying with the firm's applicable quality control policies and procedures;
issuing auditor's reports that are appropriate in the circumstances; and
the engagement team's ability to raise concerns without fear of reprisals and
the fact that quality is essential in performing audit engagements.
.01 This section addresses the specific responsibilities of the auditor regarding quality control procedures for an audit of financial statements. It also addresses, when applicable, the responsibilities of the engagement quality control reviewer. This section also applies, adapted as necessary, to other engagements conducted in accordance with generally accepted auditing standards (GAAS) (for example, a review of interim financial information conducted in accordance with section 930, Interim Financial Information). This section is to be read in conjunction with the AICPA Code of Professional Conduct and other relevant ethical requirements.
.02 Although Statements on Quality Control Standards are not applicable to auditors in government audit organizations, this section is applicable to auditors in government audit organizations who perform financial audits in accordance with GAAS.
System of Quality Control and the Role of the Engagement Teams
.03 Quality control systems, policies, and procedures are the responsibility of the audit firm. Under QC section 10, A Firm's System of Quality Control, the firm has an obligation to establish and maintain a system of quality control to provide it with reasonable assurance that
the firm and its personnel comply with professional standards and applicable legal and regulatory requirements and
reports issued by the firm are appropriate in the circumstances.
.04 Within the context of the firm's system of quality control, engagement teams have a responsibility to implement quality control procedures that are applicable to the audit engagement and provide the firm with relevant information to enable the functioning of that part of the firm's system of quality control relating to independence.
.05 Engagement teams are entitled to rely on the firm's system of quality control, unless the engagement partner determines that it is inappropriate to do so based on information provided by the firm or other parties.
.06 The engagement partner may use the assistance of other members of the engagement team or other personnel within the firm in meeting the requirements of this section. The requirements imposed by this section on engagement partners do not relieve other members of the engagement team of any of their professional responsibilities.
Effective Date
.07 This section is effective for engagements conducted in accordance with GAAS for periods ending on or after December 15, 2012.
Objective
.08 The objective of the auditor3 is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that
the audit complies with professional standards and applicable legal and regulatory requirements and
the auditor's report issued is appropriate in the circumstances."
AU-C Section 220 provides the requirements for Quality Control in the audit of financial statements. It also discusses the requirements of the quality control review, if applicable, and should be read in conjunction with the AICPA Code of Professional Conduct.
Best practices for quality control policies are discussed in QC Section 10 "A Firm's System of Quality Control", which can be found at this link: https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/qc-00010.pdf
QC Section 10 requires that the audit firm establish and maintain a system of quality control that provides reasonable assurance that the firm and its personnel comply with professional standards and legal and regulatory requirements, and the reports issued by the firm are appropriate in the circumstances. To fulfill that responsibility, QC Section 10 addresses the following topics:
Leadership responsibilities for quality within the firm
Relevant ethical requirements
Acceptance and continuance of client relationships and specific engagements
Human resources
Engagement performance
Monitoring
Engagement teams have a responsibility to comply with the quality control policies implemented by the audit firm, especially those related to independence. In addition, the engagement team is entitled to rely on the firm's system of quality control, for example:
competence of personnel through their recruitment and formal training.
independence through the accumulation and communication of relevant independence information.
maintenance of client relationships through acceptance and continuance systems.
adherence to applicable legal and regulatory requirements through the monitoring process.
Many of the requirements in this section are addressed to the engagement partner; but the engagement partner may delegate some of the duties to others within the firm. In turn, the duties imposed on engagement partners in this section does not relieve other engagement team members of their duties.
