ACCM4400 Auditing and Assurance Assignment: ASA 220 Requirements

This report provides a summary of ASA 220, focusing on Quality Control for Audits of Historical Financial Information. The assignment outlines the main objective of ASA 220 which is to provide mandatory requirements and explanatory guidance regarding the quality control processes required for audits of historical information. The report highlights the responsibilities of the audit engagement partner, including ensuring the engagement team's competence, directing and supervising the audit engagement, and reviewing audit documentation. It emphasizes the importance of ethical requirements, independence, and the need for proper procedures for accepting and continuing client relationships. The report also details the roles of the engagement partner in directing and supervising the audit engagement team's performance, as well as the requirements for the reviewer of quality control, especially for listed organizations' financial reports.

Running head: AUDITING AND ASSURANCE
Auditing and assurance
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ASA 220 - Quality control for audits of historical financial information
ASA 220 was released by AUASB to fulfil the requirement of legislative provisions and
is applicable to the audit of annual statement for specific financial year or the audit of annual
statement for half-year that is prepared in confirmation with the Part 2M.3 of Corporation Act
and to the audit of annual statement for any other objectives (Auasb.gov.au 2019). Main
objective of ASA 220 is to offering mandatory requirements as well as offering explanatory
guidance regarding particular responsibilities of the organization regarding the quality control
processes required for audit of the historical information those are reported in the annual
statement. Audit engagement team shall establish the procedures for quality control applicable
for audit engagements (Legislation.gov.au 2019).
Audit engagement partner is liable for overall quality in context of each audit
engagements which is allocated to the partner. Generally the engagement partner sets example
for other partners though all the audit engagement stages. This is crucial for carrying out the
work in compliance with the auditing standards along with the legal as well as regulatory
requirements, for conforming to the quality control procedures and policies and issuing reports in
accordance with the circumstances (Auasb.gov.au 2019). Further the engagement partner is
liable to take into consideration whether the engagement team members are complying with the
relevant requirements those are ethical and related to the audit engagements. Generally the
ethical requirements associated with the audit engagements includes the need of applicable code
of conduct for the professional accountant that includes the fundamental principles of
professional competence an due care, integrity, objectivity, professional behaviour and
confidentiality (Auasb.gov.au 2019).

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Apart from that the engagement partner is liable to form the conclusion in compliance
with the requirement of independence applicable to the team of audit engagements. While doing
so, the partner is required to generate information from the client organisation and its network
organisation, if applicable those are relevant and can be used to recognise as well as analyse the
circumstances along with the relationship that may become threat to the independence.
Engagement partner is also liable to analyse the information to recognise the breaches, if any
regarding the independent procedures and policies of the client organisation for establishing
whether they may pose threat to the auditor’s independence regarding audit engagement
(Legislation.gov.au 2019). Engagement partner shall take proper actions for eliminating any
threats or reducing the threats to the acceptable level through application of safeguards. In case
of any failure in resolving the issues regarding proper action shall report the same promptly to
the firm. The engagement partner is further required to document conclusions regarding
independence as well as relevant discussions, if any with the client firm for supporting
conclusion. The engagement partner must satisfy himself regarding appropriate procedures for
acceptance as well as continuance of the client relationship and particular audit engagements are
followed. In addition, the conclusions are made appropriately and are documented (El-Dyasty
2019).
The engagement partner must satisfy himself that collectively the engagement team has
the requited competencies, capabilities and time for performing audit engagement in
conformation with the standards on auditing and the legal as well as regulatory requirements that
will enable the auditor’s report to be appropriate under the existing circumstances. Required
competence and capabilities expected from the entire engagement team includes – (i) practical
experience and understanding of audit engagements of similar complexity and nature through

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proper participation and training (ii) required technical knowledge that includes relevant
knowledge of information technology (iii) understanding of the auditing standards and legal as
well as regulatory requirements (iv) understanding of the company’s procedures and policies
regarding quality control and (v) ability regarding application of professional judgment
(Sanderson 2014)
The engagement partner is liable to take the responsibility for directing, supervising and
the audit engagement team’s performance in confirmation with the auditing standards and legal
as well as regulatory requirements along with the reports of the auditors issued under existing
circumstances (Auasb.gov.au 2019). Engagement partner in ordinary course provides direction to
the team through informing regarding their responsibilities, issues that may arise during the
course of audit, issues related to risks, nature of business carried out by the client entity and
detailed approach regarding the engagement performance. Before issuance of the auditor’s
report, the engagement partner must satisfy himself regarding generation of appropriate and
adequate evidences through reviewing the audit documentation along with carrying out
discussion with the team to reach the conclusions for issuing audit report (Carey, Monroe and
Shailer 2014).
Engagement partner is further responsible for the team undertaking proper discussion on
controversial or difficult issues. He must satisfy himself that audit engagement team member
have taken proper consultation during engagement and the scope, conclusion and nature of such
consultation are properly documented and consulted with the party. He shall further determine
that the resulted conclusion from the consultation has been implemented (Legislation.gov.au
2019). Where any difference is there for opinion in team, with those who were consulted among
the engagement partner and reviewer of quality control, the engagement team is required to

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follow the procedures and policies of the client company to deal and resolve the variances in
opinion. Further, the discussion among the team members enables the less experienced members
raising questions with the expert members which in turn will aid in proper communication
(Bepari and Mollik 2015).
For the purpose of auditing the listed organisation’s financial reports, engagement
partners shall (i) establish that the reviewer of quality control for the engagement has been
engaged (ii) shall not release the report until review completion of quality control (iii) discuss
noteworthy matters generated during audit engagement with the reviewer of quality control for
the engagement. Reviewer of quality control for the engagement must include objective
evaluation of noteworthy judgments those are made by engagement team and reaching
conclusions while formulating the report to be issued by auditors (Chi and Ziebart 2017).

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Reference
Auasb.gov.au. 2019. [online] Available at:
https://www.auasb.gov.au/admin/file/content102/c3/Nov13_Compiled_Auditing_Standard_ASA
_220.pdf [Accessed 6 Sep. 2019].
Bepari, M.K. and Mollik, A.T., 2015. Effect of audit quality and accounting and finance
backgrounds of audit committee members on firms’ compliance with IFRS for goodwill
impairment testing. Journal of Applied Accounting Research, 16(2), pp.196-220.
Carey, P.J., Monroe, G.S. and Shailer, G., 2014. Review of Post‐CLERP 9 Australian Auditor
Independence Research. Australian Accounting Review, 24(4), pp.370-380.
Chi, Y.H. and Ziebart, D.A., 2017. Audit quality and attributes of management earnings
forecasts. Review of Accounting and Finance, 16(4), pp.406-423.
El-Dyasty, M.M., 2019. The Effect of Auditor Type on Audit Quality: An Empirical
Analysis. Available at SSRN 3428707.
Legislation.gov.au. 2019. ASA 220 - Quality Control for Audits of Historical Financial
Information - April 2006 . [online] Available at:
https://www.legislation.gov.au/Details/F2006L01365 [Accessed 6 Sep. 2019].
Sanderson, J., 2014. Audit issues. SMSF Guide: Current Issues and Strategies for the Self-
Managed Superannuation Funds Adviser, p.377.