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Hi, I am a bit confused for this two because it seems the requirements for these two are the same and I am not sure that AAA exam would require us to answer in firm level or individual level?
The are very different.
Chapter 9:
ISQC 1 – every firm/practice – whether it has two partners or fifty partners and whether it has a handful of audit clients or hundreds of audit clients must have a SYSTEM of quality control.
ISA 220 – quality controls must be applied to the conduct of each individual audit/review engagement. These will be specific to each individual engagement. An Engagement Quality Control review (EQCR) is a requirement only for listed entities.It’s really not possible to confuse these in an exam Q – e.g. S18 Q3(b):
“Comment on the quality of the planning and performance of THE AUDIT of WATSON CO discussing the quality control and other professional issues raised.”
i.e. specific to one individual engagement – so ISA 220.I have come across a question require the quality control of a specific individual engagement and firm wide policies. Therefore, I don’t really know any should I answer in terms of the firm system.
Well I don’t know which Q you are referring to. The 6 elements of a QC system – Chapter 9 – might be useful as an “ideas list”. An example of a policy/procedure that would be relevant to ethics is that every professional accountant employed by the firm signs a declaration every year to the effect that they do no hold shares in any audit client.
You can download ISQC 1 from here https://www.frc.org.uk/getattachment/0555c538-d7df-45dc-ab2c-0b94470565d2/ISQC-(UK)-1_Revised-June-2016_Updated-July-2017.pdf
Application material is the best place to look for examples – A5, A22, A28 … A58.The topic is very broad so in the exam you’d be given a scenario and you’d have to look for clues in it. For example, if it has been discovered that for a particular audit client there is a previously undisclosed relationship between the client and a member of the engagement team – this would suggest that QCs at the firm level are a inadequate.
But the elements is the same right? It’s also HARLEM for both engagement and firm level
No – at the engagement level is SACRED:
? Supervision
? Assignment
? Competence
? Review
? Ethics
? DirectionSo yes there are some elements of overlap but the procedures applied at firm level encompass ALL engagements while procedures at the engagement level are specific to each engagement. At the firm level is like the QC “environment” and at the engagement level is like QC “activities” – or it’s like “general” and “application” controls – some are “overall” and others are specific.
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