The elements that should be included in an audit firm’s system of quality control at firm level as required by ISQC1 are as follows:

• Firm and leadership responsibilities for quality within the firm:
  Personnel within the firm responsible for establishing and maintaining the firm’s system of quality control shall have an understanding of the entire text of the ISQC, including the application and other explanatory material, to understand its objectives and to apply the requirements properly. Firms are required to ensure that appropriate training is provided to ensure there is complete understanding of the objectives and procedures under ISQC1.
• Human Resources:
  The firm’s overriding desire for quality will necessitate policies and procedures on ensuring excellence in its staff, to provide the firm with reasonable assurance that it has sufficient personnel with capabilities, competence, and commitment to ethical principles to perform engagements in accordance with professional standards and regulatory and legal requirements, and to enable the firm or engagement partners to issue reports that are appropriate in the circumstances.
• Assignment of Engagement teams:
  The assignment of engagement teams is an important matter in ensuring the quality of individual assignments. This responsibility is given to the engagement partner.
• Engagement Performance:
  The firm should take steps to ensure that engagements are performed correctly, that is, in accordance with standards and guidance. Firms often produce a manual of standard engagement procedures to give to staff so that they know the standards they are working towards. Ensuring good engagement performance involves:
  • Direction
  • Supervision
  • Review
  • Consultation
  • Resolution of disputes.
• Monitoring:
  The standard states that firms should have policies in place to ensure that their quality control procedures are relevant, adequate, operating effectively, and complied with. In other words, they must monitor their system of quality control. Monitoring activity should be reported to the management of the firm on an annual basis for corrective action to be taken.

(5 points for 5 marks)

ii) The code of ethics for professional accountants requires that professional accountants or auditors accept only engagements which they are competent and capable of performing. In addition, they must ensure that they comply with the relevant statutory and legal requirements. It is therefore necessary for them to carry out procedures and consider the following factors:

• They must consider whether they are professionally and legally qualified to accept the engagement.
• They must consider whether there are any ethical issues that may confront them if they accept the nomination. Example: threats to the objectivity and independence.
• They must consider whether they have the time and resources, including expert knowledge and skills, to serve the client.
• They must consider whether they have been properly nominated and any outgoing auditor has properly parted with his client.
• They must also fulfill the professional etiquette requirement of communication with the outgoing auditor, if any, as a sign of courtesy and to require information as to whether there are professional reasons for not accepting the nomination.
• The procedures should also enable the auditors to determine whether the prospective client has integrity and falls within the risk appetite of the firm.
• Therefore, on the whole, the procedures are carried out to enable the auditor to make an informed decision whether to accept or reject the nomination.

(Any 5 points for 5 marks)