An Auditor-General may be able to engage a private sector auditor or firm under contract, to perform audit engagements or audit procedures. Contracted auditors are ‘service providers’ under ASQM 1. ASQM 1 includes requirements and related guidance to address the additional responsibilities and considerations when the Audit Office uses resources from a service provider.

In applying ASQM 1, Audit Offices will have policies and procedures in place to manage quality in respect of engagements performed by Audit Service Providers on behalf of the Auditor-General.

ASQM 1 explains that, notwithstanding that an Audit Office may use resources from a service provider in the performance of engagements, the Audit Office remains responsible for its system of quality management.

As responsibility for quality remains with the Audit Office (statutory auditor), Audit Offices may consider establishing policies or procedures, for example, to:

Confirm that contracted Audit Service Providers have sufficient personnel with the appropriate competencies and capabilities, including sufficient time, to deliver assigned work in accordance with contractual arrangements.

Confirm that contracted Audit Service Providers meet the relevant ethical standards, including independence, on appointment and periodically thereafter.

Identify and resolve potential conflicts.

Ensure contracted-out engagements are included within the scope of the Audit Office’s quality management arrangements.

Review all audit deliverables to be issued to those charged with governance.

Although responsibility for quality remains with the Audit Office (statutory auditor) for contracted-out engagements, this does not absolve the contracted Audit Service Provider of responsibility for their system of quality management within their firms in accordance with ASQM 1. In practice, the Audit Office (statutory auditor) may decide to request an Audit Service Provider to provide assurance regarding the system of quality management within their firm or, alternatively, may undertake procedures to confirm that an Audit Service Provider’s system of quality management is working effectively.

In applying ASA 220, individuals from Audit Service Providers who perform audit procedures on the audit engagement to assist the Audit Office will form part of the Audit Office engagement team. ASA 220 provides guidance on the application of policies and procedures when the engagement team includes individuals who are from another firm. ASA 220 notes that ASA 600, adapted as necessary in the circumstances, may provide a useful point of reference when the engagement team includes individuals from a firm external to the Audit Office in the performance of engagements.

The Auditor-General, or Audit Office employee delegated authority to sign and issue the auditor’s report on behalf of the Auditor-General, will sign and issue the statutory auditor’s report. Audit legislation may allow for the Signing Officer role to be delegated to an Audit Service Provider (private sector auditor or audit firm partner).

As explained in paragraphs 138-147 of this GS, the Signing Officer remains ultimately responsible, and therefore accountable, for the audit engagement and its performance, and for the auditor’s report that is issued. This includes taking overall responsibility for managing and achieving quality on the engagement in accordance with paragraph 13 of ASA 220.

The contracted Audit Service Provider performs assigned work in accordance with the terms of the contractual arrangement, which will generally set out the respective duties and responsibilities of the contracted Engagement Leader and relevant Audit Office staff. The contracted Engagement Leader has a contractual responsibility to the Audit Office for ensuring that the work delivered meets the expectations as agreed with the Audit Office.

The contracted Engagement Leader is responsible for ensuring that work undertaken for and on behalf of the Auditor-General is performed in accordance with applicable Auditing Standards and for managing and achieving quality for the engagement at firm level in accordance with the contract and the Audit Service Provider’s own quality management system.

The Signing Officer has reduced involvement in the audit due to the involvement of the contracted Engagement Leader. For the Signing Officer to be able to sign and issue the auditor’s report , the Signing Officer may need to undertake additional procedures and/or obtain additional information from the contracted Engagement Leader, relevant Audit Office staff and from the Audit Office’s system of quality management.

There may be circumstances where an outsourced audit has both an Audit Office Signing Officer and an Audit Office employee assigned responsibility for oversight of the outsourced audit engagement and its performance in practice. In these circumstances, the assigned Audit Office Engagement Leader and contracted Engagement Leader perform assigned Engagement Partner duties and responsibilities in accordance with Audit Office policies and procedures and the terms of the contractual arrangement, for and on behalf of the Signing Officer.

Audit Offices generally will have internal policies or procedures in place to respond to different arrangements and to clarify the respective leadership roles and responsibilities of the contracted Audit Service Provider, Audit Office Engagement Leader and the Signing Officer, to ensure the objectives of ASA 220 are achieved.

The Audit Office may develop policies or procedures to address the form or specific wording of the overall conclusion to be provided by the Audit Service Provider. In some cases, the Audit Service Provider may be required to provide draft deliverables, including a draft auditor’s report to the Audit Office.

If differences of opinion arise between the Audit Service Provider and the Signing Officer or individuals performing activities within the Audit Office’s system of quality management, the parties shall follow the Audit Office’s policies or procedures for dealing with and resolving such differences of opinion.

In circumstances where the legislative audit mandate allows for the Engagement Partner role to be fully contracted-out to a private sector auditor or firm, the appointed auditor or individual assigned responsibility for the engagement by an appointed firm, fulfils the role and responsibilities of Engagement Partner in their own right and will be responsible for the audit engagement and its performance, and for the auditor’s report that is issued, in accordance with the requirements of ASA 220. In these circumstances, the Audit Service Provider (individual or firm) issues the audit report in their own name and assumes responsibility for quality.