Scope of this Auditing Standard
This Australian Standard on Quality Management (ASQM) deals with:
- The appointment and eligibility of the engagement quality reviewer; and
- The engagement quality reviewer’s responsibilities relating to the performance and documentation of an engagement quality review.
This ASQM applies to all engagements for which an engagement quality review is required to be performed in accordance with ASQM 1. This ASQM is premised on the basis that the firm is subject to ASQM 1 or to national requirements that are at least as demanding. This ASQM is to be read in conjunction with relevant ethical requirements. Relevant ethical requirements are defined in ASA 102.[*] Law, regulation or relevant ethical requirements may establish responsibilities for the firm’s management of quality beyond those described in this ASQM (Ref: Para. A2).
See Australian Standard on Quality Management (ASQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements, paragraph 34(f).
See ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements.
This ASQM does not address the responsibilities of the assurance practitioner that may exist in legislation, regulation or otherwise in connection with, for example, independence or other assurance related requirements of the Corporations Act 2001.
An engagement quality review performed in accordance with this ASQM is a specified response that is designed and implemented by the firm in accordance with ASQM 1. The performance of an engagement quality review is undertaken at the engagement level by the engagement quality reviewer on behalf of the firm.
The nature, timing and extent of the engagement quality reviewer’s procedures required by this ASQM vary depending on the nature and circumstances of the engagement or the entity. For example, the engagement quality reviewer’s procedures would likely be less extensive for engagements involving fewer significant judgements made by the engagement team.
The Firm’s System of Quality Management and Role of Engagement Quality Reviews
ASQM 1 establishes the firm’s responsibilities for its system of quality management and requires the firm to design and implement responses to address the quality risks in a manner that is based on, and responsive to, the reasons for the assessments given to the quality risks. The specified responses in ASQM 1 include establishing policies or procedures addressing engagement quality reviews in accordance with this ASQM.
The firm is responsible for designing, implementing and operating the system of quality management. Under ASQM 1, the objective of the firm is to design, implement and operate a system of quality management for audits or reviews of a financial report, or other assurance or related services engagements performed by the firm, that provides the firm with reasonable assurance that:
- The firm and its personnel fulfill their responsibilities in accordance with AUASB standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and
- Engagement reports issued by the firm or engagement partners are appropriate in the circumstances.
As explained in ASQM 1, the public interest is served by the consistent performance of quality engagements. Quality engagements are achieved through planning and performing engagements and reporting on them in accordance with AUASB standards and applicable legal and regulatory requirements. Achieving the objectives of those standards and complying with the requirements of applicable law or regulation involves exercising professional judgement and, when applicable to the type of engagement, exercising professional scepticism.
An engagement quality review is an objective evaluation of the significant judgements made by the engagement team and the conclusions reached thereon. The engagement quality reviewer’s evaluation of significant judgements is performed in the context of AUASB standards and applicable legal and regulatory requirements. However, an engagement quality review is not intended to be an evaluation of whether the entire engagement complies with AUASB standards and applicable legal and regulatory requirements, or with the firm’s policies or procedures.
The engagement quality reviewer is not a member of the engagement team. The performance of an engagement quality review does not change the responsibilities of the engagement partner for managing and achieving quality on the engagement, or for the direction and supervision of the members of the engagement team and the review of their work. The engagement quality reviewer is not required to obtain evidence to support the opinion or conclusion on the engagement, but the engagement team may obtain further evidence in responding to matters raised during the engagement quality review.
Authority of this ASQM
This ASQM contains the objective for the firm in following this ASQM, and requirements designed to enable the firm and the engagement quality reviewer to meet that stated objective. In addition, this ASQM contains related guidance in the form of application and other explanatory material and introductory material that provides context relevant to a proper understanding of this ASQM, and definitions. ASQM 1 explains the terms objective, requirements, application and other explanatory material, introductory material, and definitions.