HKSA 220 - Quality Management for an Audit (Condensed)
| Section | Key Concept | Brief Description |
|---|---|---|
| Scope & Objectives | Engagement-level quality management | HKSA 220 applies to all audits; objective is to manage quality so that the audit complies with standards and the report is appropriate. |
| Definitions | Key terms | Defines engagement partner, team, quality review, resources, and relevant ethical requirements. |
| Leadership Responsibilities | Engagement partnerโs overall responsibility | Partner must create a quality-focused environment, be sufficiently involved, and assign tasks appropriately. |
| Ethical Requirements & Independence | Compliance with ethics | Partner ensures team understands and complies with ethical requirements, including independence, and addresses breaches. |
| Acceptance & Continuance | Client relationship decisions | Partner follows firm policies, uses information for planning, and communicates new information promptly. |
| Engagement Resources | Sufficient and appropriate resources | Partner ensures timely assignment of competent human, technological, and intellectual resources. |
| Engagement Performance | Direction, supervision, review, consultation, quality review, differences of opinion | Partner oversees work, ensures consultation, completes engagement quality review, and resolves differences before report date. |
| Monitoring & Remediation | Using firmโs monitoring information | Partner understands monitoring results and takes action; deficiencies do not automatically mean audit failure. |
| Overall Responsibility & Documentation | Final determination and records | Partner confirms sufficient involvement; documentation includes ethics, acceptance, consultations, and quality review completion. |
Scope and Objective (Paragraphs 1-11)
Scope of HKSA 220
Applies to all audits of financial statements, including group audits. Addresses engagement-level quality management and engagement partner responsibilities. Must be read with relevant ethical requirements.
Objective
To manage quality at the engagement level to obtain reasonable assurance that:
- The auditor has fulfilled responsibilities in accordance with professional standards and legal/regulatory requirements.
- The auditor's report issued is appropriate in the circumstances.
Key Definitions (Paragraph 12)
Important Terms
| Term | Definition |
|---|---|
| Engagement partner | The partner or other individual responsible for the audit engagement and its performance, and for the auditor's report. |
| Engagement team | All partners and staff performing the audit, excluding auditor's external expert and internal auditors providing direct assistance. |
| Engagement quality review | An objective evaluation of significant judgments and conclusions, performed by the engagement quality reviewer. |
| Relevant ethical requirements | Principles of professional ethics applicable to the audit, ordinarily comprising the HKICPA's Code of Ethics. |
| Response | Policies or procedures designed to address quality risks. |
Leadership Responsibilities (Paragraphs 13-15)
Overall Responsibility
The engagement partner takes overall responsibility for managing and achieving quality on the audit engagement. This includes:
- Creating an environment that emphasizes the firm's culture and expected behavior.
- Being sufficiently and appropriately involved throughout the audit.
- Having the basis to determine that significant judgments and conclusions are appropriate.
Creating the Environment
The partner must emphasize:
- Team responsibility for quality.
- Importance of professional ethics, values, and attitudes.
- Open and robust communication, with ability to raise concerns without fear of reprisal.
- Exercise of professional skepticism by all team members.
Assignment of Procedures
If the partner assigns tasks to other team members, the partner continues to take overall responsibility through direction, supervision, and review of their work.
Relevant Ethical Requirements and Independence (Paragraphs 16-21)
Understanding and Awareness
The engagement partner must understand applicable ethical requirements and ensure the team is aware of them, including policies for identifying and addressing threats, breaches, and non-compliance with laws.
Evaluating Threats and Breaches
If matters indicate a threat to ethical compliance, the partner evaluates the threat using firm policies and takes appropriate action. The partner remains alert throughout the audit for breaches.
Acceptance, Continuance, and Resources (Paragraphs 22-28)
Acceptance and Continuance
The engagement partner determines that firm policies have been followed and conclusions are appropriate. Information from the process is used in planning and performing the audit. If new information arises that might have caused the firm to decline the engagement, the partner communicates it promptly to the firm.
Engagement Resources
The partner determines that sufficient and appropriate resources are assigned or made available in a timely manner, considering the nature and circumstances of the audit. Resources include:
- Human: Team members, external experts, internal auditors.
- Technological: Automated tools, IT applications.
- Intellectual: Audit methodologies, guides, templates.
The partner ensures the team collectively has appropriate competence and capabilities. If resources are insufficient, the partner takes action, including communicating the need for additional resources.
Engagement Performance (Paragraphs 29-38)
Direction, Supervision, and Review
The engagement partner is responsible for direction, supervision, and review. The nature, timing, and extent must be responsive to the audit's nature and circumstances. The partner reviews audit documentation at appropriate points, including significant matters, judgments, and other relevant matters. On or before the report date, the partner determines that sufficient appropriate audit evidence has been obtained.
Review of Financial Statements and Auditor's Report
Prior to dating the report, the partner reviews the financial statements and the auditor's report to ensure they are appropriate. Formal written communications to management, those charged with governance, and regulators are also reviewed before issuance.
Consultation
The partner ensures consultation on difficult or contentious matters, and that conclusions are agreed and implemented.
Engagement Quality Review
For engagements requiring a quality review, the partner ensures a reviewer is appointed, cooperates, and does not date the report until the review is complete.
Differences of Opinion
The partner ensures differences are addressed and resolved in accordance with firm policies, and that conclusions are documented and implemented.
Monitoring, Remediation, and Overall Responsibility (Paragraphs 39-40)
Monitoring and Remediation
The engagement partner obtains an understanding of information from the firm's monitoring and remediation process, determines its relevance to the audit, and takes appropriate action. The partner remains alert for information that may be relevant to the firm's monitoring process and communicates it.
Taking Overall Responsibility
Prior to dating the auditor's report, the partner determines that they have taken overall responsibility for managing and achieving quality. This includes confirming that their involvement was sufficient and appropriate, and that the nature and circumstances of the engagement were considered.
Documentation (Paragraph 41)
Required Documentation
In applying HKSA 230, the auditor includes in audit documentation:
- Matters identified, relevant discussions, and conclusions regarding ethical requirements (including independence) and acceptance/continuance.
- The nature, scope, and conclusions of consultations, and how conclusions were implemented.
- If an engagement quality review was required, that it was completed on or before the date of the auditor's report.
Documentation Approaches
| Method | Example |
|---|---|
| Direction documentation | Signoffs of audit plan and project management activities. |
| Communication evidence | Minutes from formal team meetings. |
| Involvement evidence | Agendas, signoffs, records of time spent. |
| Review evidence | Signoffs by engagement partner and other team members. |
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