Question

It is believed that to achieve quality audit, quality auditing standards must be complied with and the auditor's compliance with these quality standards will largely depend on the auditor's resources at his disposal and how effectively he is monitored by his profession's regulator Required: With empirical evidence: a) Examine the factors influencing the level and extent of compliance with audit quality standards (ISA 220 and ISQC 1) by auditing firms in Ghana. b) Evaluate the impact of the regulator's monitoring on compliance with audit quality Standards in any developing economy of your choice; c) Assess the effect of the auditor's audit resources on audit quality:

Answer 1

1) These are the factors which drives the quality of audit in audit firms-:

a) Engagement partner should ensure the overall quality of audit. It is the primary responsibility of senior audit team members for adhering to quality standards.

b) Relevant ethical requirements such as independence, safeguarding threats etc during the engagement.

c) Client acceptance should be carefully done by the audit firms.

d) Engagement team members should have sufficient number of experience and expertise in the particular sector of client.

e) Continuous monitoring should be done by the senior audit team members. Documentation of audit procedures is the overall responsibility of the engagement team for maintaining quality in the audit.

2) Lets take the example of India where one of the big 4 was barred to audit the banking and NBFC sector. This was mainly done because regulator has seen some lapses during their review. In this case, auditor should have maintained the quality and raised red flags during the audit. After that incident, every audit firm is very careful to maintain the overall quality during the engagements.

3) Auditor's resources has a key impact on performance of audit procedures. With introduction of more technology, testing of automated controls requires expertise in information technology. Audit firms should have separate team who should assist the engagement team in performance of audit procedures through computer assisted audit techniques. In addition to that data analytics can now only done through use of IT systems. Thus if the audit firm does not have these resources then obviously the quality of the audit will be hampered.