Question

Good corporate governance is said to be one of the key contributors of the company’s success.
a) Define what corporate governance is, and explain why an effective internal audit function and the audit committee are referred to as one of the cornerstones of good corporate governance? (8 marks)
b) International standard in audit 220(ISA 220) “quality control for audit financial statements” gives 6 main requirements of quality control procedures for an audit of financial statements of the audit firm.
List the any three of the six elements of quality control and provide one example of a policy or procedure that can be used to fulfil each of the three elements listed. (9 marks)
c)After discussing the audit standard ISA 220 “quality control for an audit financial statements”, one of your classmates thinks that auditing of audit firms should be one of the ways of ensuring quality in the audit firms, but then your classmate is wondering as to who audits, audit firms.
Explain clearly to your classmate as to who audits, audit firms and how quality control is maintained in audit firms (8 marks)

Answer 1

• Corporate Governance is the set of all rules, procedures, systems, This is the basis out of which a company is controlled
• Generally, company Board of directors will be responsible for the governance of the companies.
• Corporate governance ensures organization follows all compliance and achieves their goals in more effective way
• If a good corporate governance is not followed corporate scandals may increase
• Corporate Governance ensures the business run for the best interest for shareholder.

Yes because an Internal audit plays a vital role in assisting the Board to deliver its responsbilities, Internal audit brings out the flaws in RISK MANAGEMENT & CONTROL PROCESS.

Elements of quality control:

• Integrity
• Acceptance of clients
• Monitoring

Any Audit firm has to be fully independent and show integrity in completing an audit, Basically he /she to be honest , and as one of the policy says in ethics Integrity and honesty is very important.

He /she has to develop the good professional relationship with the clients and treat them with utmost respect and project a good attitude towards the deliverables

Constantly work need to be monitored to ensure the best is given to clients.

Who audits audit firms?

Similar to annual reports given by corporates, audit firms also submit Transparancy report.

To maintain the quality in audit firm

• Frequently review policies ,procedures
• Monitor the quality control policy
• Develop industry specific guidance
• Engagement quality reviews to be performed