INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Purpose:

This document describes the objectives and scope of the Quality Assurance Review (QAR) framework, responsibilities and functions of Quality Assurance Board (QAC) and policies, procedures and process of Quality Assurance Review established by the Institute of Cost and Management Accountants of Pakistan (the Institute).

Preamble

National Council of the Institute will form Quality Assurance Committee (QAC) with an objective to ensure quality in conduct of audit under Quality Assurance Review (QAR) program that entails developing and issuing policies and procedures on quality control and monitoring compliance of the same.

All practicing members and firms of the Institute are required to establish a system of Quality Control designed to provide them with a reasonable assurance that the firm and its personnel comply with the applicable professional Standards and regulatory requirements and that the reports issued by them are appropriate in the circumstances.

The Institute has a responsibility to establish and implement a System of Quality Control that encompasses policies and procedures, including but not limited to periodic reviews of the work of its practicing members and firms, designed to provide reasonable assurance that our members engaged in audit and other practices are doing so in line with the relevant rules, regulations and professional standards. Such a system should ensure that failure to comply with relevant quality control standards should render the firm and its personnel to appropriate sanctions, reprimands or penalties etc.

While the QAC members are appointed by the Council through a nomination process and as per the composition described in paragraph 5 below, the Committee performs its functions and discharges its responsibilities in accordance with this framework independently of the Council.

Definitions

Wherever mentioned in this Framework, the following terms have the meaning attributed below:

"Audit" - the objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements, cost and other records have been prepared, in all material respects, in accordance with an applicable financial reporting framework.

Committee - Quality Assurance Committee constituted under 'Framework of Quality Assurance Review Program'.

"Engagement Partner" - the partner or other person in the firm who is responsible for a particular engagement and its performance, and for the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body.

"Firm" - a sole practitioner or a partnership of the members of the Institute engaged in professional practice.

"Entity" - a client of a firm whose financial statements are audited.

"Institute" - Institute of Cost and Management Accountants of Pakistan

"Council" means National Council of the institute.

"Quality Control Reviewer" (the reviewer) - a Cost and Management Accountant engaged by the Institute, to carry out the review of:

audit working papers of firm engaged in audits; and

firm's system of quality control.

The Quality Control Reviewers may be assisted by appropriately qualified and experienced staff.

Quality Control Review (QCR) - it includes engagement review and firm review.

Engagement Review - A review of the audit engagement performed by the firm to determine whether the audit report(s) issued by the firm in respect of the reviewed client(s) was supported by appropriate audit evidence.

Firm Review - A review of the firm's system of quality control designed to provide it with reasonable assurance that the firm and its personnel comply with the International Standards on Auditing and regulatory and legal requirements as applicable in Pakistan, and that the reports issued by the firm are appropriate in the circumstances.

Reasonable Assurance - In the context of the International Standard on Quality Control (ISQC-1), a high, but not absolute, level of assurance

COP - Certificate of Practice issued by the Institute

Network Firms - Network amongst two or more firms/ practices means an arrangement to facilitate the better functioning of the affiliate member firms/practices in the common economic interest.

Terms not defined herein above shall have meaning assigned to them by 'International Auditing and Assurance Board' or 'International Accounting Standards Board'.

Scope

This framework applies to all Cost and Management Accountancy firms and practicing CMAs holding Certificate of Practice (COP) from the institute carrying out audits of financial statements, cost audits, special statutory audits, tax audits, public sector audits and review of historical financial information and other assurance and related service engagements having proper authority from a professional, legal or regulatory body.

The Quality Assurance Committee (QAC)

The Quality Assurance Committee comprises of 12 members including the Chairperson and Vice Chairperson who shall be appointed by the Council. The Chairperson shall neither be a practicing member nor from the sitting Council.

The composition of the members of the Committee shall be as follows:

Two members from the Council;

Three members from practicing firms;

Two non-practicing member of the Institute

Five Independent Nominees including:

One member from Securities and Exchange Commission of Pakistan (SECP)

One member from Federal Board of Revenue (FBR)

Once member from State Bank of Pakistan (SBP)

One member from Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

One member from Auditor General of Pakistan (AGP)

The Chairperson will be the member of the Institute.

The Committee Members will be appointed for a period of three years.

Any five members present in a meeting shall constitute a quorum.

Objectives of the Committee

To establish policies and procedures for the QCR program that ensures that firms carry out audits in accordance with the professional standards as applicable in Pakistan and adopted by the Institute.

To establish appropriate quality assurance review and monitoring mechanism, including issuance of standards, directives and guidelines in relation to audit practice carried out by the firms in public interest and to comply with the requirements of Statement of Membership Obligation (SMO)-1 on Quality Control issued by the International Federation of Accountants (IFAC).

Responsibilities and Functions of Quality Assurance Committee

To carry out Quality Assurance Review (QAR) of the firms through a defined Quality Assurance Review (QAR) Program.

To perform oversight and monitoring of the QAR program to ensure its adequate and effective implementation.

To consider and review reports prepared by the reviewers and to take appropriate actions and make suitable decisions.

To provide necessary guidance and directives to the reviewers and the reviewee members and firms.

To set, develop and implement policies and procedures for the QAR programs and ensure that they are as relevant as possible to all types and sizes of practices and decide on all matters relating to QAR, in the public interest and in the interest of the profession.

To establish a system of periodic review and perform a periodic review of the QAR program (including policies, procedures and processes etc.) to ensure that it remains up-to-date.

To arrange and coordinate training programs, courses, seminars, workshops etc. to improve the quality standards of professional engagements.

To take all steps and decisions necessary for the implementation of the QAR program.

In carrying out the above functions, the Committee shall be assisted by the Practice Profession Development Committee (PPDC) and the Quality Assurance Department.

Selection of Audit Engagements

Firms shall undergo a Quality Control Review (QCR) organized by the Committee after every three years. However, an earlier review may be required under special circumstances. These circumstances may include cases where a member is found guilty of professional misconduct by the Institute, or any other circumstances, which in the opinion of the Committee warrant an earlier review, in the public interest.

A 10-days notice of a visit will be given to the practicing firm/ member at the registered address of the firm/ partner. However, in exceptional cases an earlier notice or a surprise visit is also permissible. Such circumstances will be decided by the Committee.

Engagement Reviews

Engagement review involves a detailed review of working paper files of specific audit engagements selected from list of entities of the firm and shall be conducted to determine whether or not the audit report issued by the firm in respect of reviewed client(s), was supported by appropriate audit evidence. However, the absence of any review comments shall not be considered an endorsement that the financial statements were necessarily fairly presented or that all aspects of the audit were fully compliant with the International Standards on Auditing as applicable in Pakistan.

The selection of audit engagements shall be made in such a manner that at least twenty five percent (25%) of all partners in audit practice are covered under the review. Each office location of the firm conducting audit shall be reviewed.

Firms shall submit to the Quality Assurance department a list of audit engagements on the prescribed format as of June 30 each year (to be submitted within 3 months after June 30), and as and when required by the Quality Assurance department. The list shall specify audit engagements for all office locations of the firm and their respective audit engagement partners.

The reviewer(s) in consultation with the Quality Assurance Department shall select audit engagements as per the criteria provided in paragraph 9.2, from the list of audit engagements provided by the firm under review. In making the selection, the reviewers shall use their professional judgment and give preference to companies with substantial operations, or other public interest entities that are considered high risk engagements.

Audit working papers and correspondence files of latest audited financial statements and records shall be reviewed to determine whether the audit opinion expressed is supported by appropriate audit evidence.

The review shall be carried out preferably at the premises of the firm. The reviewer(s) shall use a QAR Checklist to ensure that requirements of the International Standards on Auditing as applicable in Pakistan have been met and that the audit opinion issued by the firm is supported by appropriate audit evidence in the form of audit working papers.

Review of the Firm

The reviewer shall also review firm's system of quality control which shall include policies and procedures addressing each of the following element:

Leadership responsibilities for quality within the firm.

Ethical requirements.

Acceptance and continuance of client relationships and specific engagements.

Human resources.

Engagement performance.

Monitoring.

The reviewer will also verify whether or not the quality control policies and procedures are documented and communicated to the firm's personnel as each individual has a personal responsibility for quality and is expected to comply with these policies and procedures.

The procedures performed during the firm review shall include:

An assessment of the system of quality control relating to audit.

Sufficient review of the quality control policies and procedures and review of engagement working papers to evaluate:

The functioning of that system of quality control, and compliance with it; and

The compliance with professional standards and regulatory and legal requirements in respect of engagements.

A key part of the firm review methodology shall be the assessment of a firm's monitoring policies and procedures. If these are judged to be effective, the reviewer may rely on them by performing tests of the conclusions of the applicable period's monitoring as a source of evidence.

Assessment of other quality control policies and procedures, where appropriate, may include discussion with the firm's appropriate individuals through interviews and focus group meetings, reviewing documentation, observation of the system of quality control in operation e.g. attending the firm's training sessions for its staff.

Review Finalization

The reviewer shall discuss all issues identified during the review with the engagement partner. After completion of the review, the reviewer shall prepare a review report, which will include issues and weaknesses identified during the review, and recommendations for improvement. In cases where major weaknesses are found, a draft report shall be sent to the firm requiring comments in writing within four weeks from the date of the draft report. The comments received shall be analyzed, in certain cases a second opinion may be obtained, before presenting both the report and the comments to the Committee.

All reports shall be presented before the Committee, for approval, except for urgent cases where the report may be finalized and approved by circulation to all the members. At least five members of Committee including the Chairperson and / or Vice Chairperson shall approve the report for finalization. Reports approved by circulation shall be ratified in the immediate next QAB meeting.

Review Report

After approval by the Committee, report shall be issued to the firm covering the following:

Conclusion stating whether the audit report issued by the firm in respect of reviewed client(s), was supported or not supported by appropriate audit evidence;

Conclusion stating whether or not appropriate evidence was available in the files as to the compliance of requirements as described in paragraph in 12.3 below.

In case where the conclusion of any audit engagement is assessed as "not supported by appropriate audit evidence" by the Committee, then except for cases falling under section 17 below, the reviewer shall select more audit engagements performed by the firm. The overall conclusion of the firm shall be "supported by appropriate audit evidence" if 75% or more of the selected audit engagements are found as "supported by appropriate audit evidence".

Review of additional files shall be carried out within a time period decided by the Committee.

The reviewer shall also include a conclusion, with a limited assurance of the following in the report:

Whether the firm's system of quality control has been designed to meet the audit requirements;

Whether the firm has complied with its system of quality control during the review period;

Reasons for negative conclusions on the above; and

Recommendations for improvements at both firm wide and engagement level.

Satisfactory QCR Rating

When all the office locations carrying out statutory audit engagements have been reviewed and the firm has received a "supported by appropriate audit evidence" conclusion, the firm shall be issued a report indicating its eligibility to be included in the list of firms with satisfactory QCR rating.

In order to carry out timely reviews of firms which are already on the list of firms with satisfactory QCR rating, the Quality Assurance Department shall initiate communication with such firms at least six months before the expiry of two and half years. This list is available on the Institute's website and is updated on a monthly basis or as and when any change occurs.

QCR Revisits

Once a firm receives a "not supported by appropriate audit evidence" conclusion and its name has been removed from the list of firms with satisfactory rating, a revisit shall not be performed before the expiry of six months of such removal. This revisit shall be performed on a written request by the practicing member or a partner, in case of a firm.

Review Procedure

In case a firm receives a "not supported by appropriate audit evidence" conclusion subsequent to review of additional files, they shall have a right to file a review application before the Committee through ICMAP Quality Assurance Department within 20 days of such conclusion having been communicated to them. The ICMAP Quality Assurance Department shall forthwith send this review application to the Chairperson of the Committee within one week of its receipt. The Chairperson of the Committee with two members of the Committee (hereinafter called the "Review Committee") would go through the submissions of the firm and may, at its discretion, give a personal hearing to the partner in charge of the audit or the authorized representative, who must be a member of the Institute associated with the said firm.

The "Review Committee" shall place its findings before the Committee suggesting any action in the matter or closing the same not later than 60 days of receipt of review application.

The Committee will discuss the report by 'Review Committee and take the appropriate actions.

Withdrawal of Satisfactory QCR Rating

If a firm already on the list of firms with satisfactory QCR rating receives a "not supported by appropriate audit evidence" conclusion in a subsequent review, the firm's name shall be immediately withdrawn from the list, after fulfilling the criteria laid down in paragraph 12.2.

Once a firm is included in the list of firms with satisfactory QCR rating, it shall get all its office locations reviewed after every three years.

Where a firm fails to get all its office locations reviewed after the expiry of aforementioned period, the name of the firm shall be removed from the list of firms with satisfactory rating. In case where there is a delay due to some genuine reason(s) or urgent engagements of the firm, additional time, which shall not be more than six months may be allowed by the Committee.

Reference to Investigation Committee

The Committee may refer a practicing member or a firm to Investigation Committee, constituted by it, if it finds that the practicing member or firm is prima facie grossly negligent in issuing an audit report or performance of an audit. The Investigation Committee shall submit its report to the Committee within 60 days of such referral.

The Committee shall issue a notice to the practicing member or firm within two weeks of constitution of investigation committee.

Confidentiality and Independence

The Committee members, reviewers, the staff assisting such reviewers shall sign a "Statement of Confidentiality" in order to ensure complete confidentiality of the information obtained from the audit firms. Further, they shall also sign a "Statement of Independence" to confirm that they are both, free and appear to be free from interest, which may be regarded as incompatible with their objectivity, as far as the firm being reviewed is concerned. Both the statements shall be signed before conduct of review.

The name of the firm and their entities shall be kept confidential. The summary of review reports, which is presented to the Quality Assurance Committee (QAC) for approval, shall also be without naming the firm or their audit engagements.

In case a firm receives a "not supported by appropriate audit evidence" conclusion, any correspondence and/ or communication by the said firm/concerned engagement partner in this regard with any QAB member, Council member or ICMAP office bearer shall be considered an inappropriate act under this framework. However, the firm/ concerned engagement partner may proceed as laid down in section 15.1.

Date of Issue and Effective Date

This framework was approved by the Council in its _____ meeting held on _______, 2010 and is applicable on all reviews falling due subsequent to this date.

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.