Page 27 - Inspection Report 2018

Engagement Quality Control Review

Although the AOB is cognisant that the engagement partner is the auditor
responsible for the overall audit performance, the EQCR partner plays a key
role in reviewing significant judgments and conclusions to formulate the audit
opinion.

Under ISA 220 Quality Control for an Audit of
Financial Statements, an appointment of EQCR is The COMMON FINDING identified by the AOB during
required for ‘audits of financial statements of listed the 2018 inspection was that no or ineffective reviews
entities, and those other audit engagements, if performed by the EQCR partner over significant
any, for which the firm has determined that an judgment and risk areas of the engagement and how
engagement quality control review is required’. the conclusions were reached.

The EQCR partner should possess sufficient and
appropriate experience to objectively evaluate KEY CONCERN/RISK
the significant judgments and conclusions in
formulating the auditor’s report. • Insufficient challenge process on significant
areas and KAMs.
In 2018, the AOB inspection results for several • Absence of a robust review by the EQCR
engagements revealed material findings that have partner affect the oversight and governance
raised concern on the effectiveness of the EQCR. over the audit partners in carrying out audited
financial statements of PIEs or schedule funds.

diagram 3
Factors contributing to ineffective EQCr

External EQCR Timeliness Competencies Engagements
Arrangement
Inconsistency in Timeliness of review • Insufficient experience • Inadequate meeting
performance and lack by EQCR partner and • Lack of technical with engagement
of accountability due to involvement in the planning competencies team due to differing
the following external stage, project management • Lack of understanding locations
arrangements: and reporting to those of the role of EQCR • Communication
charged with governance partner was only with team
• EQCR partner was (TCWG) members and not
outsourced from an with the engagement
external firm partner
• EQCR partner was not
a full time partner of
the firm
The AOB observed that appropriate resource allocation between the engagement
Best practices partner and EQCR partner would yield an effective quality control review during the
audit process.

AUDIT OVERSIGHT BOARD
ANNUAL INSPECTION REPORT 2018 25

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