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· The checklist for auditing & assurance standards, guidance notes etc. was not prepared to ensure compliance with all standards while performing attestation engagements.

· The documentations for communication of policies and procedures by the audit firm to its personnel as well as communication of the identity and role of engagement partner to key members of client’s management and those charged with governance were not maintained. · Documented policy or other evidences of procedures for rotation were not available.

· Audit firms had not properly framed its quality control policies and procedures, as it did not ensure that the firm or its staff were free from any self interest which might be regarded as being incompatible with integrity and objectivity.

· No policies and procedures were designed to provide reasonable assurance that the firm had sufficient personnel with capabilities, competence and commitment to ethical principles necessary to perform its engagement.

· Firm did not have an established policy in relation to client acceptance including background checks of key management, performing conflict checks and formalizing documentation for the same in compliance with requirement of SQC-1.

· Quality control review Partner and Partner-in-charge were the same which is not in line with SQC-1.

· No carry forward working papers were prepared by the firm containing the summary of major observations and related documents to be used in subsequent audits.

· The policies and procedures relating to conflict checking system were not documented.

· There was no systematic manner of implementation of certain aspects of the policy in terms of competencies, career developments, evaluation etc.

· Compliance procedures of firm’s code of ethics did not address the firm’s policies and procedures regarding ethics and independence and its importance was not conveyed to the staff by way of regular trainings and in staff meetings.

· Audit firm did not have any established recruitment policy.

· There were no policies and procedures established to provide it with reasonable assurance that the policies relating to quality control were relevant, adequate and there were periodic inspection of selection of completed engagements.

· As per Para 23 of SQC-1 the firm should obtain written confirmation of compliance with its policies and procedures on independence from all firm personnel. However, it was noticed that declarations were only in relation to details of investment made.

· Firm needed to strengthen the mechanism to promote a quality oriented internal culture including frequent actions and messages from all levels of firm’s management relating to quality.

· Annual independence declarations and declarations for insider trading for all clients did not include detailed list of securities, moreover, in respect of dependents/ relatives, declarations were not consistent. Further, in terms of conserving price sensitive information, declarations were taken on yearly basis.

· There were no specific documentation in the audit working papers with regard to the process on consultation and differences of opinion as required by the firm’s SOC-1 policy.

· The Quality control policy of the audit firm did not cover all the elements of standards of quality control- SQC 1.

· More frequent programmes and seminars needed to be conducted to appraise the partners and staff about latest changes in law, regulation and accounting and other standards.

· There was no policy document in respect of issues detailing the implementation processes and documentation thereof. Moreover, the policies and its implementation with reference to safeguards in respect of the senior personnel on assurance engagements over a long period of time were not documented.

· The firm lacked in defining and designing detailed policies & procedures for systematically implementing policies related to competence, career development, evaluation etc as per SQC -1

· The firm had not effectively designed and documented policies and procedures in respect of completion of assembly of final engagement files, confidentiality, safe custody, integrity, accessibility and retrievability, retention and ownership of engagement documentation. Further, engagement planning memoranda, working paper, deliverables, evaluation process, controls, etc. were not in tune with the requirement of SQC-1.

· Formal documentation of procedures for rotation of audit engagement partner was not maintained as required by the Para 27 of SQC-1.

· Documentation for communication of policies and procedure by the firm to its personnel was not maintained as required by the Para 106 of SQC-1.

· Audits were conducted only by Articled Assistants who had a maximum tenor of 3 years with the firm. Engagement partner was also not rotated (Ref Para 27 of SQC-1).

· Checklists for Standards on Auditing, Guidance Notes etc. were not prepared.

· The audit firm’s system of quality control had not been designed to meet the requirements of quality control standards for attestation services and did not provide a reasonable assurance of complying with technical standards in all material aspects.

· The audit firm had not provided the policy on quality control, if any, implemented within the firm regarding the responsibilities for its system of quality control for audits and review of historical financial information, and or other assurance and related services engagements (Ref SQC-1).

· The quality review programme/checklist containing the details of team involved, test performed, extent of verification etc. were not found.

· There were no policies and procedures designed to provide with reasonable assurance that the audit firm, its personnel and, where applicable, others subject to independence requirements (including the experts contracted by the firm and network firm personnel) maintained independence where required by relevant ethical requirements. (Para 18 to 27 SQC-1).

· Annual declarations for independence from all the personnel at firm level were not obtained as suggested by SQC-1.

· Clearance by engagement partner & professional practice director was given on a later date, however, the Audit Acceptance Letter had been sent much earlier.

Quality Review Board Report on Quality Review Findings (2012-15) Click Here >>

Quality Review Board (QRB) Report 2012-15- Observations on Auditing Standard on Quality Control SQC-1 |18-08-2015|