The term Quality control review is widely used in the world of accounting and auditing. It aims to enhance the accuracy of implemented controls in the processes. The topic can be seen from two perspectives including auditing and operational business management.
This article shall discuss quality control review with perspective to external audit.
Certain quality parameters must be implemented for better auditing procedures. The quality control review ensures that quality protocols of professional standards have been met. This comes with many other advantages along with the appropriate implementation of quality standards. Let’s have a deep understanding of quality review with perspective to auditing.
What is Quality Control in Auditing?
In auditing, quality control is the process of ensuring all the quality protocols of professional standards have been followed while performing auditing. The process is based on objectivity. All the results provided by this review are unbiased and based on facts. The firm gets sure that it has complied with all the quality parameters throughout an audit.
The overall goal of this review is to check whether the firm complies with professional and organizational standards of quality control or not. This process enables the auditor to issue a clean audit report.
Also read, operational audit.
Quality Control Procedures
Auditors need to work on different quality control procedures to maintain audit quality. Here is the list describing the elements of quality control in auditing:
1- Independence, Integrity, and Objectivity
The audit team must discharge professional responsibilities with independence. The team shouldn’t only be independent but appear to be independent of the audit client.
Integrity refers to performing tasks with personal honesty. Although, it’s a personal trait. However, it can be nourished to ensure the adequacy of an audit.
Objectivity means that the task should be performed on facts neglecting personal intuitions and biases. So, compliance with this policy can effectively ensure quality. This element of quality control review deals with different factors that the audit team must ensure.
Personnel management is an important aspect of designing quality control policies and procedures. This factor contains the nature of supervision that should be provided to personnel. It should be effective and drive the personnel to perform their responsibilities at their best.
Other than nature, the extent of supervision should also be taken care of. Too much extra supervision might generate negative outcomes, so as much-avoided supervision. Personnel management also involves practices such as hiring, assigning of tasks, professional development, etc.
3-Acceptance and Continuation of Clients and Engagements
Client acceptance is another important aspect of quality control. An audit firm needs to ensure they are independent of the client. Further, they have sufficient resources to assure on the risk brought by a new audit client.
For instance, insurance companies, financing companies, and banks carry higher audit risks. So, the firms need to assess if they have sufficient resources, time, and competence to ensure they would be able to cover the risk. Generally, audit firms assess internal risk assessments with internally designed forms. This helps them ensure risk is appropriately assessed before client acceptance. Usually, senior managers are assigned to assess risk as it’s a strategic matter.
Likewise, policies should also be designed to assess whether a relationship with a client should be continued. Lastly, it explains the performance of an engagement with a client.
4- Engagement Performance
The engagement personnel needs to comply firm’s quality protocols and overall professional standards. Policies and procedures should be designed to enhance these policies.
As the name of the element suggests, engagement performance is a broader concept and covers all the phases from planning to execution of the engagement. The control policies are developed by keeping in mind the applicable professional standards. Usually, these policies involve supervision, communication, planning, and other stuff related to engagement execution.
Monitoring is one of the crucial elements while establishing procedures for quality control. It aims to ensure appropriateness, effectiveness, and compliance of the audit processes and achievement of objectives.
Effectiveness is equally important to assure that there is no wasted resources and results are optimized. Further, continuous professional development activities should also be monitored to evaluate whether processes are effective or not.
The above-discussed elements make the policies and procedures of quality protocols more effective. A firm’s audit department can reach new heights by ensuring that its policies have these elements. All the loopholes of auditing practices can be limited by implementing policies with these elements.
The importance of quality control in auditing
- The quality control review comes with many advantages. One of which is determining the areas of improvement. The review helps the firm identify the key areas that need more quality compliance. The firm can work on the loopholes and improve the overall functions.
- The review also helps the firm maintain credibility among competitors. Quality control ensures that all the quality protocols have been met, which means that companies can take advantage of higher quality work. Further, companies can use it while dealing with clients and even the general public.
- Another benefit sought from quality control is the satisfaction of users of financial statements. Quality control adds integrity to the entire process. This can assure users that all the quality parameters have been met before using the financial statements.
Quality control review is an important technique in the world of accounting and auditing. It ensures that quality parameters defined by the firm, professional accounting standards, and regulators are met.
The audit firms design special policies and procedures to ensure higher quality deliverables. Further, it’s important to note that quality control measures need to be implemented throughout the audit process.
Generally, the components of quality control review include independence, objectivity, integrity, personnel management, client acceptance, engagement performance, and monitoring, etc.
Implementing a quality control review program helps audit firm maintain quality, meet professional expectations, and ensure compliance with the guidelines issued by regulators.