How do we encourage it?: Both: Through engagement team discussion, through supervision, through proper training of team members (industry, regulatory environment, etc.). and whether additional testing should now be performed because of the potential misstatements and deviations. ISA 540 could include matters on how to apply the guidance in ISA 200 Paragraph 43 in the context of accounting estimates How do we encourage it?: Controls: Encourage through ISQC 1 as well as through the language in A43 of ISA 200. Substantive: Duplicate language from ISA 540 (ex. A80, A124) within ISA 315 and ISA 330 to be more general and applicable to the overall audit. Retain Para. 11 and Para. A57 of ISA 500 that guides the auditor’s response to identified inconsistencies in audit evidence, or doubts over the reliability of audit evidence. Further ISA 230 Para. 11 indicates that, for significant audit matters, when the auditor identifies information that is inconsistent with the auditor’s final conclusion, the auditor shall document how the inconsistency was addressed. ISA 540 could make reference to documenting how inconsistencies in audit evidence were addressed and the implications of deviations from controls where such controls are designed to address indicators of possible management bias and the auditor intends to rely on those controls ISA 540 could extend the requirement in Paragraph 23 to require the auditor to consider the effect of indicators of possible management bias in performing the auditor’s procedures and whether the auditor has obtained sufficient appropriate audit evidence when reaching conclusions about the results of those procedures How do we encourage it?: Both: Potentially through IQSC 1, in particular via encouragement by “tone at the top”. Also, a link between ISA 330 Para. 17 and ISA 315 Para. 31.
importance to audit quality of, for example, the engagement team’s ability to raise concerns without fear of reprisals and in issuing auditor’s reports that are appropriate in the circumstances.[ISA 220, Para. A3] Engagement team members feel comfortable to raise issues with the sufficiency of the audit procedures and whether sufficient appropriate audit evidence has been obtained. The QMA approach within the ITC would allow team members to challenge whether sufficient appropriate evidence has been obtained. How do we encourage it?: Through ISQC 1. How do auditors evidence it? Through the audit documentation where the auditor demonstrates that it has obtained sufficient appropriate audit evidence in order to conclude that reasonable assurance has been obtained. [ISA 700, Para. 11] How do we encourage it?: Through ISQC 1. How do auditors evidence it? Through the audit documentation where the auditor demonstrates that it has obtained sufficient appropriate audit evidence in order to conclude that reasonable assurance has been obtained. [ISA 700, Para. 11] identified inconsistencies in audit evidence, or doubts over the reliability of audit evidence. Further ISA 230 Para. 11 indicates that, for significant audit matters, when the auditor identifies information that is inconsistent with the auditor’s final conclusion, the auditor shall document how the inconsistency was addressed. ISA 540 could address the requirements in ISA 540 Paragraphs 18-21 by emphasizing a “stand back” about matters such as: audit evidence obtained, inconsistencies identified, and how they have been resolved, indicators of management bias, etc. How do we encourage it?: ISA 540 could reinforce that evaluating the sufficiency of audit evidence for disclosures in the financial statements involves the application of the same types of considerations as when evaluating the sufficiency of audit evidence for accounting estimates recognized in the financial statements How do auditors evidence it? Through documentation and sign-offs of the audit file by engagement team members. Quality Control at Firm and Engagement