ISA 220 (Revised)

Quality Management for an Audit of Financial Statements

1Objective and scope

ISA 220 (Revised) deals with the specific responsibilities of the auditor regarding quality management at the engagement level for an audit of financial statements, and the related responsibilities of the engagement partner. It operates within the firm's system of quality management under ISQM 1: the firm designs the policies and resources, the engagement partner uses them and is responsible for the quality of the audit performed. It applies to audits of financial statements for periods beginning on or after 15 December 2022, the same date as ISQM 1 and ISQM 2.

The objective of the auditor is to manage and achieve quality at the engagement level, so as to obtain reasonable assurance that quality has been achieved such that (a) the auditor has fulfilled the auditor's responsibilities and conducted the audit in accordance with professional standards and applicable legal and regulatory requirements, and (b) the auditor's report issued is appropriate in the circumstances.

2Key definitions

3Requirements

Leadership and the engagement partner's overall responsibility

• The engagement partner takes overall responsibility for managing and achieving quality, including creating an environment that emphasises the firm's culture and the expected behaviour of team members, and remains sufficiently and appropriately involved throughout the engagement.
• The partner may assign the design or performance of procedures and tasks to team members but retains responsibility for them; the partner's own involvement must be sufficient to provide a basis for the stand-back conclusion.
• Where the partner concludes that the firm's policies or procedures are inappropriate or insufficient in the circumstances, the partner must take action to comply with the ISA and communicate the matter to the firm.

Ethics, acceptance and resources

• Relevant ethical requirements: the partner understands them, remains alert to breaches through inquiry and observation, takes action when a breach is identified, and before dating the report determines whether ethical requirements including independence have been fulfilled. Other team members are also required to remain alert and to communicate breaches.
• Acceptance and continuance: the partner determines that the firm's acceptance and continuance procedures have been followed and that the conclusions are appropriate; information that would have caused the firm to decline is communicated promptly to the firm.
• Engagement resources: the partner determines that sufficient and appropriate resources are assigned or made available in a timely manner, that the team collectively has the competence and capabilities (including time) to perform the audit, and that any technology, methodology or auditor's expert used is appropriate. Where the firm's resources are inadequate, the partner obtains additional ones or acts appropriately, including communicating with the firm.

Engagement performance: direction, supervision, review, consultation

The partner is responsible for the nature, timing and extent of direction and supervision of team members and the review of their work, tailored to the assessed risks, the areas of judgement and the competence of the individuals. Direction means informing the team of their responsibilities, the objectives of the work, the nature of the business, risk-related issues and the detailed approach; supervision means tracking progress, addressing questions and identifying matters requiring more experienced input; review means evaluating whether the work was performed in accordance with standards, whether significant matters have been raised for consideration, whether consultations took place and were documented, and whether the evidence supports the conclusions.

• The partner reviews the financial statements and the report, the audit documentation relating to significant matters and significant judgements, and other documentation the partner considers relevant, and does so before dating the report.
• The partner takes responsibility for the team undertaking appropriate consultation on difficult or contentious matters, for the conclusions being agreed with the party consulted, and for those conclusions being implemented.
• Differences of opinion within the team, or with the engagement quality reviewer or those consulted, are resolved under the firm's policies before the report is dated; the report is not dated while a difference remains unresolved.
• Where an engagement quality review is required, the partner determines that a reviewer has been appointed, cooperates with the reviewer, discusses significant matters and judgements, and does not date the report until the review is complete. The partner remains responsible for the audit and the report regardless of the review.

Monitoring and remediation, and the stand-back

The partner understands the firm's monitoring and remediation process, and considers information from it, including any identified deficiencies relevant to the engagement, in determining whether it affects the audit. Before dating the report the partner determines, taking responsibility for it, that their involvement has been sufficient and appropriate throughout the engagement to provide a basis for concluding that the significant judgements and the conclusions reached are appropriate given the nature and circumstances of the engagement, and that the audit has been conducted in accordance with professional standards and applicable legal and regulatory requirements.

4Documentation and reporting

The engagement documentation must show that the partner's responsibilities have been met: the matters identified, relevant discussions and conclusions on ethical requirements and independence; the conclusions on acceptance and continuance; the nature, scope and conclusions of consultations; the engagement quality review having been completed on or before the date of the report where one was required; and the basis for the partner's stand-back determination. The auditor's report is not dated until the partner is satisfied that sufficient appropriate evidence has been obtained, that quality has been managed and achieved, and that any engagement quality review is complete.

5Examinable focus