## Quality Control for an Audit of Financial Statements (SA-220)

SA-220 deals with quality control at the individual engagement level; SQC-1 covers the firm level. The Engagement Partner (EP) bears overall responsibility.

### Comparison: SA-220 vs. SQC-1

	SA-220	SQC-1
Level	Individual engagement	Entire firm
Responsible party	Engagement Partner	Firm's CEO/MP
Scope	One specific audit	All engagements

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### Key Areas Under SA-220

#### 1. Ethical Requirements

EP identifies threats to independence that safeguards cannot eliminate/reduce to an acceptable level
Action: Report within the firm → determine appropriate action (eliminate the activity creating the threat)
If unresolvable and legally permitted: withdraw

#### 2. Leadership

EP ensures quality by:

1. Performing work that complies with SAs

2. Complying with firm's quality control policies

3. Issuing an appropriate audit opinion

4. Ensuring ET members can raise concerns without fear

#### 3. Acceptance & Continuance

EP evaluates:

1. Integrity of client promoters/key owners

2. Firm's capabilities and competence

3. Compliance with ethical requirements

4. Significant matters from this audit OR the prior year audit ← additional consideration beyond SQC-1

#### 4. Monitoring

Work monitored at regular intervals to check:

Adherence to professional standards
Whether QCS is properly designed
Whether QC policies are properly applied

#### 5. Engagement Performance — EP's Overall Responsibilities

Area	EP's Responsibility
Direction, supervision, performance	As per professional standards and law
Audit report	Ensuring it is appropriate
Documentation	Review of audit documentation
Evidence	Ensuring S&A evidence is obtained
Consultation	Ensuring ET consults on difficult matters (within or outside the firm)

#### 6. EQCR — EP's Specific Responsibilities (Listed Companies / When Required)

EP Must:	Details
Determine	EQCR reviewer is appointed
Discuss	Significant matters during audit AND during EQC with the reviewer
Date the report	NOT before completion of EQC

Differences of Opinion: If differences arise within ET or between ET/EP/EQCR → follow firm's procedures for resolving (e.g., consult other practitioner, professional body)

Worked example

### Example 1

During an audit of a listed company, the EQCR reviewer disagrees with the EP about whether a ₹10 crore contingent liability must be disclosed as a provision. The EP cannot date the audit report until this difference is resolved through the firm's dispute resolution procedures — dating the report before resolution is a direct violation of SA-220.

### Example 2

An ET member discovers that the audit manager has a small financial interest in the client entity. Applying SA-220 (environment of open communication — 'raise concerns without fear'), the ET member reports this to the EP. The EP must immediately assess the independence threat and, if it cannot be eliminated (e.g., by the manager divesting), remove the manager from the engagement.

⚠️ Common exam mistakes

Confusing SA-220 (engagement level quality control) with SQC-1 (firm level) — both cover similar elements but at different levels; SA-220 obligations fall on the EP for the specific engagement.
Thinking the EQCR reviewer shares or reduces the EP's responsibility — EP's responsibilities are NOT reduced by EQCR.
Forgetting SA-220's additional acceptance/continuance consideration: significant matters from the PRIOR YEAR audit must also be evaluated (SQC-1 does not require this specifically).
Assuming that if ET members agree among themselves on a position, there is no need for escalation — SA-220 requires that even ET-level disagreements are resolved per firm's procedures before the report is issued.

Reference: — SA 220 — Quality Control for an Audit of Financial Statements (ICAI)

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