## SA 220 – Quality Control for an Audit of Financial Statements

### Objective

Implement QC procedures in every engagement to obtain reasonable assurance that:

1. The audit complies with Professional Standards and Legal Requirements

2. The Audit Report issued is appropriate

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### Client Acceptance and Continuance

Before accepting or continuing a client relationship, evaluate:

Factor	Key Question
Integrity of KMP & TCWG	Are key people honest and ethical?
Team capabilities	Does the team have the skills, time, and resources?
Ethical compliance	Can the team meet all ethical requirements?
Significant matters	Have material issues arisen that affect the relationship?

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### Engagement Partner (EP) Responsibilities

The EP is personally responsible for audit quality on each engagement across three dimensions:

#### A) Direction — before and at the start of work

Inform team members about:

Nature of the entity's business
Risk-related issues
Problems that may arise
The audit plan
Allocation of staff

#### B) Supervision — during work

Track progress of the audit
Ensure work is carried out as planned
Address significant matters as they arise
Identify need to modify the audit plan
Coordinate among team members
Identify matters requiring consultation

#### C) Review — ongoing / after work

Assess whether:

Work complies with professional standards and legal requirements
Significant matters have been raised for further consideration
Consultations have taken place and conclusions are documented and implemented
Nature, timing, or extent of work needs revision
Work performed supports the conclusions reached
Evidence obtained is sufficient and appropriate
Objectives of engagement procedures have been achieved

Worked example

### Example 1

Scenario: An Engagement Partner assigns a junior associate to audit the treasury function of a large listed company without briefing them on the entity's complex hedging arrangements or the risk of management override. Identify the QC failures.

Analysis: Two failures: (1) Inadequate Direction — the EP failed to brief the team on risk-related issues and nature of business before fieldwork began; (2) Inadequate Supervision — no tracking of whether work was proceeding as planned on a high-risk area. Under SA 220, the EP is personally responsible for both.

⚠️ Common exam mistakes

Treating QC as only a firm-level requirement — SA 220 applies at the individual engagement level
Confusing Direction, Supervision, and Review — Direction is before work begins, Supervision is during, Review is ongoing/after
Omitting ethical requirements when listing client acceptance factors — all four factors are mandatory
Confusing 'sufficient and appropriate evidence' as only a Review concern — it flows from all three dimensions

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

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