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

### 1. Leadership Responsibilities for Quality

The engagement partner is responsible for overall quality on each audit engagement assigned to them.
Must clearly communicate the following messages to the audit team:
Perform work complying with professional standards and regulatory/legal requirements.
Comply with firm's quality control policies and procedures.
Issue appropriate auditor's reports.
Team members can raise concerns without fear of reprisals.
Quality is essential in performing audit engagements.

### 2. Relevant Ethical Requirements

Trigger	Action
Engagement partner identifies a threat to independence that safeguards cannot eliminate or reduce to an acceptable level	Report to relevant persons within the firm → determine action: eliminate the activity/interest creating the threat, OR withdraw from the engagement (if legally permitted)

### 3. Acceptance and Continuance of Client Relationships – Mnemonic: C²SI

The engagement partner evaluates:

C – Whether the engagement team is Competent with necessary capabilities, time, and resources.
C – Whether the firm and team can Comply with relevant ethical requirements.
S – Significant matters arising during current or previous engagements and their implications.
I – Integrity of principal owners, key management, and those charged with governance.

### 4. Assignment of Engagement Teams

Engagement partner must ensure the team (including any auditor's experts not part of the team) collectively have:
Appropriate competence and capabilities
Ability to perform the engagement per professional standards and legal/regulatory requirements

### 5. Engagement Performance

Partner ensures appropriate consultation on difficult/contentious matters, within and outside the firm.
For audits of listed entities (and other engagements requiring EQCR), the partner must:
(a) Determine that an EQCR has been appointed.
(b) Discuss significant matters (including those from EQCR) with the reviewer.
(c) Not date the auditor's report until EQCR is complete.
Differences of opinion → follow firm's policies for resolving them.

### 6. Monitoring – Documentation Requirements

The engagement partner must document the following for each audit:

Issues identified regarding compliance with ethical requirements and how they were resolved.
Conclusions on compliance with independence requirements.
Conclusions on acceptance and continuance of client relationships and engagements.
Nature, scope, and conclusions of consultations undertaken during the engagement.

Worked example

### Example 1

Example – C²SI in Practice: A new client approaches the firm. The engagement partner applies C²SI: (C) Does the team have tax and IT expertise needed? (C) Does the team's prior relationship with the CFO create an independence threat? (S) Were there any prior audit qualifications with a previous auditor? (I) Has the promoter been involved in regulatory investigations? Only after satisfactory answers can the partner accept the engagement.

### Example 2

Example – EQCR & Report Dating: An audit of a listed entity is complete, and the partner is ready to sign. However, the EQCR is still in progress and has flagged a concern on revenue recognition. The partner cannot date the report until the EQCR is completed and the concern is resolved.

### Example 3

Example – Independence Threat: Mid-audit, the engagement partner discovers that a team member's spouse recently acquired shares in the audit client. Since this threat cannot be reduced to an acceptable level, the partner reports this to the firm, and the team member is removed from the engagement.

⚠️ Common exam mistakes

Confusing SA 220 (engagement-level quality control) with SQC 1 (firm-level quality control) – SA 220 focuses on the engagement partner's specific duties.
Forgetting the C²SI mnemonic order, especially mixing up the two 'C' factors (Competence vs Compliance).
Assuming EQCR is optional for listed entities – it is mandatory.
Thinking the partner can date the report before the EQCR is completed – this is explicitly prohibited.
Overlooking that auditor's experts who are NOT part of the engagement team must also collectively meet competence requirements under Assignment of Teams.

Reference: Paragraphs covering Leadership (Para 8), Ethical Requirements (Para 9-11), Acceptance & Continuance (Para 12-13), Team Assignment (Para 14), Engagement Performance (Para 15-23), Monitoring (Para 24) — SA 220 – Quality Control for an Audit of Financial Statements (ICAI)

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SA 220 – Quality Control for an Audit of Financial Statements (Engagement Partner's Responsibilities)

Worked example

⚠️ Common exam mistakes