Understanding the Principles of ISQC 1

Business meetingThe objective of the firm is to establish and maintain a system of quality control to provide it with reasonable assurance that:

  • The firm and its personnel comply with professional standards and applicable legal and regulatory requirements; and
  • Reports issued by the firm or engagement partners are appropriate in the circumstances.

The Quality Control System

The firm shall establish and maintain a system of quality control that includes policies and procedures that address each of the following elements:

  • Leadership responsibilities for quality within the firm.
  • Relevant ethical requirements.
  • Acceptance and continuance of client relationships and specific engagements.
  • Human resources.
  • Engagement performance.
  • Monitoring.

The firm shall document its policies and procedures and communicate them to the firm’s personnel. (Ref: Para. A2–A3)

The firm shall establish, implement, maintain, monitor, and enforce a quality control system that provides reasonable assurance that its personnel comply with professional standards and applicable regulatory and legal requirements, and that the firm’s engagement reports are appropriate for the circumstances.

Accordingly, the firm’s quality control system shall include appropriately documented, communicated, and monitored policies and procedures that address each of the following elements.

  • Leadership responsibilities for quality within the firm
  • Relevant ethical requirements (including independence)
  • Accepting and continuing client relationships and specific engagements
  • Human resources
  • Engagement performance (including engagement quality control review)
  • Monitoring

It is suggested that the underlying foundation of the quality control system be built on principles that stress:

  • Ethical conduct
  • Independence and objectivity
  • Maintaining professional competency
  • Due care and quality of work
  • Generally accepted standards of practice;
  • Clarity of wording and guidance;
  • Practicality and relevance balanced with economics, firm size and resources, and reasonable cost/benefit considerations for clients and the firm;
  • Reasonable client retention; and
  • Personnel development, satisfaction, and retention.

Accordingly, the quality control system is designed to encompass and address the specific elements and practices needed to meet or exceed professional standards, applicable legal and regulatory requirements, and the IESBA Code.

In the introduction to the firm’s general policy statement on quality control, the firm may include its mission statement. A firm may also wish to identify its goals and details on the organizational structure.

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General Roles and Responsibilities of All Partners and Staff

  • All partners and staff are, to varying degrees, responsible for implementing the firm’s quality control policies and procedures.
  • In consultation with all partners and staff, a firm can choose to identify the common values to which it is willing to subscribe, and which will comprise a part of its quality control manual. These values might include quality of service, timely and appropriate client communication, and a collegial professional attitude within the firm, which is backed by integrity, conscientiousness, and consultation.

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