SUPERVISION AND MONITORING OF AUDITORS

Functions and Responsibility

Audit engagement partners should ensure that audit work is directed, supervised
and reviewed in a manner that provides reasonable assurance that the work
has been performed competently.

Direction and Supervision

Direction of audit staff involves:
(a) Being informed of their responsibilities, the nature of the entity’s
business, accounting or auditing problems that may arise, and the
overall audit plan;
(b) Being encouraged to raise any questions they may have with more
experienced team members;
(c) Understanding the objectives of the work to avoid drawing inappropriate
conclusions as a result of misunderstandings; and
(d) Being educated on appropriate team-working and training.
Supervision is closely linked to ‘both direction and review and includes:
(a) Considering the progress of the audit;
(b) Considering whether audit staff have the competencies necessary to
perform the audit work expected of them and sufficient time to carry out
their work, whether they understand their instructions and whether the
work is being carried out in accordance with the overall audit plan and
audit programme;
(c) Addressing significant accounting and auditing questions raised during
the audit, assessing their significance and modifying the overall audit
plan and audit programme as appropriate; and
(d) Identifying matters for further consideration during the audit.
Work performed by audit staff is reviewed by other more senior audit staff or
the audit engagement partner. Reviewers consider whether:
(a) The work has been performed in accordance with the firm’s procedures
and in accordance with the audit programme;
(b) The work performed is adequate in light of the results obtained and has
been adequately documented;
(c) Significant audit matters have been raised for further consideration;
(d) Appropriate consultations have taken place and the results of such
consultations have been documented;
(e) The objectives of the audit procedures have been achieved; and
(f) The conclusions are consistent with the results of the work performed.
Audit engagement partners perform an overall review of working papers. The
review is sufficient for them to be satisfied that the working papers contain
sufficient appropriate evidence to support the conclusions reached and for the
auditors’ report to be issued. Although the review may not cover all working
papers, it covers:
(a) All critical areas of judgement, especially any relating to difficult or
contentious matters identified during the audit;
(b) Audit evidence relating to high risk areas; and
(c) Any other areas which the audit engagement partner considers
important.
Audit engagement partners document the extent of their review and its timing
so as to demonstrate that it was completed before the auditors’ report was
signed.
The audit engagement partner reads the auditors’ report, the financial
statements and the information issued with the financial statements’ (Chitty,
2004).
Review notes, recording questions or points raised in the course of the audit
need not be retained at the end of the audit provided that the working papers
have been updated thereto and, in particular, record the reasoning on all
significant matters which require the exercise of judgement.

Monitoring

Firms should appoint a senior audit partner to take responsibility for monitoring
the quality of audits carried out by the firm.
The responsibility for monitoring the quality of audit performance is different
from the responsibility for the establishment of quality control policy and
processes. Wherever possible, the two responsibilities are undertaken by
different senior audit partners.
The objective of monitoring reviews is to provide an independent assessment
of:
(a) The appropriateness of the auditors’ report, and the conduct of the audit
in accordance with auditing standards, ethical and other regulatory
requirements; and
(b) Whether the firm’s own quality control policy and processes have been
applied in practice and appropriate consultation has taken place in
relation to difficult or contentious issues.
The senior audit partner responsible for the monitoring process:
(a) Develops procedures for the systematic review of the conduct of a sample
of completed audit engagements. The review is undertaken by competent
individuals who, wherever possible, are independent of those performing
the audit;
(b) Develops appropriate course of action where failures are identified.
Courses of action may involve communication of the findings within the
firm, additional training and professional development; and
(c) Ensures changes to the firm’s policies and procedures and disciplinary
action against those who repeatedly fail to comply with the firm’s
standards.

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