DECEMBER 2020
INTRODUCTION TO ISA 220
(REVISED)
Quality Management for an
Audit of Financial Statements
FACT SHEET
INTRODUCTION TO ISA 220 (REVISED)
BACKGROUND
WHAT? WHEN?
ISA 220 (Revised), Quality Management for an Audit of Financial ISA 220 (Revised) is effective for
Statements, deals with the specific responsibilities of the auditor regarding audits of financial statements for
quality management at the engagement level for an audit of financial periods beginning on or after
statements, and the related responsibilities of the engagement partner. December 15, 2022.
HOW? The revised standard clarifies and strengthens the key
elements of quality management at the engagement
level. This is achieved by focusing on the critically
important role of the engagement partner in managing
and achieving quality on the audit engagement, and
reinforcing the importance of quality to all members of
the engagement team.
WHAT OUTCOME IS THE REVISED STANDARD SEEKING TO ACHIEVE?
The changes are intended to:
• Encourage proactive management of quality at the engagement
level.
• Keep the standard fit for purpose in a wide range of circumstances
and in a complex environment.
• Emphasize the importance of professional skepticism and enhance
the documentation of the auditor’s judgments.
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INTRODUCTION TO ISA 220 (REVISED)
WHAT ARE THE SIGNIFICANT CHANGES?
MANAGING AND ACHIEVING QUALITY AT THE ENGAGEMENT LEVEL
The engagement partner’s overall responsibility to manage and achieve quality on the engagement is demonstrated through
sufficient and appropriate involvement throughout the audit engagement.
Engagement partner is responsible
for managing and achieving LEADERSHIP
quality at the engagement level. RESPONSIBILITIES
Engagement partner is responsible
for determining the nature, DIRECTION,
timing and extent of direction, STANDBACK SUPERVISION,
supervision and review, in light AND REVIEW
of engagement circumstances.
Engagement partner shall be
satisfied that involvement has
been sufficient and appropriate
to provide basis for taking overall
ENGAGEMENT PARTNER INVOLVEMENT
responsibility. THROUGHOUT THE ENGAGEMENT
MODERNIZING ISA 220 FOR AN EVOLVING ENVIRONMENT
ENGAGEMENT TEAM DEFINITION
All partners and staff performing ….excluding an auditor’s
the audit engagement, and any external expert and internal
other individuals who perform auditors who provide direct
Changes have been made to the
audit procedures on assistance on an engagement.
definition of the engagement team
the engagement…
to recognize different and evolving
engagement team structures.
Changes in the definition recognize that, regardless of where individuals are located or how they
are related to the firm, if an individual is performing audit procedures then he or she is to be
appropriately directed and supervised and the work reviewed in accordance with ISA 220 (Revised).
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INTRODUCTION TO ISA 220 (REVISED)
WHAT ARE THE SIGNIFICANT CHANGES? (cont.)
CLARIFYING ENGAGEMENT PARTNER RESPONSIBILITIES
• The term “the engagement partner • The engagement partner is required to take into account
shall take responsibility for…” information obtained in the acceptance and continuance
is used for those requirements that process in planning and performing the audit engagement.
the engagement partner is permitted
to assign to appropriately skilled or
suitably experienced members of the
engagement team.
• For other requirements, ISA 220 (Revised)
expressly intends that the requirement
or responsibility be fulfilled by the
• Requirements and application material are more explicit
engagement partner and may need
about what the engagement partner needs to review,
to obtain information from the firm
including a listing of examples of significant judgments in
or the engagement team to fulfill the
relation to the audit engagement.
requirement.
ENGAGEMENT TEAM MAY DEPEND ON THE FIRM’S SYSTEM OF
QUALITY MANAGEMENT
ISA 220 (Revised) clarifies that, ordinarily, the engagement team may
depend on the firm’s policies or procedures, unless (i) the engagement
team’s understanding or experience indicates that the firm’s policies or
procedures would not be effective or (ii) information provided by the firm
or others indicates that the firm’s policies or procedures are not operating
effectively. This approach avoids the risk that the engagement team blindly
relies on the firm’s system of quality management.
ISA 220 (Revised) also integrates the new quality management concepts
in ISQM 1, Quality Management for Firms that Perform Audits or Reviews of
Financial Statements, or Other Assurance or Related Services Engagements, so
that such concepts can be carried through at the engagement level.
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INTRODUCTION TO ISA 220 (REVISED)
WHAT ARE THE SIGNIFICANT CHANGES? (cont.)
PROFESSIONAL SKEPTICISM IS CENTRAL TO QUALITY MANAGEMENT
ISA 220 (Revised) also
Application material describes
includes new material on the
impediments to professional
importance of professional
skepticism, auditor biases,
skepticism and professional
and actions the engagement
judgment in performing audit
team can take.
engagements.
RESOURCES
The engagement partner is responsible for
determining that there are sufficient and
appropriate resources assigned or made
available on a timely basis and for taking
appropriate action when insufficient or HUMAN TECHNOLOGICAL INTELLECTUAL
RESOURCES RESOURCES RESOURCES
inappropriate resources are provided by
the firm, among other matters.
HOW IS SCALABILITY ADDRESSED?
The standard includes introductory material on scalability that the standard is
intended to be applied in the context of the nature and circumstances of each
audit. This includes audits carried out entirely by the engagement partner and
those whose nature and circumstances are more complex.
Further implementation support materials are
available on the IAASB website.
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