CA Rishabh Jain QUALITY CONTROL 1

Chapter-1
Chapter 1
Quality Control

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Chapter Overview

I SQC 1
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II SA 220

SQC 1 Vs. SA 220

III

Peer Review Board

Mechanisms for
IV Review of Quality Quality Review Board
Control
National Financial
Reporting Authority (NFRA)

Introduction to Quality Standards

1) SQC 1- Quality Control for firms that perform audits and reviews of historical financial
information, and other assurance and related services engagements and SA-220- Quality
Control for an audit of financial statements deal with issue of establishing quality control
systems and responsibilities of auditors in this regard. Both the standards deal with
framework of audit quality.
2) SQC 1 applies to all engagements and deals with quality at level of firm. SA-220 deals with
audit quality at individual audit engagement level.
3) Besides above two standards, other Standards on auditing, code of ethics issued by ICAI
and certain provisions of Companies Act, 2013 facilitate quality control process. There also
exists mechanism for review of quality control through
Ü Peer review Board,

Ü Quality review Board and

Ü NFRA (National financial reporting authority)

SQC 1

Quality Control
Standards

SA 220

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“Quality Control For Firms That Perform Audits &
SQC-1 Reviews Of Historical Financial Information, And
Other Assurance & Related Services Engagements”

1) SQC 1 requires that the firm should establish a system of quality control designed to
provide it with reasonable assurance that

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a) the firm and its personnel comply with professional standards and regulatory and legal
requirements and
b) that reports issued by the firm or engagement partners are appropriate in the
circumstances.
2) Firm’s system of quality control should consist of policies designed to achieve these
objectives.
3) This quality control standard applies to all firms irrespective of their constitution.

Elements of a System of Quality Control:

The firm’s system of quality control should include policies and procedures addressing each
of the following elements:
(a) Leadership responsibilities for quality within the firm.
(b) Ethical requirements.
(c) Acceptance and continuance of client relationships and specific engagements.
(d) Human resources.
(e) Engagement performance.
(f) Monitoring.

(a) Leadership Responsibilities for Quality within the Firm

1) SQC 1 requires firms to establish policies and procedures designed to promote an internal
culture based on the recognition that quality is essential in performing engagements.
2) Such policies and procedures should require the firm’s chief executive officer or the firm’s
managing partners to assume ultimate responsibility for the firm’s system of quality control.
3) The example set by firm’s leadership encourages an inner culture that recognizes high quality
audit work.
4) Further, persons assigned operational responsibilities for the firm’s quality control system
by the firm’s chief executive officer or managing partners should have sufficient and
appropriate experience, ability, and the necessary authority to assume that responsibility.

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5) Essentially, it implies that audit quality is paramount in all engagements. It is non-

negotiable. In this regard, it should be ensured that: -
a) The firm assigns its management responsibilities so that commercial considerations do
not override the quality of work performed.
b) The firm’s policies and procedures addressing performance evaluation, compensation,
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and promotion (including incentive systems) with regard to its personnel are designed to
demonstrate the firm’s overriding commitment to quality and
c) The firm devotes sufficient resources for the development, documentation and support
of its quality control policies and procedures.

(b) Ethical requirements

1) The firm should establish policies and procedures designed to provide it with reasonable
assurance that the firm and its personnel comply with relevant ethical requirements
contained in the code of ethics issued by ICAI.
2) The Code establishes the fundamental principles of professional ethics, which include:
a) Integrity;
b) Objectivity;
c) Professional competence and due care;
d) Confidentiality; and
e) Professional behavior
3) Fundamental principles should be emphasized by
a) Actions of the leadership of the firm
b) spreading awareness and training
c) Monitoring
d) A process for dealing with non-compliance.
4) Observance of “Independence”
a) The firm should establish policies and procedures designed to provide it with
reasonable assurance that the firm, its personnel and, (including experts contracted
by the firm and network firm personnel), maintain independence where required by
the Code.
b) Such policies and procedures should enable the firm to: -
i. Communicate its independence requirements to its personnel
ii. Identify and evaluate circumstances and relationships that create threats to

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independence, and to take appropriate action to eliminate those threats or reduce

them to an acceptable level by applying safeguards, or, if considered appropriate,
to withdraw from the engagement.
c) There should exist a mechanism in the firm by which engagement partners provide
firm with relevant information about client engagements and personnel of firm
promptly notify firm of circumstances and relationships that create a threat to

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independence.
d) All breaches of independence should be promptly notified to firm for appropriate
action.
e) At least annually, the firm should obtain written confirmation of compliance with its
policies and procedures on independence from all firm personnel required to be
independent in terms of the requirements of the Code.
5) SQC 1 special emphasis on familiarity threat
a) SQC 1 lays special emphasis on familiarity threat. Using the same senior personnel on
assurance engagements over a prolonged period may impair the quality of performance
of the engagement.
b) Therefore, the firm should establish criteria for determining the need for safeguards
to address this threat.
c) In determining appropriate criteria, the firm considers such matters as-
Ÿ The nature of the engagement, including the extent to which it involves a matter of
public interest and
Ÿ The length of service of the senior personnel on the engagement.

Examples of safeguards
1) Include rotating the senior personnel or requiring an engagement quality control review.
The familiarity threat is particularly relevant in the context of financial statement audits
of listed entities.
2) For these audits, the engagement partner should be rotated after a pre - defined period,
normally not more than seven years (except in cases where audit of listed entities is
conducted by a sole practitioner).
3) However, to ensure quality control exists in such firms and appropriate reports are issued,
there is a process for mandatory peer review of such firms.

(c) Acceptance and Continuance of Client

Relationships and Specific Engagements

1) A firm before accepting an engagement should acquire vital information about the client.
Such an information should help firm to decide about: -
a) Integrity of Client, promoters and key managerial personnel.
b) Competence (including capabilities, time and resources) to perform engagement.

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c) Compliance with ethical requirements.

2) The firm should obtain such information as it considers necessary in the circumstances
before accepting an engagement with a new client, when deciding whether to continue an
existing engagement, and when considering acceptance of a new engagement with an
existing client.
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3) Where issues have been identified, and the firm decides to accept or continue the client
relationship or a specific engagement, it should document how the issues were resolved.

With regard to the integrity of a client, matters that the firm considers include, for
example:
The identity and business reputation of the client’s principal owners, key management, related
parties and those charged with its governance.
a) The nature of the client’s operations, including its business practices
b) Information concerning the attitude of the client’s principal owners, key management and
those charged with its governance towards such matters as aggressive interpretation of
accounting standards and the internal control environment.
c) Whether the client is aggressively concerned with maintaining the firm’s fees as low as
possible.
d) Indications of an inappropriate limitation in the scope of work.
e) Indications that the client might be involved in money laundering or other criminal
activities.
f) The reasons for the proposed appointment of the firm and non-reappointment of the
previous firm.
g) The extent of knowledge a firm will have regarding the integrity of a client will generally
grow within the context of an ongoing relationship with that client.

In considering whether the firm has the capabilities, competence, time and resources
to undertake an engagement, following matters have to be taken into consideration:
a) Firm personnel have knowledge of relevant industries or subject matters;
b) Firm personnel have experience with relevant regulatory or reporting requirements, or
the ability to gain the necessary skills and knowledge effectively;
c) The firm has sufficient personnel with the necessary capabilities and competence;
d) Experts are available, if needed;
e) Individuals meeting the criteria and eligibility requirements to perform engagement
quality control review are available, where applicable; and
f) The firm would be able to complete the engagement within the reporting deadline

Note – 1- If there is any conflict of interest between the firm and client: -
If there is any conflict of interest between the firm and client, it should be properly resolved
before accepting the engagement.
Where the firm obtains information that would have caused it to decline an engagement if that

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information had been obtainable earlier, policies and procedures on the continuance of the
engagement and the client relationship should include consideration of:
a) The professional and legal responsibilities that apply to the circumstances, including
whether there is a requirement for the firm to report to the person or persons who made
the appointment or, in some cases, to regulatory authorities; and

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b) The possibility of withdrawing from the engagement or from both the engagement and the
client relationship.
Note – 2- Policies and procedures on withdrawal from an engagement or from both the
engagement and the client relationship address issues that include the following:
a) Discussing with the appropriate level of the client’s management and those charged with its
governance regarding the appropriate action that the firm might take based on the
relevant facts and circumstances.
b) If the firm determines that it is appropriate to withdraw, discussing with the appropriate
level of the client’s management and those charged with its governance withdrawal from
the engagement or from both the engagement and the client relationship, and the reasons
for the withdrawal.
c) Considering whether there is a professional, regulatory or legal requirement for the firm
to remain in place, or for the firm to report the withdrawal from the engagement, or from
both the engagement and the client relationship, together with the reasons for the
withdrawal, to regulatory authorities.
d) Documenting significant issues, consultations, conclusions and the basis for the conclusions.

(d) Human Resources

1) The firm should establish policies and procedures designed to provide it with reasonable
assurance that it has sufficient personnel with the capabilities, competence, and
commitment to ethical principles necessary to perform its engagements in accordance with
professional standards and regulatory and legal requirements, and to enable the firm or
engagement partners to issue reports that are appropriate in the circumstances.
2) Such policies and procedures should address relevant HR issues including:
a) Recruitment;
b) Compensation
c) Training
d) Career development
e) Performance evaluation; etc.
3) There should be emphasis on the continuing professional development of firm’s personnel.
4) The firm should assign responsibility for each engagement to an engagement partner.
5) The firm should establish policies and procedures requiring that:

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a) The identity and role of the engagement partner are communicated to key members of
the client’s management and those charged with governance;
b) The engagement partner has the appropriate capabilities, competence, authority and
time to perform the role; and
c) The responsibilities of the engagement partner are clearly defined and communicated
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to that partner
Note:
The firm should assess performance of their partners and team members keeping in mind their
commitment towards quality.

(e) Engagement Performance

1) Consistency in quality of engagement performance is achieved through briefing of

engagement teams of
a) their objectives,
b) processes for complying with engagement standards,
c) processes of engagement supervision and training,
d) methods of reviewing performance of work,
e) appropriate documentation of work performed.
2) Consultation in difficult or contentious matters:
a) Consultation should take place in difficult or contentious matters pertaining to an
engagement.
b) Consultation includes discussion, at the appropriate professional level, with individuals
within or outside the firm who have specialized expertise, to resolve a difficult or
contentious matter.
c) It helps to promote quality and improves the application of professional judgment.
d) Consultation procedures require consultation with those having appropriate
knowledge, seniority and experience within the firm (or outside the firm) on significant
technical, ethical and other matters and appropriate documentation and
implementation of conclusions resulting from consultations.
e) A firm needing to consult externally, for example, a firm without appropriate internal
resources, may take advantage of advisory services provided by other firms or
professional and regulatory bodies.
f) Complete and proper documentation should be maintained on issues involved and
results of consultation

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(f) Monitoring

1) The firm should ensure that policies and procedures relating to the system of quality
control are
a) relevant,

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b) adequate,
c) operating effectively and
d) complied with in practice.
2) Such policies and procedures should include an ongoing consideration and evaluation of the
firm’s system of quality control, including a periodic inspection of a selection of completed
engagements.
3) Quality control of engagements has to be monitored taking into account following factors:
a) Deciding whether quality control system of the firm has been appropriately designed
and effectively implemented.
b) Examining whether new developments in the professional standards, legal and
regulatory requirements have been reflected in the quality control policies.
c) Conducting monitoring by entrusting responsibility of monitoring process to a partner
or other persons with sufficient and appropriate experience and authority in the firm.
d) Dealing with complaints and allegations against the firm or any employees of it of non-
compliance with professional standards or appropriate regulatory requirements by a
person within or outside the firm.
e) Taking appropriate remedial actions against the personnel who did not conform to
quality control policies.
f) Taking action when deficiencies in the design or operation of the firm’s quality control
policies and procedures, or non-compliance with the firm’s system of quality control are
identified.

Engagement quality control review

1) Significant judgments made in an engagement should be reviewed by an engagement quality

control reviewer for taking an objective view before the report is issued.
2) The extent of the review depends on the complexity of the engagement and the risk that
the report might not be appropriate in the circumstances. The review does not reduce the
responsibilities of the engagement partner.
3) Engagement quality control review is mandatory for:
a) all audits of financial statements of listed entities.

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b) In respect of other engagements, firm should devise criteria to determine cases

requiring performance of engagement quality control review.
4) An engagement quality control review for audits of financial statements of listed
entities includes considering the following:
a) The engagement team’s evaluation of the firm’s independence in relation to the specific
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engagement.
b) Significant risks identified during the engagement and the responses to those risks.
c) Judgments made, particularly with respect to materiality and significant risks.
d) Whether appropriate consultation has taken place on matters involving differences of
opinion or other difficult or contentious matters, and the conclusions arising from those
consultations.
e) The significance and disposition of corrected and uncorrected misstatements
identified during the engagement.
f) The matters to be communicated to management and those charged with governance
and, where applicable, other parties such as regulatory bodies.
g) Whether working papers selected for review reflect the work performed in relation to
the significant judgments and support the conclusions reached.
h) The appropriateness of the report to be issued
5) Engagement quality control reviewer should be a suitably qualified external person such as
a partner or employee (who should be member of ICAI) or can be from another firm with
similar background. It is necessary to maintain objectivity of such reviewer.
6) Therefore, participation in engagement or making decisions for engagement team is to be
avoided at all costs.
7) However, engagement partner may consult engagement quality control reviewer during the
engagement so as not to compromise his objectivity and eligibility to perform the role.

Note
a) Where the nature and extent of the consultations become significant, however, care is
taken by both the engagement team and the reviewer to maintain the reviewer’s
objectivity.
b) Where this is not possible, another individual within the firm or a suitably qualified
external person is appointed to take on the role of either the engagement quality control
reviewer or the person to be consulted on the engagement.
c) The firm’s policies should provide for the replacement of the engagement quality control
reviewer where the ability to perform an objective review may be impaired.

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Differences of Opinion

1) There might be difference of opinion within engagement team, with those consulted and
between engagement partner and engagement quality control reviewer. The report should
only be issued after resolution of such differences.

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2) In case, recommendations of engagement quality control reviewer are not accepted by
engagement partner and matter is not resolved to reviewer’s satisfaction, the matter
should be resolved by following established procedures of firm like by consulting with
another practitioner or firm, or a professional or regulatory body.

Engagement documentation

1) The firm should establish policies and procedures for engagement teams to complete the
assembly of final engagement files on a timely basis after the engagement reports have
been finalized.
2) Engagement files should be completed in not more than 60 days after date of auditor’s
report in case of audit engagements and in other cases within the limits appropriate to
engagements.
3) Where two or more different reports are issued in respect of the same subject matter
information of an entity, the firm’s policies and procedures relating to time limits for the
assembly of final engagement files should be considered for each report as if it were for a
separate engagement.
For example, be the case when the firm issues an auditor’s report on a component’s financial
information for group consolidation purposes and, at a subsequent date, an auditor’s report
on the same financial information for statutory purposes.
Policies and procedures should be designed to maintain the confidentiality, safe custody,
integrity, accessibility and retrievability of engagement documentation.

4) Care should be taken that policies and procedures on documentation of the engagement
quality control review should require documentation that: -
a) The procedures required by the firm’s policies on engagement quality control review
have been performed.
b) The engagement quality control review has been completed before the report is issued
and
c) The reviewer is not aware of any unresolved matters that would cause the reviewer to
believe that the significant judgments the engagement team made and the conclusions
they reached were not appropriate.

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Who owns Engagement Documentation?

a) Unless otherwise specified by law or regulation, engagement documentation is the

property of the firm.
b) The firm may, at its discretion, make portions of, or extracts from, engagement
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documentation available to clients, provided such disclosure does not undermine the
validity of the work performed, or, in the case of assurance engagements, the
independence of the firm or its personnel.

Retention of Engagement Documentation

a) Engagement documentation has to be retained for a period of time sufficient to permit

those performing monitoring procedures to evaluate the firm’s compliance with its system
of quality control, or for a longer period if required by law or regulation.
b) In the specific case of audit engagements, the retention period ordinarily is no shorter
than 7 years from the date of the auditor’s report, or, if later, the date of the group
auditor’s report.

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Quality Control for an
SA 220
Audit of Financial Statements

a) Engagement partner of a team is responsible for quality control procedures of a particular

audit engagement in accordance with SA-220. Therefore, SA-220 is premised on the basis

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that the firm is subject to SQC 1.
b) Within the context of the firm’s system of quality control, engagement teams have a
responsibility to implement quality control procedures that are applicable to the audit
engagement and provide the firm with relevant information to enable the functioning of
that part of the firm’s system of quality control relating to independence.
c) Engagement teams are entitled to rely on the firm’s system of quality control, unless
information provided by the firm or other parties suggests otherwise.

Objective of this SA

The objective of the auditor is to implement quality control procedures at the engagement
level that provide the auditor with reasonable assurance that:
a) The audit complies with professional standards and regulatory and legal requirements;
and
b) The auditor’s report issued is appropriate in the circumstances.

Elements of A System of Quality Control

It describes responsibilities of engagement partner in relation to following matters: -

(a) Leadership responsibilities for quality on audits
(b) Relevant Ethical requirements
(c) Acceptance and continuance of client relationships and specific engagements
(d) Assignment of engagement teams
(e) Engagement performance
(f) Monitoring

(a) Leadership responsibilities for quality on audits

1) Leadership responsibility of an engagement partner is to take responsibility for the overall

quality on each audit engagement.
2) The actions of the engagement partner and appropriate messages to the other members of
the engagement team, in taking responsibility for the overall quality on each audit
engagement, emphasis:
3) The importance to audit quality of:

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a) Performing work that complies with professional standards and regulatory and legal
requirements;
b) Complying with the firm’s quality control policies and procedures as applicable;
c) Issuing auditor’s reports that are appropriate in the circumstances; and
d) The engagement team’s ability to raise concerns without fear of reprisals; and
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4) The fact that quality is essential in performing audit engagements.

(b) Relevant Ethical Requirements

The responsibilities of an engagement partner in relation to ethical requirements in an audit

engagement are as under: -
1) Identifying a threat to independence regarding the audit engagement that safeguards
may not be able to eliminate or reduce to an acceptable level.
2) Reporting by engagement partner to the relevant persons within the firm to determine
appropriate action, which may include
a) eliminating the activity or interest that creates the threat, or
b) withdrawing from the audit engagement, where withdrawal is legally permitted.

(c) Acceptance and Continuance of Client Relationships & Audit Engagements

1) The responsibility of an engagement partner in this regard in an audit engagement is on

lines of SQC 1 which requires the firm should obtain such information as it considers
necessary in the circumstances before accepting an engagement with a new client, when
deciding whether to continue an existing engagement, and when considering acceptance of a
new engagement with an existing client.
2) Information like
a) integrity of principal owners,
b) competence of engagement team and consideration of necessary capabilities including
time and resources,
c) compliance with relevant ethical requirements and
d) significant matters arisen during current or previous audit engagement and
e) their implications assist the engagement partner in determining whether the
conclusions reached regarding the acceptance and continuance of client relationships
and audit engagements are appropriate.

(d) Assignment of Engagement Teams

It should be ensured by engagement partner that the engagement team and any auditor’s
experts who are not part of the engagement team, collectively have the appropriate
competence and capabilities to perform the engagement in accordance with professional
standards and regulatory and legal requirements.

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(e) Engagement Performance

1) Engagement partner has the responsibility for direction, supervision and performance of
audit engagement in accordance with professional standards and regulatory and legal
requirements.

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2) He is responsible for auditor’s report being appropriate in circumstances.
3) Further, review of audit documentation before issue of audit report is his responsibility. It
has to be ensured that sufficient appropriate audit evidence has been obtained to support
the conclusions reached and for issuance of auditor’s report.
4) Engagement partner is also responsible for ensuring undertaking appropriate consultation
on difficult or contentious matters by engagement team not only within the team but also
with others at appropriate level within or outside the firm.

(f) Monitoring

1) An effective system of quality control includes a monitoring process designed to provide

the firm with reasonable assurance that its policies and procedures relating to the system
of quality control are relevant, adequate, and operating effectively.
2) The engagement partner shall consider the results of the firm’s monitoring process as
evidenced in the latest information circulated by the firm and, if applicable, other network
firms and whether deficiencies noted in that information may affect the audit engagement

Engagement Quality Control Review

1) For audits of financial statements of listed entities, and those other audit
engagements, if any, for which the firm has determined that an engagement quality
control review is required, the engagement partner shall:
a) Determine that an engagement quality control reviewer has been appointed,
b) Discuss significant matters arising during the audit engagement, including those
identified during the engagement quality control review, with the engagement quality
control reviewer
c) Not date the auditor report until the completion of the engagement quality control
review.
2) The engagement quality control reviewer shall perform an objective evaluation of the
significant judgments made by the engagement team, and the conclusions reached in
formulating the auditor’s report. This evaluation shall involve:
a) Discussion of significant matters with the engagement partner
b) Review of the financial statements and the proposed auditor’s report
c) Review of selected audit documentation relating to the significant judgments the

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engagement team made and the conclusions it reached and

d) Evaluation of the conclusions reached in formulating the auditor’s report and
consideration of whether the proposed auditor’s report is appropriate
3) For audits of financial statements of listed entities, the engagement quality control
reviewer, on performing an engagement quality control review, shall also consider the
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following::
a) The engagement team’s evaluation of the firm’s independence in relation to the audit
engagement;
b) Whether appropriate consultation has taken place on matters involving differences of
opinion or other difficult or contentious matters, and the conclusions arising from
those consultations;
c) Whether audit documentation selected for review reflects the work performed in
relation to the significant judgments made and supports the conclusions reached.

Differences of Opinion

If differences of opinion arise within the engagement team, with those consulted or, where
applicable, between the engagement partner and the engagement quality control reviewer,
the engagement team shall follow the firm’s policies and procedures for dealing with and
resolving differences of opinion.

Documentation
1) The engagement partner should document following matters pertaining to an audit
engagement:
a) Issues identified with respect to compliance with relevant; ethical requirement and
how they were resolved;
b) Conclusions on compliance with independence requirements that apply to the audit
engagement, and any relevant discussions with the firm that support these conclusions.
c) Conclusions reached regarding the acceptance and continuance of client relationships
and audit engagements.
c) The nature and scope of, and conclusions resulting from, consultations undertaken
during the course of the audit engagement.

2) Besides, the engagement quality control reviewer shall document, for the audit
engagement reviewed, that:
a) The procedures required by the firm’s policies on engagement quality control review
have been performed.
b) The engagement quality control review has been completed on or before the date of
the auditor’s report.
c) The reviewer is not aware of any unresolved matters.

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III SQC 1 VS SA 220

Key Differences In Nature, Scope And Applicability:

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S.N SQC 1 SA 220

1 It applies to entire firm and fixes the It applies to a particular audit

responsibility of firm to be assumed by engagement and engagement partner
CEO or managing partners takes responsibility of the same.

2 It is applicable to audits, reviews of It is applicable to audit engagements

historical financial Information, and only.
other assurance and related services
engagements.

3 It relates to setting up of a quality It deals with responsibilities of

control system consisting of policies and engagement teams to implement quality
procedures for firm as a whole. control procedures that are applicable to
audit engagements.

4 It pertains to establishing a system of It is premised on the basis that firm is

quality control designed to provide firm subject to SQC 1. Therefore, SQC 1 is a
with a reasonable assurance that a firm sine qua non for applicability of SA 220.
and its personnel comply with It is within overall context of a firm’s
professional standards and regulatory system of quality control, engagement
and legal requirements so that reports teams implement quality control
issued by firm or engagement partners procedures applicable to audit
are appropriate in circumstances. engagements.

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IV MECHANISMS FOR REVIEW OF QUALITY CONTROL

Peer Review Board

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1) Peer review Board is constituted by Council of ICAI. The main objective of Peer review
Board is to ensure that, in carrying out assurance assignments: -
a) Technical, professional and ethical standards including regulatory requirements are
complied with by members of ICAI.
b) Proper systems are in place including documentation thereof which amply demonstrate
quality of assurance services provided by members.
2) The peer review is meant for purpose of enhancing quality of professional work resulting in
more reliable and useful audit reports.
3) Peer review means an examination and review of the systems and procedures to determine
whether the same have been put in place by the Practice Unit for ensuring the quality of
assurance services as envisaged by the technical, professional and ethical Standards or
any other regulatory requirements.
4) Once a Practice Unit is subjected to Peer review, its assurance engagement records
pertaining to the Peer review period are subject to examination and review by the Peer
Reviewer. On completion of this exercise, a “peer review certificate” is issued in case of
unqualified report issued by Peer Reviewer.
5) In case of a qualified report, it is informed to the Practice Unit that same cannot be issued
along with the reasons therefor as well as inform about the due date for conducting a
follow-on review as may be decided by the Board.

Quality Review Board

1) Quality review Board has been set up by Central government. It consists of members
nominated by Central govt and Council of ICAI. The functions of QRB are: -
a) To make recommendations to the Council regarding the quality of services provided by
the members of the Institute;
b) To review the quality of services provided by the members of the Institute including
audit services and
c) To guide the members of the Institute to improve the quality of services and
adherence to the various statutory and other regulatory requirements;
2) The statutory auditors in respect of the companies are identified for their audit quality
review based upon risk-based approach. The review is carried out by technical reviewers
who are empanelled by QRB on engagement basis from across the country.

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National Financial Reporting Authority (NFRA)

1) NFRA has been constituted in terms of Section 132(1) of Companies Act,2013. Duties of
NFRA also include the following: -
a) Monitor and enforce compliance with accounting standards and auditing standards

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b) Oversee the quality of service of the professions associated with ensuring
compliance with such standards and suggest measures for improvement in the quality of
service
2) It has power to monitor and enforce compliance with accounting standards and auditing
standards and oversee the quality of service under section 132(2) or undertake
investigation under section 132(4) of the auditors of certain class of companies. Such
companies include listed companies, insurance companies, banking companies and other
companies as provided for in rule 3 of NFRA Rules,2018.
3) Therefore, overseeing quality of audit services of listed companies falls under the purview
of NFRA. QRB can review quality of audit services provided by the members of the
Institute only in respect of entities other than those specified under Rule 3 of NFRA
Rules, 2018 and those referred to QRB by NFRA under relevant rules.

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 1 QUALITY CONTROL CA Rishabh Jain
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