Audit Quality Control and Professional Ethics
Quality management
Quality control at the firm level and at the engagement level is governed by ISQM 1 (firm-level quality management) and ISA 220 (engagement quality). Candidates must understand the components: governance and leadership, relevant ethical requirements, acceptance and continuance of client relationships, human resources, engagement performance, and monitoring and remediation. Know the role of the engagement quality reviewer for listed and higher-risk engagements.
Professional ethics
Ethics is built on the IESBA Code principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Candidates must apply the conceptual framework: identify threats, evaluate their significance, and address them. Know the five threat categories - self-interest, self-review, advocacy, familiarity, and intimidation - and the safeguards (e.g., rotation, independent review, declining the engagement).
Traps in questions
- Confusing independence (a state) with objectivity (a mindset).
- Assuming a safeguard always eliminates a threat; sometimes the only response is to decline or withdraw.
- Overlooking familiarity threat from long association - rotation addresses it.
- Treating confidentiality as absolute; legal or professional disclosure may be required.
Rule of thumb
For any ethics scenario, run the three-step test: (1) identify the threat category, (2) assess whether it is at an acceptable level, (3) if not, apply a safeguard or decline the engagement. Never assume a fee arrangement removes a self-interest threat - it usually creates one.