EVALUATION ON THE IMPLEMENTATION OF ISA 220 – QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENT (A CASE STUDY OF KAP XYZ)

Abstract

One of the external auditor’s roles is to ensure that financial report prepared by the management of the company has been in line with the Generally Accepted Accounting Principle (GAAP). Most of business organizations rely on auditor’s report as part of their accountability. In order to make good quality of audit report there are several requirements established in ISA 220, need to be implemented by auditors. The purpose of this research is to evaluate how the XYZ CPA Firm implements the audit quality control as required by ISA 220. This research is using qualitative method with type of evidence (audit) approach. Gathering and assessing data is done through literature review and field research such as observation, inquiries of clients and documentation are done to obtain data. Obtained data available based on the implementation of ISA 220 requirements. During the research process, researcher founds several strengths indicating that the firm has applied good quality control such Partners are responsible as a leader of the audit team, relevant ethical requirement on independency has been standardize through firm’s Ethic and Independence Policy, and engagement performance in direction, supervision, performance which has been done in line with the requirement set by ISA 220. Moreover, researcher founds several weaknesses of quality control activity. First, different response on hospitality treatment provide by client. Second, there is assignment of one audit team member to more than one client. Third, Partner who improper review on accepting client engagement. Last but not least, improper review is done by quality control reviewer. For the better improvement in the quality control activity, there are several actions that should be considered. First, the company should established written policy and standards regarding to the hospitality and gift provided by client. Second, manager in charge should add or recruit necessary auditor. Third, partner should review the acceptance of client engagement thoroughly. Last but not least, Quality Control Reviewer should perform the quality control review procedure properly.