1.0 Status of Procedures
These procedures are constrained by the requirements of the Financial Reporting Act 2004, the Charter of the APRP and the Policies adopted by the FRC in respect of audit practice review. They are not intended to be all encompassing and highlight particular issues only.
Voting procedures reflect the importance in the Audit Practice Review process within the FRC. All questions arising at meetings of any sub-team or working party shall be decided by a simple majority vote by a show of hands.
However the decision to recommend to the Council the cancellation or suspension of a license granted to an auditor or the publication of the case with the name of the licensed auditor or name of a firm, a three-quarter majority of all members of the Panel, whether present at the meeting or not, is required.
All other questions will require a simple majority of all members present. For matters concerning the recommendation for sanctions the quorum shall be 6 members. Any member having a conflict of interest with any decision of the panel shall abstain from voting.
3.0 Teams / Working Parties
The APRP may need to co-opt individuals with particular expertise to assist in the work of the Panel. Each sub-team that is established under the APRP shall have its brief terms of reference and will be responsible for a specific area and range of work.
4.1 General Basis for procedures
The APRP is expected to assist and advise in the monitoring of the practice of auditors with a view to maintaining high standards of auditing practices and ensure compliance with Quality Control, the IFAC Code of Professional Conduct and Ethics and with International Standards on Auditing and enforce compliance with this Act and the rules of the Council by conducting investigations and where appropriate, imposing sanctions on licensed auditors.
4.2.1 Auditors, Audit Firms, and Affiliates of Auditors or Audit Firms are subject to Practice Review.
The Licensing Unit of the FRC maintains a register of licensed auditors. and audit firms together with their affiliated entities (the “register of auditors”). The information in the audit register will be used to determine which auditors and/or audit firms are subject to practice review by the APRP.
4.2.2 Procedures for the Selection of Audit Participants for Practice Review:
a. The audit register contains information on the audit experience of licensed auditors, the identity of their audit firms, and which licensed auditors perform audits of PIEs.
b. The selection of licensed auditors for practice review will be made, with the guidance of the panel, at least every calendar quarter and will be based on a number of factors including, but not limited to:
- Number of PIEs which are audit clients;
- Length of time engaged in the practice of auditing in Mauritius;
- Date of last practice review;
- Results of last practice review; and
- Sectors of the auditing profession that are believed to require more scrutiny.
c. Special circumstances may give rise to an audit practice review independent of the normal selection process with the approval of the CEO/Council.
Examples of such circumstances are:
i. Notice of a material irregularity under Section 40 of the Act;
ii. Complaints from entities and/or stakeholders;
iii. Requests from other regulatory agencies;
iv. Notice from the PIE of a change in the external auditor; and
v. News releases.
In the event a review is initiated as a result of outside information, the licensed auditor will report on the audit practices investigated pursuant to the powers set forth in Section 78 of the Act.
d. After the initial transition period for licensing, the APRP will endeavor to conduct a practice review of a newly licensed auditor within the first year of the licensee’s practice.
e. Once a licensed auditor has been selected for review, the APR Unit will advise the auditor in writing of the review and the general information that will be requested and that should be made available at the outset of the review. [See general review procedures under paragraph 4.3 (d) (Practice Review Procedures – Audit Engagements Review) below].
f. Other entities that assist the licensed auditors or audit firms in the conduct of an audit engagement will be selected for practice review, as appropriate, in connection with the practice review of specific audit engagements as set forth in paragraph 4.3 (Practice Review Procedures) below.
4.3 Practice Review Procedures:
a. The objective of the audit practice review is to verify that:
I. The information submitted by the licensed auditor in the license application is accurate;
ii. The auditor and, as appropriate, the audit firm has:
1. Performed the audit services in accordance with the International Standards of Auditing.
2. Complied with the Code of Professional Conduct and Ethics
3. The internal policies and procedures in place and operating effectively to ensure compliance with paragraphs 1 and 2 above, Collectively referred to herein as “Approved Audit Practices”.
b. The auditor practice review procedures will focus both on the practices of the licensed auditor and the audit firm. However, many controls over the quality of an auditors’ practice function are at the firm level and must be reviewed at that level.
c. Licensed Auditor – General Review Procedures
The APR shall:
- Obtain information of audit services supervised and/or engaged in since last review by client
1. Name of client;
2. Nature of the audit services performed;
3. Audit and non-audit services performed by affiliates; and
4. Fees charged.
- Determine that the auditor’s policies and procedures regarding independence and quality control, including the criteria and procedures in place for accepting and retaining audit engagements are in compliance with professional standards. This will involve verification through review of internal documents that such procedures are operating effectively.
Note: In many instances the policies and procedures covered herein are conducted within the audit firm. Therefore, the verification process will be necessarily extended to the audit firm practices which will entail the participation and cooperation of other licensed auditors within the firm.
d. Licensed Auditor-Audit Engagements Review
The FRC shall;
- From the list of audit engagements obtained in (c) (ii) above, review a sample of audit engagement (s) selected with the approval of the CEO, and request the correspondence file, working papers, and other such documents pertaining to that engagement from the licensed auditor.
- Review the engagement organisation and planning to include, among other things:
1. Arrangements made for the audit with the client including
a. Pre-engagement meetings with the audit committee; and
b. Executed engagement letter
2. Assessment of audit risks
a. Evaluation of internal controls; and
b. Determination of audit scopes.
3. Use of a written audit program; and
4. Competence of supervisory and other staff assigned.
- Examine the audit working papers and other documents to verify that the evidence of the engagement:
1. Conformed to Accepted Audit Practices
2. Supported the judgments used by the auditor in reaching conclusions on audit and reporting issues
3. Supported the opinion in the auditor’s report
- Examine the arrangements for the work of entities that assisted the auditor in the engagement:
1. There shall be evidence that the auditor verified that the assisting entities are both competent and independent; and
2. The reports of the assisting entities, if relied upon, should support the conclusions of the auditor.
e. Evidence of both the General Practice review and the Audit Engagements Practice review, including any copies of documents obtained in connection therewith and the practice review report should be retained by the APR.
4.4 Reporting Results of Practice Reviews:
a. The initial results of the practice review should be documented in a preliminary review report and forwarded, together with the review documents, to the APRP, for review and comment prior to discussing specific review resulted and/or practice issues/deficiencies with the licensed auditor.
b. Upon review by the APRP in (a) above and receipt of APRP comments, the report will be discussed with the licensed auditor. Depending upon the seriousness of any issues/deficiencies noted, the APRP may wish to participate in the preliminary discussion.
c. Upon completion of discussions with the licensed auditor, the comments/clarifications resulting there from, as appropriate, together with a written response from the licensed auditor, will be incorporated into the report and, upon the approval by the APRP, a final report will be issued.
d. The final report would typically conclude that:
i. The audit practices complied in all material respects with Accepted Audit Practices, or
ii. Issues/deficiencies noted in the practice review were of a minor nature and the licensed auditor has agreed to correct the policy and procedures to prevent a re-occurrence of such deficiencies, or
iii. The issues/deficiencies were of such seriousness that further action is required.
e. In the event that serious practice deficiencies are noted in the report, to report, supporting documentation, and APRP recommendations will be forwarded to the FRC.
f. The completion of the practice review and the results of the report thereon will be sent to the Licensing Department for inclusion in the auditor register.
4.5 Miscellaneous Procedures
a. The APRP will prepare reports of the results of its audit practice reviews in such format at such time as requested by the CEO of the FRC and/or the Council;
b. The Director APRP will ensure that all matters noted in the Panel’s practice review procedures that may pertain to other activities of the FRC are promptly reported to the Director responsible for such activities;
c. It is anticipated that the functions of the APRP may overlap and/or interact with the functions of other regulatory agencies and professional association of auditors, including the Mauritius Institute of Professional Accountants (MIPA), and that the respective levels of responsibility between such associations and agencies will be defined in memorandums of understanding (MOUs). Accordingly, appropriate procedures will be developed and monitored to ensure that the terms of the MOUs are adhered to in the APRP’s operations.
d. APRP may, in the course of performing its monitoring responsibilities, identify common deficiencies and misunderstandings in the audit practices of licensed accountants. Accordingly, it may be appropriate for the APRP, acting alone or in coordination with other Panel(s), to organise workshops and/or other training programs for stakeholders to facilitate the accomplishment of its objectives.
Effective on June 2008.