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Nachiket Palsule asked 1 year ago
2 Answers
RaviRavi Staff answered 1 year ago

Question
M/s NK & Co., Chartered Accountants were appointed as Statutory Auditors of Fresh Juice Limited for the F.Y 2019-2020. The previous year’s audit was conducted by M/s. LP & Associates. After the audit was completed and report submitted, it was found that closing balances of last financial year i.e., 2018-19 were incorrectly brought forward. It was found that M/s NK & Co. did not apply any audit procedures to ensure that correct opening balances have been brought forward to the current period.

Accordingly, a complaint was filed against NK & Co. in relation to this matter.

You are required to inform what policies are required to be implemented by NK & Co. for dealing with such complaints and allegations as required by Standard on Quality Control (SQC).
 

RaviRavi Staff answered 1 year ago

This concept was not given in ICAI module, it was not present in any one’s book. Don’t be bother be much with it, in every exam out of 120 they will keep few question to check mental strength and ability to bear pressure.

Now Para 101 to 105 of SQC 1 tell us what CA firm should do to handle complaints and allegation against them for poor quality work.

Para 101 gives basic principle and 102 to 105 elaborate this basic principle.

Comments in italics is summary of points which follow

BASIC PRINCIPLE

2 types of complains or allegation can be received 1. not following law, regulations, professional standards or 2. not following firm’s quality control system. Firm should have system (policies & procedures) to handle these.

The firm should establish policies and procedures designed to provide it with reasonable assurance that it deals appropriately with:
(a) Complaints and allegations that the work performed by the firm fails to comply with professional standards and regulatory and legal requirements; and
(b) Allegations of non-compliance with the firm’s system of quality control.

Appoint Person

Person should be appointed to receive complaints & allegation and process them as per firms’ policy. Such person can be engagement team member or any designated person in firm.

 

Complaints and allegations (which do not include those that are clearly frivolous) may originate from within or outside the firm. They may be made by firm personnel, clients or other third parties. They may be received by engagement team members or other firm personnel.

Create Channel

Mediums for employees to communicate any C or A with out any fear. (Like facility for making anonymous complaints)

As part of this process, the firm establishes clearly defined channels for firm personnel to raise any concerns in a manner that enables them to come forward without fear of reprisals.

Investigate C and A

Mandatory investigation as per policies & procedures of firm. Under supervision of partner who is not involved with that assignment. Sole proprietors or small firms can use external person or firm.

The firm investigates such complaints and allegations in accordance with established policies and procedures. The investigation is supervised by a partner with sufficient and appropriate experience and authority within the firm but who is not otherwise involved in the engagement, and includes involving legal counsel as necessary. Small firms and sole practitioners may use the services of a
suitably qualified external person or another firm to carry out the investigation.

Action after getting results of Investigation

If results indicate deficiencies in firms quality control system or instances of non compliance of quality control system, they should take appropriate action like changes, punishments etc 
Where the results of the investigations indicate 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 by an individual or individuals, the firm takes appropriate action as discussed in paragraph 95.

Documentation

Complaints, allegations and the responses to them are documented.

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