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As part of the PICPA’s over-all mission of promoting, upholding, and maintaining high standards in the
accountancy profession and to serve the best interest of the members and the stakeholders, which can
be achieved through, among others, a committed leadership, effective professional development
programs, and strict implementation of professional ethics, PICPA initiates this Voluntary Quality
Assurance Review Program for audit practitioners.
Under the IFAC Statement of Membership Obligations 1 Quality Assurance, PICPA, being a member body
of IFAC, shall assist practitioners in understanding the objectives of quality control and implementing
and maintaining appropriate systems of quality control. To meet this obligation, PICPA is hereby
implementing a voluntary quality review program that will enable practitioners to obtain an
independent, confidential assessment of their quality control policies and procedures, apart from any
formal quality assurance review system. (see IFAC SMO 1.23-24)
The program has the objectives to provide the practitioners, with a/an:
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Scope of the Program:
The PICPA VQARP is a PICPA-initiated quality assurance review for practitioners who will
voluntarily submit themselves to a quality review to have a reasonable assurance that they are
in compliance with the requirements of ISQC 1 and ISA 220.
Definition of Terms:
Practitioner– A sole public practitioner, a partner affiliated with an auditing firm, or an auditing
firm composed of a number of partners
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I.ORGANIZATION OF VQAR DIVISION
The QAR Director reports directly to the Executive Director and shall ensure the availability of
appropriate expertise and adequate financial and other resources to enable the timely and effective
performance of QARs.
The QAR Director shall select and organize the QAR team composed of a leader and members for each
review on the basis of meritocracy. In forming and selecting the team for each assignment the Director
shall be guided by the following considerations:
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d. knowledge of specific industries;
To establish independence, the Leader and team members must not have a financial or professional
interest in the practitioner and the engagements that will be examined. The leader or member of the
QAR Team of the previous three consecutive QARs of the practitioner shall not be part of the current
team, to establish a cool-off period.
Depending on the size and complexity of the practitioner under review, the Director shall assign a
team leader and a number of member/s for each review. The QAR team leader shall:
e. be responsible for preparing the main QAR report and other applicable QAR-related
documents.(1.55)
Definition of Practitioner
The subject of the QAR, herein called as “Practitioner” shall either be an individual practicing as a sole
owner of a practice, an individual practitioner (i.e. partner) belonging to an auditing firm, or an auditing
firm consisting of a number of partners who voluntarily subjects his/their practice to a QAR, for a
consideration and as provided for in this Framework.
For each QAR engagement, quality assurance is addressed at two levels: the practitioner level and the
engagement level. (1.3). At the practitioner level, the adequacy of the quality control policies and
procedures are reviewed to determine whether they comply with ISQC 1. At the engagement level,
selected engagements are reviewed to determine whether the selected engagements have complied
with professional standards, regulatory requirements and the practitioner’s policies and procedures.
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Period Covered Under Review
Audit engagements of financial statements subject to selection for QAR are those completed and issued
audits of financial statements with fiscal-year periods ending during the QAR period. If a more recent
auditor’s report has been issued during the QAR, consideration is given to reviewing that audit. (1.41)
If, during or after a QAR period, a practitioner under review has (a) made a significant acquisition of all
or a portion of another’s practice, or (b) has divested itself of a significant portion of its practice, before
commencing the QAR the Reviewer shall consult with the QAR Director on the scope of the QAR or other
actions that may be taken.(1.42).
Jurisdiction
Engagements of practitioners to be chosen for VQAR shall be limited to those within the Philippine
jurisdiction only, and for non-public interest entities (non-PIEs).
For each review assignment, the reviewer shall sign a standard contract (QAR Form _____) laying the
terms of for remuneration, timeline, deliverables, and an undertaking of confidentiality and non-
competition. The Team shall consider the fundamental principles set out in the Code of Ethics. These
include integrity, objectivity, professional competence and due care, confidentiality and professional
behavior.
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In performing a VQAR, the Reviewer shall obtain a sufficient understanding of:
The nature and extent of the practitioner’s audit practice and the methodologies used;
The design of the system of quality control of the practitioner;
The practitioner’s ethical and independence policies and procedures ; and
The practitioner’s training policies and procedures; (1.46)
To understand the practitioner and its policies and procedures on quality control and to prepare for
inspection, the Reviewer performs the following procedures:
a. A notification letter (QARP Form __) together with the questionnaires (Peer Review Checklist
____) are sent to the practitioner to be reviewed. The information covered by Section __ of
QARP Form __, together with the attachments and the answered questionnaires shall be sent
back to the Division within one (1) week from receipt thereof.
b. If deemed necessary, a preliminary meeting date will be set and confirmed with the practitioner.
The Team members will attend and document the preliminary meeting, including the
arrangements for workspace, computer and administrative assistance, the practitioner’s contact
person and the personnel who are needed for the inspection.
c. Based on the information obtained from Section __ of QARP Form __ and/or preliminary
meeting, engagements to be reviewed are selected, and inspection date is set.
d. The Team who will do the inspection shall be given a briefing about the practitioner, the focus of
the inspection, the timeline and their respective assignments.
e. A day before the start of the inspection, the practitioner shall be informed of the list of the
selected audit engagements. Also, the preparations made at the practitioner’s end are checked:
working space, audit files, availability of management, the person responsible for the quality
control and the partners and personnel involved in the engagements to be reviewed.
Inspection Procedures
To evaluate the quality control policies and procedures as to their conformity and compliance with
ISQC 1 and ISA 220 and regulatory and policies at the practitioner’s level and selected engagements,
the Reviewer shall perform the following procedures:
a. On the first day of the inspection, a meeting is conducted, using QARP Form __, in
coordination with the contact person, of all practitioner’s personnel involved, to briefly
discuss the QAR process, as this applies to the practitioner, the final timeline, the target
date of closing meeting, expected feedback and other matters. This will also be an
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opportunity for the introduction of all participants and familiarization with the practitioner’s
facilities.
b. All requirements shall be rechecked if met including the audit files of the engagements to be
reviewed.
c. All matters obtained during the inspection are documented. The inspection is performed,
using Peer Review Checklist Form ____ for the practitioner level review. Compliance with
ISQC 1 is determined through reviews of administrative files and engagements, inquiry with
personnel and observation.
The purpose of the practitioner level review is to assess the appropriateness of the
policies and procedures and the degree of compliance with them in each of the following
areas:
Leadership responsibilities for quality
Ethical requirements
Human resources
Client acceptance and continuance
Engagement performance
Monitoring
Documentation
d. The inspection is performed using Peer Review Checklist Form __for the engagement level
review. The evaluation consists of a review of the auditor’s report, the financial statements
and underlying working papers, and discussions with the partner and members of the
engagement team.
The review of the audit working papers of the practitioner shall include evaluating:
the existence and effectiveness of the system of quality control implemented by the
practitioner, and the performance of the audit;
For subsequent reviews, the Reviewer should also obtain the practitioner's most recent QAR report and
documentation regarding any litigation that the practitioner has been involved in since the last QAR.
Documentation
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The Team shall maintain documentation that supports the work performed, including findings and
recommendations.
To summarize findings, the Team shall perform documentation of consolidated results of QAR
observations, findings, conclusion and recommendation, by performing the following procedures:
On the last day of the review, the practitioner and engagement level review findings and results
are consolidated to assist in preparing for the closing meeting and drafting the Leader’s Report,
using QARP Form ___.
Closing meeting with the audit teams reviewed shall be held and findings, comments and
observations shall be reviewed, and any exceptions are cleared.
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REPORTING
The Team shall hold a closing meeting with the practitioner to discuss the results, findings,and
recommendations for corrective actions, if any.
The Report shall be prepared by the Leader based on the results of the review as documented in the
various forms and questionnaires. Any reference to specific names of engagements shall be avoided in
the Report.
A template, intended to present a suggested style and format to achieve a certain degree of uniformity,
shall be used as a guide in drafting the Report. It is not intended to inhibit the Leader from including any
comments he considers to be appropriate.
Reporting to Practitioner
a. Within fifteen (15) days after the closing meeting with the reviewed practitioner, the QAR
Report (QARP Form __) is drafted, reviewed and sent to the practitioner.
b. TheDraft Report is submitted to the Director for review and approval.
c. The approved Report as signed by Leader, is addressed and sent to the reviewed practitioner’s
management.
The QAR Team Leader shall issue a written report to the reviewed upon completion of each QAR
assignment. The report shall include the following portions:
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c) specifies the period covered by the QAR.
Recommendations for areas of improvement at both the practitioner level and the engagement
level.
Response of Practitioner
The reviewed practitioner shall provide a timely written response to the findings and recommendations
of the QAR report, including planned actions and expected time of completion or implementation. The
response shall be addressed to the QAR Director through the Leader, not later than fifteen (15) days
after receipt of the Report. The response to the Report (QARP Form ___) should address all matters
contained in the report and should present the Team’s comments, observations, and findings and the
practitioner’s response with action steps to be taken.
A template, intended to achieve a certain degree of uniformity in style and format, shall be used as a
guide for the reviewed practitioner.
Corrective Measures
After receiving the practitioner’s response the QAR Director, through the QAR Team Leader shall
recommend the following possible corrective measures that the reviewed practitioner may apply to his
practice:
requiring revisions or additions to quality control policies and procedures or audit methodology;
requiring additional CPD;
requiring additional QARs;
POST-REVIEW
All findings from the review shall be documented properly and the working papers shall be the property
of the Division. Archives of the working papers post-engagement shall be in the custody of the Division.
Consistent with the practice as applied to audits of financial statements and as required by professional
standards, regulation and law, the timeframe of retaining documentation of accomplished QARs shall
be long enough to allow PICPA or its oversight body, if any, to maintain appropriate oversight of the QAR
process. (1.50)
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Confidentiality
The QAR team shall follow confidentiality requirements similar to those established for professional
accountants performing audits of financial statements. As stated in the Code of Ethics or relevant
national ethical requirements, and where not forbidden by law, practitioners under review shall be
exempted from professional client confidentiality requirements concerning audit engagement working
papers for the purpose of QARs. (1.66)
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