Quality Control

  • Quality Review
Overview

All financial auditors, members of the Chamber, natural entities and audit firms are subject to a quality assurance system, established as an independent system, according to the provisions of Government Emergency Ordinance no. 75/1999 regarding the financial audit activity, republished with the subsequent amendments and additions and also of the Chamber’s Organization and Functioning Regulation approved by Decision no. 2/2018 of the CAFR Conference, published in the Official Journal, Part I no. 436 of 23 May 2018. This system is implemented by the Monitoring, Control, Professional Skills and Investigation Department (CMCCCP).
The exception is for financial auditors participating to engagements related to financial audit, other than statutory audit, review, assurance, internal audit or other professional services, in their capacity as employees of audit firms or other entities, or as subcontractors of other financial auditors, without assuming ultimate responsibility towards the clients, according to Art. 2 (2) of the Rules on the review of the quality of financial audit, other than the statutory audit, and of other activities conducted by financial auditors, as approved by CAFR Council Decision no. 60/19.07.2018.
The department specialized in performing quality reviews in CAFR is the Monitoring, Control, Professional Competence and Investigation Department (CMCCCP).

CMCCCP Structure

The department consists of 10 people, 3 senior inspectors and 6 inspectors (9 financial auditors and a trainee in financial audit), coordinated by a head of department (who is also a financial auditor):

Head of department: Adrian POPESCU (financial auditor)

Senior Inspectors: Silviu AGACHE, Andrei CLIM, Rodica IACOB (financial auditors)

Inspectors: Ana Maria DUTA (PUGHINEANU), Ileana POROJAN, Alexandru RĂDOI, Simona VIȘAN (financial auditors); Andreea MARIN (trainee in auditing).

MANDATORY CONDITIONS FOR THE INSPECTION TEAM:

The inspection team consists of a minimum of 2 employees and is coordinated by a senior inspector or inspector within the CMCCP, who must be a financial auditor.
The inspectors conducting quality assurance reviews sign annually the statement of compliance regarding the Chamber’s professional requirements on the audit quality control.
Upon receipt of the inspection delegation, the members of the inspection team shall sign the statement that sets forth whether they are in one of the conflict of interest situations under the Code of Ethics or other applicable regulations, in relation to the financial auditor for whom the quality review is to be carried out.

Pursuant to the Rules on the review of the quality of financial audit, other than the statutory audit, and of other activities conducted by financial auditors, as approved by CAFR Council Decision no. 60/19.07.2018 and the Chamber’s Organization and Functioning Regulation approved by Decision no. 2/2018 of the CAFR Conference, published in the Official Journal, Part I no. 436 of 23 May 2018, the main tasks of the CMCCCP Department may include, inter alia:

a) performance of reviews for assuring the quality of the financial audit, other than the statutory audit, and other activities carried out by financial auditors, CAFR members, under the law;

b) oversight of financial auditors for a definite period of time according to the rating obtained, risk factors identified or other criteria approved by a Decision of the Chamber’s Council, at the request of the CMCCCP Department;

c) ensured implementation of the control system concerning the quality of the activity carried out by the Chamber’s members, for the activities set out in Art. 3 (3) (b)-(e) of GEO no. 75/1999;

d) performance of the control concerning the activity performed by the Chamber’s members, set out in Art. 3 (3) (b)-(e) of GEO no. 75/1999, under the law;

e) drafting the applicable regulations related to the CMCCCP specific activity, ensuring their compliance with internal and international relevant rules and regulations, and submitting them to the approval of the Chamber’s Council;

f) monitoring the compliance by the Chamber’s members of the rules governing the practice of the financial auditor profession, under the law;

g) follow-up to the Disciplinary Commission in case there are indications regarding possible misconduct by the inspected financial auditors, under the law;

h) technical assistance, based on the approval of the Chamber’s Council, to the investigation of the professional matters in the context of disciplinary procedures concerning the Chamber’s members, carried out by the Disciplinary Commission, under the law;

i) performance of any other duties provided by law or set by the Chamber’s Council, under the law.

 

Requirements for Quality Review

Members’ compliance with the quality assurance provisions, consisting of:

1. The provisions of the International Standards on Auditing (ISA) in force and other professional standards (ISRS, ISAE, Internal Audit Standards).

2. The main rules of the Chamber regarding quality assurance are:

  • Decision of the CAFR Council no. 60/19.07.2018 for the approval of Rules on the quality review of the financial audit activity other than the statutory audit activity and other activities performed by the financial auditors.
  • Decision no. 68 of 21 December 2015 for the approval of the Rules on the imposition by financial auditors of measures to prevent and fight against money laundering and terrorist financing.
  1. Requirements of the Ethics Code of Professional Accountants.
Performing Quality Reviews

The quality assurance inspections are carried out in accordance with the Rules on the quality review of the financial audit activity other than the statutory audit and other activities carried out by the financial auditors approved by the CAFR Council Decision no. 60/19.07.2018.

Review procedures for quality assurance are implemented by CMCCCP under the form of “lists of inspection objectives”, based on the nature of the engagement.
The main objectives of reviewing the quality of financial audit activity or other activities performed by financial auditors are:
a) understanding the scope of financial audit activities, other than statutory audit, and other professional services, based on the examination of the engagement letters/service agreements, and their compliance with International Auditing Standards (ISA) or Internal Audit Standards, or with other relevant standards, as well as with the rules and regulations;

b) verification of the financial auditors’ compliance with the data entered in the application/statement for obtaining the licence to practise this profession, the adequacy of reporting the revenue from financial audit activity, as well as other professional services, checking the full and timely payment of contributions, as well as compliance with other obligations to the Chamber;

c) compliance with the obligations regarding the continuous training of financial auditors, as well as the attendance of additional courses by the audited financial auditors who have obtained a B, C or D grade;

d) verifying the implementation by the financial auditors of an internal quality control system in accordance with the provisions of ISQC 1 and ISA 220, as appropriate;

e) evaluation of the internal quality control system in terms of compliance with the relevant international standards and with the requirements of the Code of Ethics for Professional Accountants;

f) inspecting the work files related to the engagements carried out by the financial auditors and selected for review in order to ensure quality parameters. The purpose is to assess compliance with the provisions regarding the actual performance of the selected engagements, in accordance with international standards and regulations issued by the Chamber;

g) verifying compliance by the financial auditors with the obligations established by the Decision of the Chamber Council no. 68/2015 for the approval of the Rules on the quality review of the financial audit activity other than the statutory audit activity and other activities performed by the financial auditors, according to provisions of Law no. 656/2002 on prevention and fighting against money laundering, as well as for the imposition of measures for the prevention and fighting against  terrorist financing, republished with further amendments;
The review objectives for quality assurance in the financial audit activity of the inspected financial auditors are based on lists of inspection objectives, depending on the the nature of the engagements. These lists are arranged by chapters.
The quality review regarding the activity of a financial auditor, member of the Chamber, included in the Inspection Program, shall be carried out by selecting a number of objectives from the list provided in Appendix no. 1 of the Rules on the quality review of the financial audit activity, other than the statutory audit, and other activities carried out by the financial auditors approved by the CAFR Council Decision no. 60/19.07.2018 and verification of the fulfillment of the objectives by the inspected financial auditor.
The duration of the quality assurance review is established by the coordinator of the inspection team with the approval of the head of the CMCCCP Department, based on the nature of the inspection objectives, the volume of work of the financial auditor to be inspected, and other factors that may influence the scope of the inspection.
The review of the quality of the financial auditor’s work is carried out on all the engagements performed by the financial auditor or at random, depending on the volume of work performed during the period under review and to the deficiencies previously identified. It includes a representative number of audit files related to the performed engagements in order to enable the inspection team to make sound conclusions about the adequacy of its quality control system, the conformity of the audit files with the quality control parameters, and the compliance with the applicable professional standards and other regulations issued by the Chamber.
At the request of the inspection team, financial auditors are required to:
a) provide all explanations necessary to verify the accuracy of the data in the annual report of the members, the application/statement for obtaining the licence to practise the profession, including the income from the activity performed, as well as to provide all the supporting documents regarding the payment of the contributions and the other fees to the Chamber;

b) provide the inspection team with access to the engagement files, to their own financial statements, as well as to all the documents under their control or safekeeping, which are subject to review and are used to document the inspection evidence supporting the conclusions of the inspection;

c) to take note of the findings of the inspection team, and to communicate in writing to the Chamber, at the deadlines set by the inspection team, the way to implement the actions and measures established following the review by the Chamber’s inspectors.

Inspection Notice. Inspection Report

By means of the CMCCCP Department, the Chamber shall be empowered to carry out the following types of inspections/reviews to ensure the quality of services provided by financial auditors, other than statutory audit engagements:

Periodical inspections refer to reviews carried out to ensure the quality of audit, other than statutory audit, and other CAFR member activities related to financial auditors included in the quarterly inspection programmes and ended with the completion of an Inspection Notice or Inspection Report, under the terms of these rules;

Thematic inspections refer to verification actions taken to ensure the quality of audit, other than statutory audit, and other CAFR member activities related to financial auditors (i) which are triggered by referrals and follow a specific topic depending on the topic or (ii) aim at checking certain aspects regarding the means of fulfilling the duties resulting from the membership of the Chamber, under the conditions established by these rules. Thematic controls end with the conclusion of an Inspection Report;

On-demand inspections refer to reviews carried out to ensure the quality of audit, other than statutory audit, and other CAFR member activities related to a financial auditor not included in the initial quarterly inspection programme, at their request to check or re-check the audit activity, other than the statutory audit, carried out after the date of the previous periodical inspection, under the conditions established by these rules. On-demand inspections end with the conclusion of an Inspection Report.

 

The Inspection Notice or the Inspection Report, as appropiate, shall be completed by the Quality Assurance Review Team within the CMCCCP Department and shall be signed on each page by the members of the review team as well as by the inspected financial auditor.

The Inspection Notice or the Inspection Report shall be drawn up in two copies, one of which shall be given to the inspected financial auditor. The copy of the Inspection Notice or Inspection Report pertaining to the inspection team is registered to the Chamber Secretariat.

In the Inspection Notice, the inspection team records non-compliance with professional standards, including the provisions of the Code of Ethics, and with the regulations issued by CAFR, ascertained following the review of quality assurance.

The sample for the Inspection Notice is set out in Appendix no. 2 Rules on the quality review of the financial audit activity other than the statutory audit and other activities carried out by the financial auditors approved by the CAFR Council Decision no. 60/19.07.2018.

The findings and conclusions of the inspection team rely on the inspection samples provided by the financial auditor.

 

The Inspection Notice mainly consists of the following elements:

a) the structure of the inspection team, the registration number of the delegation under which the quality assurance inspection was carried out, the date or the period during which the inspection was carried out;

b) identification data of the inspected financial auditor;

c) as for the audit firms, the identification data of the associates and/or financial auditors representing the firm are also necessary;

d) the period under review, the identification of the clients related to the engagements selected for quality review, the identification of the agreements based on which the engagements thereof were carried out, as well as the related fees;

e) data on the determination of the variable fee and the payment of contributions, as well as the observance of the rules on professional insurance, submission of the annual report, participation to CPD courses;

f) the objectives adequately addressed by the inspected financial auditor in performing the engagement, according to the requirements of the relevant International Standards adopted by the Chamber, and other regulations issued by the Chamber, as well as those of the applicable financial reporting framework;

g) the objectives not adequately addressed or documented by the inspected financial auditor, as per the requirements of the above regulations;

h) the inspected auditor’s possible reasoning regarding the fulfilment or failure to fulfil certain objectives pursued by the inspection team;

i) the rating obtained by the auditor subject to the quality review of the performed activity;

j) conclusions and suggestions;

k) date of the Inspection Notice;

l) the signatures of the members of the inspection team and the inspected financial auditor on each page of the Inspection Notice.

 

The Inspection Report mainly consists of the following elements:

a) the structure of the inspection team, the registration number of the delegation under which the quality assurance inspection was carried out, the date or the period during which the inspection was carried out;

b) identification data of the inspected financial auditor;

c) as for the audit firms, the identification data of the associates and/or financial auditors representing the firm are also necessary;

d) the period under review and the thematic objectives pursued by the inspection team;

e) the findings of the inspection team;

f) the inspected auditor’s possible reasoning regarding the fulfilment or failure to fulfil certain objectives pursued by the inspection team;

g) date of the Inspection Report;

h) the signatures of the members of the inspection team and the inspected ffinancial auditor on each page of the Inspection Report.

The Inspection Notice, the Inspection Report and any other documents related to the performance of the quality assurance review shall be recorded, archived and kept at the Chamber for a period of seven years, starting from the date of registration with the CAFR Secretariat.

Auditing Process

Auditing Standards

International Standards on Auditing (ISAs) are the professional standards for performing financial audit of financial information. These standards are issued by International Federation of Accountants (IFAC) through the International Auditing and Assurance Standards Board (IAASB).

 

List of the standards:

 

• International Standard on Quality Control (ISQC);
• International Standards on Audits of Historical Financial Information (ISA 200 – 265);
• International Standards on Risk Assessment and Responses to Assessed Risks (ISA 300 – 450);
• International Standards on Audit Evidence (ISA 500 – 580);
• International Standards on the Use of the Activity of Other Parties (ISA 600 – 620);
• International Standards on Audit Conduct and Reporting (ISA 700 – 720);
• International Standards on Specialized Areas (ISA 800 – 810);
• International Audit Practice Notes (IAPN 1000);
• International Standards on Audits and Reviews of Historical Financial Information (ISRE 2400 – 2410);
• International standards on assurance engagements other than audits or reviews of historical financial information (ISAE 3000, ISAE 3400, ISAE 3402, ISAE 3410, ISAE 3420);
• International Standards on Related Services (ISRS 4400 – 4410).

Auditing Procedures
Auditing Procedures
The Guide on Quality Audit, jointly published by CAFR jointly with ICAS in 2012, consists of a handbook of audit procedures for the members, updated to comply with the International Standards on Auditing.
Current File Index
Sign Off
A 1    Copy of Signed Financial Statements
A 2    Signed Letter of Representation
A 3    Future Matters Checklist
A 4    Independent Partner/Immediate File Review or Consultation Matters
Audit Completion
A 5    Audit Completion
A 6    Significant Matters
A 7 Review of Letter to Those Charged with Governance
A 8    Review of the Representation Letter
A 9    Summary of Misstatements
A 10  Review of Financial Statements and Disclosure Checklists
A 11  Final Analytical Review
A 12  Post Balance Sheet Events
A 13  Going Concern
A 14  Auditing Report
A 15  Other Planning Appropriate to the Specific Engagement
Audit Planning
B 1    Planning Objectives, Conclusion, Approval and Checklist
B 2   Acceptance of Appointment or Re-appointment
B 3    Know Your Client and Risk Assessment
B 4    Inherent Risk Assessment
B 5    Materiality
B 6    Preliminary Analytical Review
B 7    Risk Assessment Summary and Sampling Plan
B 8    Initial Balances/Comparative Figures
B 9    Audit Planning Memorandum
B 10  Permanent Information Checklist
B 11  Planning Meeting Agendas
B 12  Previous Year’s Accounts (previous year financial statements)

Internal Control Review

C 1    Accounting Systems and Internal Controls
Financial Statement Assertions
D    Intangible Assets
E    Tangible Assets
F    Investments
G     Stock and Work in Progress
H    Debtors
I    Bank Balances and Cash
J     Creditors
K    Taxation
L    Liabilities, Undertakings and Charges
M    Legal and Statutory Matters, Share Capital and Stock
N    Sales and Income
O    Purchases and Expenditure
P    Salaries and Assimilated Debts
Q    Profit and Loss Account
R    Related Parties
S    Cash Flow Statement
T    Compliance with Laws and Regulations
U    Trial Balance
V    Audits of Group Financial Statements
ISQC1 and ISA 220 Requirements

All CAFR members are bound to :
1. Adhere to the Ethics Code of Professional Professionals issued by IFAC and fully adopted by CAFR;
2. Implement a quality control system for performing audit, review, other insurance and related service engagements, in accordance with applicable standards (ISQC 1 and ISA 220).
Based on the experience and modus operandi, when implementing a quality control system for performing audit, review, other insurance and related service engagements, each CAFR member should take the following steps:
ISQC 1  deals with a firm’s responsibilities for its system of quality control for audits and reviews of financial statements, and other assurance and related services engagements.
• Application and compliance with relevant requirements
• Elements of a quality control system
• Leaders’ responsibilities for quality at the firm level

• Relevant ethical requirements
• Acceptance and continuance in terms of customer relationships and specific engagements
• HR
• Achieving the engagement
• Monitoring
• Quality Control System documentation

ISA 220 – Quality Control for an Audit of Financial Statements
• Management’s responsibilities for the quality of audits
• Relevant ethical requirements
• Acceptance and continuance in terms of customer relationships and specific engagements
• Designating the engagement teams
• Performing the engagement
• Monitoring
• Documentation

  • Reporting and Communications:
CMCCCP's Annual Activity Report

According to Art. 65 of the Rules on the quality review of the financial audit activity other than the statutory audit and other activities carried out by the financial auditors approved by the CAFR Council Decision no. 60/19.07.2018:

  • Based on the findings originating in the Inspection Reports, for a full calendar year, following the quality assurance review, the CMCCCP Department shall draw up an annual activity report, bringing out the overall results of the quality assurance system implemented by CAFR, by deleting the information regarding the identification of the inspected financial auditors or those relating to their clients.
  • The report shall be submitted to the CAFR Council in order to be approved;
  • The Chamber’s Annual Report on Review for Quality Assurance in Financial Audit Activity and Other Activities Performed by Financial Auditors is published on the CAFR website.

 

The Quarterly Programme of Inspections
  • Inspection programme for the first quarter of 2019, approved during the meeting of the Permanent Bureau of the CAFR Council on December 19, 2018. Click here to view.
  • Inspection programme for the second quarter of 2019, approved during the meeting of the Permanent Bureau of the CAFR Council on March 19, 2019. Click here to view.
  • Preventing and Fighting Against Money Laundering
Legislation :
CAFR Council Decision no. 68/2015 approving the Rules on the imposition by financial auditors of measures to prevent and fight against money laundering and terrorist financing
Law no. 656/2002, republished, for preventing and fighting against money laundering, as well as for the establishment of measures to prevent and fight against terrorism