Quality Control Unit for Auditors' Work

Circular Letter No. (6) for the Year 2014

Regarding Emphasizing the Duties of Auditors Registered with the Authority's Records

Committed to the quality of the work system in the offices of the esteemed auditors and audit processes, and under the guidance of the Unit's Council, in light of the Unit's examination of a sample of the work of some auditors to verify their competence and audit their work through verifying:

• Adherence to the Egyptian Auditing Standards issued by the Minister of Investment Decision No. (166) for the year 2008, and the directives, instructions, and controls issued by the Egyptian Financial Supervisory Authority.
• Fulfillment of the professional competence and suitability conditions for the audit office (Authority Board of Directors Decision No. (33) for the year 2009, through which the auditor provides services to companies) by ensuring the availability of:
  1. A team with the required level of competence.
  2. The office's implementation of a quality system and verification of professional independence.
  3. Compliance with continuing professional education rules.
• Compliance with the performance and conduct rules for practitioners of the accounting and auditing profession registered with the Authority's register (issued by the Chairman of the Authority's Board of Directors Decision No. 79 for the year 2007).
• Verification that the office's clients adhere to the Egyptian Accounting Standards in preparing the financial statements being audited (issued by the Minister of Investment Decision No. 243 for the year 2006).

The Unit emphasizes the necessity for auditors to comply with Egyptian accounting standards and the decisions, instructions, and controls issued by the Egyptian Financial Supervisory Authority, in order to ensure:

1. Compliance of all professional staff in the auditor's office with professional standards and legal and regulatory requirements.
2. That reports issued by the auditor's office are appropriate to the circumstances under which those reports are prepared.

In this context, the Unit reminds of the obligation to comply with the following:

First: Regarding the quality of the work system in the office:

1. Focus on documenting the work quality system in the auditor's office, which must include at a minimum the following elements:
   • Office (institution) leadership levels regarding quality within the office.
   • Ethical and behavioral requirements.
   • Acceptance and continuance of client relationships and specific engagements.
   • Human resources.
   • Engagement performance.
   • Monitoring.

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Second: Regarding the quality of the audit process:

1. Establishing policies and procedures aimed at ensuring that engagements are performed in accordance with professional standards and regulatory and legal conditions, and that the issued report is appropriate to the circumstances.
2. Existence of an engagement letter or other contractual form between the client and the auditor clarifying the responsibilities of both parties.
3. Completeness of audit files in terms of:
   • Audit plan and assigned auditors.
   • Working papers (auditor in charge - audit duration - fulfillment of expectations on audit papers).
   • Examination of the internal control system and internal audit reports to determine the extent of reliance on them.
   • Substantive procedures (inventory, financial analysis, etc....).
   • Documentation of discussions between the auditor and the work team.
   • Management plans that include the auditor's comments on the financial statements and internal control system, and required amendments, if any.

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Third: Regarding the quality of the work system in the office:

4. Focus on the auditor obtaining appropriate representations from management, which may include:
   • A management representation letter, or a letter from the auditor clarifying the auditor's understanding of management's representations, which is reviewed and endorsed by management.
   • Minutes of relevant board of directors meetings or any similar body, or a signed copy of the financial statements.
5. Necessity of establishing policies and procedures for pre-issuance review, with a designated management or quality control officer conducting the pre-issuance review according to the volume of work.
6. Focus on the adequacy of disclosure regarding related parties, and obtaining sufficient and appropriate audit evidence regarding management's identification and disclosure of related parties and the impact of significant transactions with them on the financial statements.
7. Focus on the soundness and adequacy of accounting estimates (provisions - depreciation).
8. Focus on comments received from the Authority's Finance and Governance Sector regarding financial statements and communicated to companies whose financial statements the auditor is reviewing.
9. Monitoring developments in laws, regulations, standards, administrative decisions, and relevant supervision.

The Unit emphasizes to the esteemed auditors registered with the Egyptian Financial Supervisory Authority the importance of complying with what is stated in this Circular Letter.

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General Manager

General Administration for Quality Control of Auditors' Work

Osama Emile Amer

2014 / 16 / 4

Accountant / Osama Emile Amer

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Egyptian Financial Supervisory Authority
Egyptian Financial Supervisory Authority

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