Who is the team leader of the audit engagement?

The responsibilities of the engagement partner, as defined by assurance standards, shall normally be discharged by the audit principal, who is referred to as the engagement leader in OAG methodology. While ensuring that audits are carried out in compliance with Office policies, professional standards, and the Office’s system of quality control, the engagement leader also recognizes that when acting as the signatory on annual audits, he or she signs on behalf of the Auditor General of Canada and is therefore accountable in his or her actions and decisions to the Office and the Auditor General.

For greater clarity, even in circumstances where the auditor’s report, special examination report, or chapter is to be signed by an assistant auditor general, or the Auditor General, the engagement leader shall retain the accountabilities and responsibilities of the engagement partner, as set out in Canadian Auditing Standards and other assurance standards.

While engagement leaders sometimes delegate certain tasks to other members of the engagement team, they may not delegate the accountabilities and responsibilities of their role. Where the engagement leader has delegated performance of a particular task that he or she normally performs, the engagement leader is sufficiently involved in and takes responsibility for satisfactory completion of the task. The engagement leader provides evidence of this involvement by marking the tasks as reviewed. For clarity, it may be necessary to document the assignment of delegated tasks in the engagement file.

CAS 220–Quality Control for an Audit of Financial Statements is the quality control standard for financial audits. An engagement leader assigned to an audit of financial statements should become familiar with the requirements of this standard and the related policies and procedures developed to support the Office’s system of quality control and compliance with these requirements.

CSAE 3001–Direct Engagements is the assurance standard for performance audits and special examinations. An engagement leader assigned to a performance audit or special examination should become familiar with the requirements of this standard and the related policies and procedures developed to support the Office’s system of quality control and compliance with these requirements.

OAG Audit 1012 Audit quality, including roles and responsibilities for audit quality, provides further guidance on the assignment of roles and responsibilities for audit quality.

The engagement leader should exercise caution when considering delegations of tasks that he or she normally performs in higher risk engagements or engagements where a quality reviewer has been assigned.

Engagement leaders are expected to ensure that they manage resources provided to them effectively and efficiently in conducting their audits. The engagement leader

• leads the performance of the audit and its documentation by being proactively and sufficiently involved throughout the audit, including being satisfied that risks have been assessed and responded to appropriately;

• exhibits leadership in continuous quality improvement and challenges engagement team members to think, analyze, question, and be rigorous in their approach and communicate regularly;

• demonstrates a willingness to teach and coach others;

• identifies that a quality reviewer has been assigned and ensures that person’s sufficient and timely involvement (i.e., sufficiently early in the audit process to allow for significant matters identified to be promptly resolved);

• budgets for the estimated time that the quality reviewer assessed would be necessary for the quality reviewer’s review;

• discusses significant matters arising during the audit, including those identified during the quality reviewer’s review, where applicable, with the quality reviewer;

• is responsible for the engagement team undertaking appropriate consultation on difficult or contentious matters and initiating those consultations where necessary (OAG Audit 3081);

• has ongoing involvement in assessing the progress of the audit and in making key judgments;

• is satisfied that the review, supervision, and quality control procedures in place are adequate and effective;

• has overall responsibility for reviewing and assessing the quality of the work done, its proper and timely documentation, and the conclusions reached (OAG Audit 3071); and

• documents the extent and timing of his or her own involvement or is satisfied that an appropriate record of his or her involvement exists.

Engagement quality control review

The engagement leader remains alert for changes in circumstances to identify situations in which an engagement quality control review is necessary, even though, at the start of the engagement, such a review was not required.

Where a quality reviewer has not been appointed and the engagement leader concludes one ought to be, the engagement leader consults with the assistant auditor general of Audit Services.

Considering the results of the OAG’s monitoring of the System of Quality Control

OAG Audit 1012 provides guidance on the assignment of roles and responsibilities for audit quality and the OAG’s monitoring process.

Acceptance and continuance of client relationships and audit engagements

The engagement leader, with appropriate consultation where necessary, recommends the decision to accept or continue/discontinue an assurance engagement according to OAG Audit 3011.

See also OAG Annual Audit 3040 for guidance concerning engagement letters.

Assignment of engagement teams

Before the completion of the planning or survey phase of the assurance engagement, the engagement leader ensures that the audit team has the necessary competencies and capabilities to perform the assurance engagement. Depending on the circumstances (and the application of other OAG policies), other members of an engagement team may include a quality reviewer, IT Audit specialists, data analytics specialists, and tax and/or other specialists.

When using Office specialists, the engagement leader may have personal knowledge of, and experience with, the specialist’s work providing them with assurance concerning the specialist’s expertise and competence. In the absence of personal knowledge or experience, the engagement leader may presume the Office specialist has the appropriate competence for the engagement by virtue of their appointment as an internal specialist. However, the engagement leader must remain alert to any indications that the specialist may not possess the necessary competence for the engagement and where necessary, take steps to ensure the engagement team has the appropriate competence.

Engagement leaders are encouraged to complete this assessment as early as practicable in the audit planning/survey phase to identify possible resource concerns at an early stage of the engagement.

The engagement leader should also be satisfied that

• the planned resources have, in fact, been allocated to the team and the team members have sufficient time to perform the work expected of them;

• there is a clear designation of roles, and responsibilities and tasks have been assigned appropriately; and

• the tasks to be performed, including the reporting lines for reviewing and reporting to the engagement leader, are clearly defined, communicated, and documented.

The engagement leader takes into account the experience of the team when determining the degree of supervision and review required.

The engagement leader is proactively involved in assessing team capabilities and performance throughout the audit and takes appropriate action when he or she becomes aware that additional resources or expertise is required. When the engagement leader delegates these tasks, he or she nonetheless remains accountable.

Teams and Relationships. Where possible, the engagement leader provides a development opportunity for team members by providing them with the scope to learn new skills. The new skills learned on one engagement will benefit not only the individual, but also future engagements the team member may work on.

Ethical requirements

OAG Audit 1031 provides guidance applicable to the engagement leader concerning ethical requirements.

Independence

The engagement leader takes appropriate action to eliminate or reduce threats to independence to an acceptable level by applying the framework for assessing threats to independence.

The framework requires the Office and its employees to

• identify threats to compliance with independence requirements;
• assess the significance of the threats identified;
• apply safeguards, when necessary, to eliminate or reduce the threat to an acceptable level; and
• document the threat and how safeguards eliminate or reduce it to an acceptable level.

OAG Audit 3031 provides guidance applicable to the engagement leader concerning independence.

See also OAG Audit 3063 Quality reviewer responsibilities, OAG Audit 3081 Consultations, and OAG Annual Audit 2210 Communications with those charged with governance.

Direction, supervision, and performance of the assurance engagement

The engagement leader is sufficiently involved in the planning phase, including team meetings, to

• assess whether the team has the appropriate competence and capabilities, resources, and time to perform the audit engagement, and whether the involvement of specialists and experts is appropriately planned;

• assess the engagement team’s compliance with ethical requirements;

• share understanding of the entity and its environment, risks, and controls;

• lead the discussion on fraud (as required); and

• share with the team his or her experience and insight, enhancing the effectiveness and efficiency of the planning process.

The engagement leader leads the development of the audit strategy and plan, including, where appropriate, holding initial meetings with senior client executives during the planning phase. The engagement leader also chairs the mandatory team planning meeting with the engagement team.

The engagement leader is satisfied with the following:

• Overall and performance materiality levels, as well as materiality for particular items and the de minimis SUM posting level (where appropriate), have been discussed among the engagement team members, agreed upon, and documented.

• Significant risks have been appropriately identified and the rationale documented.

• Planned responses to assessed risks, including the nature, timing, and extent of audit procedures for material account balances, systems, and practices or matters of significance to the scope of the audit, have been appropriately identified and documented.

• Appropriate planning activities have been performed and documented, including the dissemination of audit instructions in the case of group audits.

• Sign offs to provide evidence of satisfaction with the planning process have been provided.

The engagement leader takes responsibility for the implementation of the audit plan, and reviews any significant matters identified during the planning stage.

During the audit, the engagement leader

• participates sufficiently in monitoring the progress of the audit to be satisfied with the engagement’s overall quality and that matters requiring judgment are being appropriately identified and resolved;

• leads the discussions and decides on whether sufficient appropriate audit evidence has been obtained or whether there is a need to revise the nature, timing, and extent of work performed;

• is satisfied that appropriate consultations have taken place and the resulting conclusions have been documented, the documentation agreed with the person consulted, and the conclusions have been implemented;

• is satisfied that the objectives of the engagement procedures have been achieved and have been reviewed by an appropriate level of staff; and

• reviews the completion activities and signs off to provide evidence of satisfaction with the work done to support the opinion or conclusion.

Teams and Relationships. Spending time with the engagement team while performing the above tasks provides the opportunity for the team members to interact with and learn from the engagement leader. These interactions with the team allow the engagement leader to coach the team on expected behaviours and provide examples and recognition of individual and team performance.

Reviews

The engagement leader reviews the audit process, not only the recorded results of work done, to be satisfied that

• the right matters have been considered; and

• the audit work has been appropriately designed and executed to address the risks identified, and to provide sufficient appropriate audit evidence.

In addition to the engagement leader’s review of significant matters, as contemplated in CAS 220.A18 and CSAE 3001.40 a), the engagement leader

• reviews other working papers, which in his or her professional judgment are important in the particular circumstances of the engagement; and

• is satisfied that an appropriate level of review of all work and documentation has been performed by the engagement team.

Review of audit work when there is a change in engagement leader during the audit

OAG Audit 1162 provides guidance applicable to the engagement leader concerning the review of audit work when there is a change in engagement leader during the audit.

Consultations

The engagement leader is responsible for making the judgments necessary to successfully carry out the audit engagement. He or she determines the prudent action to take on accounting, auditing, and reporting matters that arise during the course of the engagement; checks that matters are resolved according to the OAG’s position on the matter; communicates the position to the entity; and determines the appropriate report to issue. The engagement leader is also responsible for checking that the appropriate expertise is brought to bear on all matters related to the engagement. Engagement leaders consult with others, as appropriate, before making a commitment to the entity on matters that may be controversial; on important judgments about the acceptability of the entity’s accounting policies, practices, and disclosures; or on the scope of the work or the form of the report.

The engagement leader

• needs to be satisfied that the engagement team has consulted appropriately (including when there is a requirement under Office policy to consult);

• consults appropriately with the quality reviewer (where applicable) and others. Note, however, that where the nature and extent of the consultations with the quality reviewer become significant, the engagement team and the quality reviewer must take care to maintain the quality reviewer’s objectivity. OAG Audit 3063 provides specific guidance on the extent of consultations with the quality reviewer.

Engagement leaders initiate consultations with the appropriate persons.

OAG Audit 3081 provides guidance on consultations.

Differences of opinion

Where differences of opinion arise within the engagement team, with those consulted, and, where applicable, between the engagement leader and the quality reviewer, the Office’s policies and procedures for dealing with and resolving differences of opinion are followed.

The engagement leader informs members of the engagement team that they may bring matters involving differences of opinion to the attention of the engagement leader or others within the Office without fear of reprisals, and encourages a culture where team members are comfortable discussing differences of opinion within the team and with the engagement leader.

It is important to identify differences of opinion at an early stage. The audit report is not dated until any differences in opinion are resolved.

Who is responsible for audit engagement?

Who appoints audit team leader?

What should the audit team leader consider in planning the audit?

Who makes up an audit team?