## **Learning Outcomes**

After reading this article, you will be able to describe the audit engagement partner’s key responsibilities for setting and managing engagement-level quality under ISA 220 (Revised), with particular focus on the effective direction, supervision, and review of audit work. You will be able to identify common deficiencies, explain how direction, supervision, and review support audit quality, and apply these concepts to practical audit scenarios.

## **ACCA Audit and Assurance (AA) Syllabus**

For ACCA Audit and Assurance (AA), you are required to understand how quality is managed at the level of individual audit engagements in accordance with ISA 220 (Revised). Specifically, you must be able to:

- Explain the requirements of ISA 220 (Revised) for engagement-level quality management.
- Identify responsibilities of the engagement partner for managing and achieving quality on an audit.
- Distinguish and explain the processes of direction, supervision, and review.
- Describe how direction, supervision, and review underpin quality, prevent audit deficiencies, and contribute to compliance with professional standards.
- Evaluate common quality management deficiencies and recommend practical steps to improve engagement quality.

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is the primary objective of direction, supervision, and review during an audit engagement?
2. Who is ultimately responsible for the quality of an individual audit engagement?  
   a) Audit junior  
   b) Audit manager  
   c) Engagement partner  
   d) Internal auditor
3. Name two potential consequences if supervision is inadequate during a complex audit area.
4. Give an example of how effective review can reduce the risk of audit deficiencies.

## **Introduction**

ISA 220 (Revised) requires audit firms to ensure each audit engagement is conducted to a high standard of quality. This is achieved by defining clear roles for direction, supervision, and review throughout the engagement. The engagement partner is accountable for ensuring that the audit is carried out in accordance with auditing and ethical standards, and that the engagement team is appropriately guided and monitored at every stage.

> **Key Term: engagement-level quality**  
> The standard of audit work and reporting achieved on a specific engagement, reflecting compliance with professional and regulatory standards.

### Direction, Supervision, and Review: Core Concepts

Audit quality is not an abstract aim—it relies on clear processes implemented at the engagement level:

- **Direction** ensures every team member knows what to do, how to do it, and why their work matters.
- **Supervision** provides real-time tracking, support, and problem-solving as audit work progresses.
- **Review** is a structured, systematic check to confirm audit work supports conclusions and is compliant with relevant standards.

> **Key Term: direction**  
> The process of instructing team members about their responsibilities, procedures to follow, and audit objectives, usually at the planning stage and as new tasks arise.
>
> **Key Term: supervision**  
> Ongoing monitoring, support, and coaching of team members during audit work to ensure timely progress, proper execution, and immediate resolution of issues.
>
> **Key Term: review**  
> The critical evaluation of audit work performed, documentation, and conclusions to ensure quality, compliance with standards, and sufficiency of audit evidence.

### Why Direction, Supervision, and Review Matter

Clear direction, close supervision, and timely review are mandatory—not optional—for every audit. They:

- Maintain audit quality and consistency.
- Reduce risk of material misstatement going undetected.
- Ensure audit work complies with ISAs and ethical standards.
- Support the engagement partner’s responsibility and accountability.

> **Key Term: engagement partner**  
> The individual with overall responsibility for the quality and outcome of a specific audit engagement, usually a senior audit partner.

### Engagement Partner Responsibilities (ISA 220)

ISA 220 makes the engagement partner ultimately responsible for:

- Taking overall responsibility for managing and achieving engagement-level quality.
- Directing, supervising, and reviewing the work of other team members.
- Regularly reviewing documentation, especially for significant matters and professional judgements.
- Ensuring that any deficiencies identified are remediated before completion.

### **Worked Example 1.1**

**A new audit junior has been assigned to test bank reconciliations for the first time. What direction, supervision, and review activities should be performed by the manager and partner to ensure quality?**

> **Answer:**  
> Direction: Explain bank reconciliation objectives, the relevant assertions, and detailed testing steps.  
> Supervision: Check progress regularly, answer questions, provide feedback, redirect if errors occur.  
> Review: Inspect working papers for completeness, recalculate bank reconciliation, confirm conclusions are justified before final sign off.

### Typical Audit Team Structure

- Engagement Partner: Overall quality responsibility; major reviews, resolves significant issues.
- Audit Manager: Day-to-day direction and supervision; reviews sections and working papers.
- Supervisors/Seniors: Assign tasks, provide support, review junior work.
- Juniors: Perform assigned procedures; escalate problems upwards.

### **Worked Example 1.2**

**During the testing of trade receivables, a junior auditor misses an old debt that is potentially irrecoverable. The oversight is only discovered during the partner’s final review. What quality process failed?**

> **Answer:**  
> Supervision and intermediate review failed; earlier checks by the supervisor or manager should have spotted the omission before the partner’s review.

### Practical Implementation

#### Direction

- Provide clear briefings at planning and when assigning tasks.
- Ensure objectives, risks, and procedures are understood by every team member.
- Assign tasks based on capabilities and experience.

#### Supervision

- Monitor work as it progresses; adjust assignments if issues or resourcing gaps arise.
- Provide on-the-job training and support, especially for complex or judgmental areas.
- Encourage open communication so juniors can raise doubts and errors immediately.

#### Review

- Perform timely, thorough checks at all levels (working papers, significant judgements, final audit file).
- Ensure conclusions and documentation are clear, evidence is sufficient, and standards are met.
- Rectify errors or incomplete evidence before final reporting.

### **Worked Example 1.3**

**During a post-issuance quality review, you identify that a section of the audit work was only reviewed three days before the audit report was signed, resulting in insufficient time to correct errors. What consequences may result, according to ISA 220?**

> **Answer:**  
> There may be insufficient appropriate audit evidence, leading to risk of an inappropriate audit opinion and possible disciplinary action or regulatory sanction.

### **Exam Warning**

> Reviewing work only at the end, or failing to supervise inexperienced staff, is a common cause of audit deficiencies found during regulatory inspection. Marks will be lost if you do not highlight the need for ongoing direction, supervision, and staged reviews.

### Common Deficiencies and How to Address Them

Typical deficiencies include:

- No team briefing at planning—remedied by holding documented opening meetings.
- Unassigned tasks or unclear responsibilities—solved through explicit written instructions.
- Lack of intermediate reviews, leading to last-minute amendment needs—addressed by scheduled, staged reviews at regular intervals.
- Inadequate supervision of juniors on complex or high-risk areas—addressed by assigning experienced staff or real-time support.

Engagement partners must act promptly to remedy deficiencies discovered and communicate lessons learned to the whole team.

## **Summary**

Direction, supervision, and review are central to engagement-level quality in audit, as codified in ISA 220 (Revised). The engagement partner leads by setting expectations, providing clear instructions, ensuring progress tracking, and applying critical review. These processes support audit quality, ensure compliance with standards and ethical requirements, prevent audit deficiencies, and safeguard the reputation of the audit firm. For the ACCA AA exam, you must be able to describe each process, explain their practical application, and recognise deficiencies and remedies in real-life audit scenarios.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- The definition and importance of engagement-level quality.
- The engagement partner’s responsibilities for quality management.
- The meaning and audit role of direction, supervision, and review.
- Ways these processes underpin compliance with auditing and ethical standards.
- Common deficiencies in direction, supervision, and review, and how to remediate them.
- Application of these processes in real audit team structures and case scenarios.
- Typical exam pitfalls—such as failing to supervise, or incomplete/late reviews.

## **Key Terms and Concepts**

- engagement-level quality
- direction
- supervision
- review
- engagement partner

Engagement-level quality (ISA 220) - Direction, supervision, and review