1- Definitions

2- Elements of the Quality Control System

3- Responsibility of the Firm’s Management regarding quality within the Firm

4- Employment Procedures within the Firm

5- Assessment Policies within the Firm

6- Promotion Policy within the Firm

7- Firm members Training & Development of skills

8-  Firm members Continuing Education

9- The Organizational Structure within the Firm

10- Ethical and Behavioral requirements

11- Acceptances and Continuance of Client Relationships

 

1. Definitions

This guide adopts the same definitions and synonyms for each expression mentioned in the Egyptian standards on quality control. The following is the most significant definitions:

1- Managing partner: means a partner or another person in an enterprise responsible for the tasks, their performance, as well as the report issued by the enterprise, provided that such report obtains the appropriate validity from the regulatory, legal or professional authority.

2- Pre-issuance review: means a designed process of an objective presentation – prior to the issuance of the report – of the significant decisions given by the taskforce and the conclusions they reach upon preparing the report.

3- Pre-issuance reviewer: means a partner, another person in the enterprise, a duly qualified person from outside the enterprise, or a team composed of a group of individuals having sufficient and appropriate experience and authority to assess objectively the significant decisions given by the taskforce and the conclusions they reach upon preparing the report, prior to the issuance of such report.

4- Taskforce: means all individuals performing the task including the experts with whom the enterprise has contracted for a matter related to this task.

5- Enterprise: means a practitioner who may be an individual, a firm, an enterprise or any other professional accountant entity.

6- Review: means a set of predetermined procedures that provides evidence demonstrating the compliance of the taskforce with the quality control policies and procedures in the enterprise upon performing its task.

7- Registered entity: means an entity whose stocks, securities or debt instruments are listed on a recognized stock exchange, or an entity whose stocks are traded according to the rules of a recognized stock exchange, or any similar body.

8-  Control: means a process that includes continuous care and assessment of the quality control system within the enterprise, implying a regular review of a set of performed tasks in order to enable the enterprise to obtain an appropriate assurance level that the quality control system in the enterprise is working efficiently.

9- Multi-branch enterprise: means an enterprise that is subject to joint control, ownership and management of the enterprise.

10- Partner: means any person having an authority to oblige the company with regard to performance of professional services.

11- Individuals: mean partners and employees.

12- Professional standards: mean the performance standards as determined by the Egyptian Auditing Standards Committee in the introduction of the Egyptian standards on quality control, audit, assurance and the relevant services, as well as the other ethical and behavioral requirements which indeed represent both parts (A) and (B) of the code of ethics for professional accountants and auditors; in addition to other relevant ethical and behavioral requirements.

13- Appropriate assurance level: Pursuant to the Egyptian standards on quality control, it is deemed to be a high assurance level – not an absolute one.

14- Employees: mean the professionals (other than the partners) including any expert appointed by the enterprise.

15- External duly qualified person: means a potential and qualified person from outside the enterprise who can act as a managing partner, for instance, a partner from another enterprise, or an employee (having an appropriate expertise) from either a professional accounting body (whose members are permitted to perform limited audit and review of historical financial data, other assurance tasks, or other relevant services), or a committee that delivers relevant quality control services.

2- Elements of the quality control system

Elements of the quality control system stated in the Egyptian standards on quality control are similar to those stated in the American and international standards on quality control. However, the Egyptian standards on quality control are indeed more detailed and appropriate to the profession in Egypt. Therefore, the firm has adopted those elements stated in the Egyptian standards on quality control which are as follows:

1. Responsibility of the Firm’s Management regarding Quality in the Firm
2. Ethical and Behavioral Requirements
3. Acceptances and Continuance of Client Relationships
4. Human Resources (HR)
5. Task Management
6. Control

Quality control policies and procedures should be documented and informed to the employees in the enterprise. Such information describes policies and procedures of quality control, as well as the objectives they strive to achieve. It also implies a message that each person shall have a responsibility and that it is expected from him to comply with such policies and procedures.

3- Responsibility of the firm’s management regarding quality in the firm

All leaders of the firm at all levels should comply with quality in all professional and personal aspects while performing their tasks inside the enterprise since they are an example for the other employees. Moreover, since quality control in all tasks performed inside the enterprise arises basically from its leadership which spreads this culture among the other employees, the enterprise cannot impose quality control procedures on its employees without firmly establishing this culture within its leadership. Accordingly, messages directed from all levels of the firm management – affirming the necessity of compliance with quality control procedures – must be transmitted. In order to achieve the foregoing, the following has been approved:

1. Assigning the responsibility of the quality control department to an experienced audit manager, provided that he is exempted from his current tasks in order to dedicate himself solely to tasks of the new department, and that all of the capabilities and authorities required to complete his task efficiently are made available to him.
2. Organization of seminars and workshops and holding meetings in which the code of professional ethics issued by the Egyptian accountants and auditors is discussed through studying, analyzing and interpreting all the points or ideas that seem ambiguous.
3. Transmission of newsletters and brief notes that discuss some situations in which quality control policies were complied with and the acting person was awarded. The purpose is to boost the value of quality so as to firmly establish this culture within the employees through reward and punishment policy (Without prejudice to the principle of confidentiality).
4. Quality control management shall be the duty of a principal, an official possessing an ultimate authority and an official engaged in assessment of the employees’ performance and setting rewards and promotion policies.
5. Quality control management shall be the duty of the person in charge of developing the training courses needed to qualify the employees of the firm professionally, provided that such training courses include a sufficient amount of seminars; as well as direct and indirect group discussions that basically rely on supporting the firm’s view regarding the significance of quality and how it can be practically achieved.
6. As the main objective of the firm shall be the achievement of quality in all tasks performed by the firm, the firm’s leadership must do the following:

1. Establish responsibilities so that the commercial considerations do not dominate over the quality of work.
2. Set policies and procedures to assess employees’ performance, wages, rewards, promotions and incentives so as to show the substantive commitment of the firm to quality.
3.  The firm shall allocate sufficient resources to develop, document and support policies and procedures of quality control.

4- Employment

Introduction

The firm adheres to securing sufficient potential and experienced employees to perform the tasks in accordance with the professional and regulatory standards and legal requirements in order to enable the firm to issue appropriate reports. This can be achieved through the employment policies and procedures, in addition to the adopted promotion policies.

The firm strives for an optimal investment of the available human resources so as to achieve an optimum performance through developing the individual capabilities of the firm’s task force, as well as providing a safe and fair work environment that motivates distinguished contribution, creativity, cooperation and involvement of professionals in developing working patterns.

The firm develops a functional structure that suits the specialties and the actual needs according to the approbated organizational structure. It also develops an index for description, categorization and ordering of the jobs at the firm. The firm follows the upcoming policies adopted by the HR department:

We are going now to discuss the firm’s HR planning and organizational strategy:

i. Employment planning:

An integrated system of Job analysis helps to properly identify the needed types and number of jobs so as to identify current and expected objectives, as well as the prerequisites and the required qualifications to occupy those positions. Accordingly, the necessary measures for securing the needs of the firm’s taskforce can be taken.

Therefore, selection process aims to select the most appropriate candidates to occupy the vacant positions in the firm. In order to accomplish this, qualifications, capabilities and dispositions of a candidate should be compared to the prerequisites provided in the job description so as to decide properly whether the candidate is qualified to occupy the position or not. Job title or job name only is not enough to decide whether the candidate is qualified. Consequently, the detailed information included in the job description is deemed crucial.

ii . The following pre-employment tests are carried out:

1. Both written and oral tests of professional expertise that suits qualifications and prerequisites required to occupy the position.
2. English proficiency test.
3. Test of the basics of the profession’s theoretical and practical studies.
4. Test of a person specification: Measures

•  Level and type of education
•  Fields and duration of experience
•  Required skills
•  The candidate’s personal attributes and whether he is qualified to occupy the position or not
•  Social characteristics through a personal interview

iii. Fulfillment of the papers and documents necessary for employment

This is represented in the legal requirements for employment, for instance, a certificate of criminal record, a military service, or an exemption certificate.

Furthermore, a copy is submitted of the academic qualifications that comply with the job’s prerequisites, in addition to the I.D. documents to affirm the employment procedures; as well as the social insurance procedures after passing the three month probationary period.

The basic general requirements which include the required qualifications and prerequisites to occupy the position should be fulfilled. The candidate should pass the previously mentioned tests and should be of good reputation. His physical fitness to perform the duties of the job must be ascertained by the competent medical authority.

iv. Employment policies

1-In case of expansions, or an existence of vacant positions due to resignations, employment procedures are applied.

2-Employment levels are set according to specialties and jobs listed in the firm’s management structure as follows:

1. A Fresh graduate: is employed as junior auditor (after passing the required tests).
2.  Experienced (3-5 years): is employed as auditor (after passing the required tests).
3. Experienced (5-10 years): is employed as senior auditor (after passing the required tests).
4.  Experienced (10-15 years): is employed as auditing manager (after passing the required tests).

5- Assessment

Assessment policies in the firm

1. Professional assessment of performance
2. Functional assessment

(a) Professional assessment of performance

Professional assessment of all jobs is carried out through the following:

• Records of the monthly activity reviewed by line managers
• Reports issued by line managers regarding the employees under each department.

Assessment of performance and capabilities is deemed a main task of the quality control department in cooperation with HR department which prepares the forms of the employees’ periodic assessment.

(b) Functional assessment

The firm follows an equitable wage system through what is known as “job evaluation”. This means the determination of the value/worth of each job to other jobs relatively. In order to conduct the evaluation procedure properly, all elements related to each job should be taken into account (duties, responsibilities, work conditions, qualifications, experience, capabilities, required preparations, physical and mental effort, etc.). Afterwards, a clear wage structure is determined, indicating the minimum rate for each job level.

In its adopted system, the firm relies on measuring the employees’ performance so as to motivate personal achievements and enhance team spirit. The employee’s performance is assessed annually (for the period from January till December of each year) on the basis of predetermined explicit standards that include: commitment to attendance, behavior, accuracy of carrying out the duties assigned to him, speed of completion of duties and other capabilities.

Assessment responsibility

The assessment responsibility is shouldered by the following:

1. The line manager who is directly responsible for the employees under his management in the department. The assessment process is initiated by an auditing manager, and then approbated by the manager of the higher level in the management structure.
2. Department manager (partner) through which all employees in the department under his management are being assessed.
3. Managing director (partner) through which all employees in all departments under his management are being assessed.

Levels of the assessment of performance are as follows:

• Excellent: 90% or more
• Very good: from 75% : 90%
• Good: from 65% : 75%
• Satisfactory: from 50% : 65%
• Poor: less than 50%

6- Promotion

Promotion policies adopted by the firm do not take seniority into consideration as a basis for promotion. Thus, promotion is based on practical and scientific grounds which include up-to-date scientific qualifications obtained by an employee. It also includes assessment of his capabilities and performance upon completion of the duties assigned to him, in addition to the speed of completion with an optimal performance. In order to avoid any bias in the promotion process, the firm relies on set prerequisites for each job. Such prerequisites include, for instance, the level of professional education, number of years of experience and annual and monthly periodic assessment reports. Accordingly, promotion basis is as follows:

• Experiences obtained by an auditor
• Professional certificates obtained by an auditor
• Academic certificates obtained by an auditor
• Training courses obtained by an auditor
• Professional efficiency and speed of completion
• Periodic reports by the managers

7- Training

The firm adopts the approach of developing skills according to the following concepts and procedures:

a. Initial professional training

Upon enrollment of a new employee in the firm, an initial educational course is offered to him upon employment in order to provide him with the information, skills and behavior required to perform the job and to fulfill the basic requirements of work. This matter is conducted through the auditing manager in charge.

b. Basic professional training

In this stage, the employee is provided with several minor details related to the duties assigned to him regarding work performance. Small education units are conducted enabling him to practice the assigned work in the department so as to complete it efficiently. This is deemed to be a training and qualification process that leads to recognition of the adopted approach upon application of either tax standards, or tax applications.

c. Advanced professional training

After an employee completes the previous two stages, he becomes able to recognize both nature and significance of the problems encountered regarding the determination of his needs in order to continue performing his work. Due to the various works assigned to him, their practices and diversity, the employee needs external training through training courses that qualify him to keep up with the changes and developments of the professional practice, through accounting, tax, or auditing courses.

 

8- Continuing education

Through adherence to continuing education, the firm aims to achieve the following:

•  Optimal investment of human capital
•  Improvement of professional efficiency and optimal resource utilization
•  Improvement of performance level
•  Development of the firm’s continuous improvement process

Through development of performance, the firm aims to:

1. Follow up external training courses and registration of all levels of the firm’s organizational structure for such training courses; as well as auditing, accounting, or tax courses.
2. The firm strives for professional preparation that targets preparation of professionals capable of executing the assigned duties efficiently. In order to boost professionalism, advanced level professional education and training are provided through training courses organized by the syndicate and the professional associations. Accordingly, technological and scientific developments are adhered to in order to prepare efficient professionals of developed, updated and boosted knowledge and skills.

This type of preparation is conducted within the competent professional educational institutions and bodies.

9- The Organizational Structure within the Firm

10- Ethical and behavioral requirements

Ethical and behavioral aspects are deemed a basic requirement in any work assigned to any person; especially in case of his knowledge of the finest secrets of clients. This case may occasionally render the assigned person, or the reviewer in a position of conflict of interests, or there may be uncertainty of the ethicality of a certain act.  The Egyptian code of ethics for professional accountants and auditors lists the basic principles of professional ethics which include:

a. Impartiality and independence

b. Objectivity

c. Professional efficiency and due care

d. Confidentiality

f. Professional behavior

This index shall discuss both points (a&b) since they are the most significant landmarks for the task force.

a. Impartiality and independence

Independence of an auditor is a key tool for him especially with regard to advising services. Accordingly, the firm’s employees should be safeguarded from any factors that may influence their independence. This is done through providing the firm’s employees with publications that indicate the following:

1. Independence requirements needed to perform various services.
2. Circumstances and relationships that may constitute a threat for independence, in addition to determination of an appropriate measure for elimination of those threats or their reduction to a reasonable degree.

In order to ascertain that those publications and literature achieve their purpose, the following should be carried out:

1.  Quality control department manager should provide the enterprise with the information related to the clients tasks (Including the scope of the provided services) in order to enable the enterprise to assess the overall effect – if any – on the independence requirements.
2. Client’s receipt of a written undertaking from the group director and managing partner that they have no impediment that hinders or threatens their independence before the client in light of the previously mentioned assessment. Furthermore, this undertaking also states that they are committed to notify the quality control department manager of any events that may occur and affect their independence promptly upon its occurrence, provided that this undertaking is updated periodically and prior to commencement with any new client.
3.  The adopted procedures in case certain events occur resulting in the loss of a taskforce member of the independence requirement while performing an audit task in a certain process are:
   – If an event negatively influencing the independence of a member of the taskforce occurs, he should notify the managing partner in writing about that event so as to be exempted from the task which shall be assigned to another auditor.
4. Upon being notified of any events that influence or contradict the independence policies and procedures, the quality control department manager shall promptly inform the respective partners about such information in order to undertake an appropriate measure, which may vary between excluding the person whose independence has been influenced from the duties assigned to him, and apologizing to the client.
5. The taskforce as well as the managing partner may not continue to provide their services to the same client for extended periods. Accordingly, quality control department should determine the period after which the task force should be altered, and should take the necessary measures to execute this matter through training new personnel capable of assuming these tasks.
6. The enterprise shall provide special training about independence to employees subject to independence.

• The enterprise shall establish policies and procedures that describe the standards of safeguarding needed to minimize the common threats to a reasonable degree upon engaging the same key employees in an assurance task for a long period of time. Examples of such threats include: existence of a direct financial interest for the client, reliance on the fees of a single client, concerns arising from the likelihood of losing the client, correlation of fees to achievement of certain conditions and an existence of a relationship between a member of the taskforce and the client. In order to be safeguarded from those threats, there are general safeguarding tools related to the enterprise and other ones related to the client. The practitioner accountant should resort to the professional judgment to determine the optimal manner to deal with each individual threat. The general safeguarding tools include the following:
  • The leadership of the enterprise’s focus on independence
  • Existence of documented policies and procedures that check whether policies and procedures of the enterprise are complied with
  • Engagement of different taskforces and partners
  • Existence of an enterprise that imposes punishments in case of breach to policies.

The special safeguarding tools include the following:​

• Supervision of another professional accountant to review the works
• Counseling others (a committee composed of independent directors)
• Discussion of ethical issues with governance directors for the client.
• If an event negatively influencing the independence of a member of the taskforce occurs, and the managing partner is not notified about that matter but it is detected:
• The auditor is exempted from the task, and it is assigned to another auditor.
• A warning letter is given to the auditor negatively influencing his assessment report.

 

(b) Objectivity

Objectivity is deemed a landmark that distinguishes an auditor or a taskforce from any other party, qualifying him for impartiality towards a specific policy or logic. Accordingly, it is necessary to keep emphasizing the significance of objectivity held by the taskforce and its leadership through the following:

– Providing the employees with training courses in order to boost their professional efficiency and recognize the recent changes in the professional standards; accordingly qualifying them for an appropriate professional background which aids in logic judgment.

11-    Acceptance and continuance of client relationships

The firm should establish appropriate policies for determination of the likelihood of acceptance a client for the first time, or continuance in providing its services to the present clients. This policy is based on three main axes, which are:

• Assessment of the client’s integrity
• Availability of professional efficiencies in the firm to provide the service
•  Likelihood of providing the service in compliance with ethical and behavioral requirements

Those axes can be fulfilled through the following: 

 

a. Client’s integrity

1. Investigating identity and reputation of the client’s main owners, top management and relevant parties.
2. Investigating the commitment extent of the client towards corporate governance code.
3. Nature of the works provided and the client’s business practices.
4. Investigating the client’s internal control environment.
5. Estimating whether the client’s concern is the quality of the service, or the estimated fees and whether he attempts to de-scope the work.
6. Inquiring about the reasons for replacing the previous auditor.
7. Attempting to obtain information from external parties, for instance, a previous auditor or financial institutions that have business relations with the client.

 

b. Availability of professional efficiencies in the firm to provide the service

1. Searching in the information center of the company for the companies of similar activity, and holding a meeting with their directors in order to recognize how to complete the task assigned to the firm.
2. Preparing a list of nominations for the managing partner who will be assigned to supervise the task on the basis of his previous experiences; subject to an approval of the board of directors.
3. The managing partner should prepare a list of nominations for the task force that will help him in completing the process. Quality control department contributes in preparing those nominations, since statements of assessment of the employees’ performance are available, and accordingly in recognizing the appropriate elements for contribution and the necessity of their professional preparation according to the nature of the client’s activity.
4. The quality control department should assure non existence of any contradiction between those nominations on the one hand, and the employees’ independence procedures and policies on the other hand.
5. Inquiring from the firm’s legal advisor about the responsibility that the firm may be liable to as a result of engagement with this client.