AS 1201: Supervision of the Audit Engagement

Effective Date: For audits of fiscal years beginning on or after Dec. 15, 2010
Guidance on AS 1201: Staff Audit Practice Alerts No. 6No. 8, and No. 10
Summary Table of Contents

Introduction

.01        This standard establishes requirements regarding supervision of the audit engagement, including supervising the work of engagement team members.

Objective

.02        The objective of the auditor is to supervise the audit engagement, including supervising the work of engagement team members so that the work is performed as directed and supports the conclusions reached.

Responsibility of the Engagement Partner for Supervision

.03        The engagement partner1 is responsible for the engagement and its performance. Accordingly, the engagement partner is responsible for proper supervision of the work of engagement team members and for compliance with PCAOB standards, including standards regarding using the work of specialists,2 other auditors,3 internal auditors,4 and others who are involved in testing controls.5 Paragraphs .05-.06 of this standard describe the nature and extent of supervisory activities necessary for proper supervision of engagement team members.6

.04        The engagement partner may seek assistance from appropriate engagement team members in fulfilling his or her responsibilities pursuant to this standard. Engagement team members who assist the engagement partner with supervision of the work of other engagement team members also should comply with the requirements in this standard with respect to the supervisory responsibilities assigned to them. 

Supervision of Engagement Team Members

.05        The engagement partner and, as applicable, other engagement team members performing supervisory activities, should:

  1. Inform engagement team members of their responsibilities,7 including:
    (1) The objectives of the procedures that they are to perform;
    (2) The nature, timing, and extent of procedures they are to perform; and
    (3) Matters that could affect the procedures to be performed or the evaluation of the results of those procedures, including relevant aspects of the company, its environment, and its internal control over financial reporting,8 and possible accounting and auditing issues;
  2. Direct engagement team members to bring significant accounting and auditing issues arising during the audit to the attention of the engagement partner or other engagement team members performing supervisory activities so they can evaluate those issues and determine that appropriate actions are taken in accordance with PCAOB standards;9

    Note: In applying due professional care in accordance with AS 1015, each engagement team member has a responsibility to bring to the attention of appropriate persons, disagreements or concerns the engagement team member might have with respect to accounting and auditing issues that he or she believes are of significance to the financial statements or the auditor's report regardless of how those disagreements or concerns may have arisen.

  3. Review the work of engagement team members to evaluate whether:
    (1) The work was performed and documented;
    (2) The objectives of the procedures were achieved; and
    (3) The results of the work support the conclusions reached.10 

.06        To determine the extent of supervision necessary for engagement team members to perform their work as directed and form appropriate conclusions, the engagement partner and other engagement team members performing supervisory activities should take into account:

  1. The nature of the company, including its size and complexity;11
  2. The nature of the assigned work for each engagement team member, including:
    (1) The procedures to be performed, and
    (2) The controls or accounts and disclosures to be tested;
  3. The risks of material misstatement; and
  4. The knowledge, skill, and ability of each engagement team member.12

    Note: In accordance with the requirements of AS 2301.05, the extent of supervision of engagement team members should be commensurate with the risks of material misstatement.13


Appendix A - Definition

.A1    For purposes of this standard, the term listed below is defined as follows:

.A2    Engagement partner - The member of the engagement team with primary responsibility for the audit.

Footnotes (AS 1201 - Supervision of the Audit Engagement):

1Terms defined in Appendix A, Definitions, are set in boldface type the first time they appear.

2AS 1210, Using the Work of a Specialist.

3AS 1205, Part of the Audit Performed by Other Independent Auditors.

4AS 2605, Consideration of the Internal Audit Function.

5Paragraphs .16-.19 of AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements.

6See also paragraph .06 of AS 1015, Due Professional Care in the Performance of Work.

7AS 1015.06 and paragraph .05 of AS 2301, The Auditor's Responses to the Risks of Material Misstatement, establish requirements regarding the appropriate assignment of engagement team members.

8AS 2110, Identifying and Assessing Risks of Material Misstatement, describes the auditor's responsibilities for obtaining an understanding of the company, its environment, and its internal control over financial reporting.

9See, e.g., paragraph .15 of AS 2101, Audit Planning, AS 2110.74, and paragraphs .20-.23 and .35-.36 of AS 2810, Evaluating Audit Results.

10AS 2810 describes the auditor's responsibilities for evaluating the results of the audit, and AS 1215, Audit Documentation, establishes requirements regarding audit documentation.

11AS 2110.10.

12See also AS 2301.05a and AS 1015.06.

13AS 2301.05b indicates that the extent of supervision of engagement team members is part of the auditor's overall responses to the risks of material misstatement.