#7 Quality Control Flashcards
CPA firm’s system of quality control
*Is required
*Applies to auditing and accounting engagements
*Is comprehensive
*Consists of policies and procedures
*Provides reasonable assurance that the firm
>Complies with professional standards
>Issues appropriate reports
!!The working papers objectives:
>Record basis for the auditor report
>Provide evidence that audit complied with GAAS.
!!Quality control system provides reasonable assurance that audits comply with GAAS. Second review is perform by a partner that was not involved with audit. Quality control reviewer evaluate significant judgement and conclusion supporting the audit opinion and review working papers to provide evidence focused on audit objective of fait F/S presentation in conformity with GAAP.
Engagement quality control review
*Objective evaluation of judgements and conclusions of audit team.
*Completed before audit report released
*Used only when dictated by firm quality control policies
*Reviewer(s) should be experienced but not on the engagement team
*Differences of opinion between engagement partner and reviewer to be settled by firm policy
!!CPA firm requires quality control policies & procedures to comply with professional standards & regulatory & legal requirements.
!! Before report released, engagement quality control reviewer evaluates the judgements and conclusions made by the audit team. If there is a disagreement between engagement partner and reviewer, the differences are resolved by the firm’s quality control policies and procedures.
What are 6 elements to a CPA firm ‘s system of quality control?
Quality control system contains 6 elements (HEAL-ME).
(H)uman resources:
*Employees are competent and trained
(E)thical requirements:
*Complies with ethical requirements (Independence, integrity, and objectivity)
(A)cceptance and continuance:
*Resources to perform engagement
*Firm does not work with shady clients
(L)eadership responsibilities for quality:
*Person in chareg for quality control has sufficient & experience and authority.
(M)onitoring:
*Firm policies are relevant, adequate and operating effectively
(E)ngagement performance:
*Engagements meet professional/quality standards and legal and regulatory requirements
Considerations for CPA firm quality control policies and procedures
4 Quality Control Criteria:
*Firm Size
*Nature of firm’s practice
*Organization structure
*Costs/benefits
The QC objective is to comply with professional, regulatory and legal requirement. And issue reports that are appropriate.
