AUD 2 Quality control standards

Question 1

Quality control elements

Answer 1

1. Human resources
2. Engagement/client acceptance and continuance
3. Leadership responsibilities
4. Performance of the engagement
5. Monitoring
6. Ethical requirements

Question 2

Human resources

Answer 2

Recruitment, hiring, determining capabilities, and competencies, assigning personnel to engagements, professional development, and performance evaluation, compensation and advancement

Question 3

Engagement / Client acceptance and contin

Answer 3

Policies established to decide if a client should be accepted.
Minimizes the likelihood of association with a client whose managements lacks integrity.
Undertake only those engagements that the firm can reasonably expect to complete with professional competence.
Can comply with legal and ethical requirements.
The firm should document how any issues with respect to the acceptance and continuance decision were resolved.
The firm should obtain an understanding with the client regarding the nature, scope, and limitations of the services to be provided.

Question 4

Leadership responsibilities for quality within the firm

Answer 4

The firm’s leadership bears ultimate responsibility for the firms quality control system and should create a culture that emphasizes quality.

Question 5

Performance

Answer 5

Achieve high level performance, supervision, integrity and retention of engagement docs, consultation with experts

Question 6

Monitoring

Answer 6

Ongoing consideration and evaluation of the design and effectiveness of the quality control (quality reviews, inspection etc) A partner should do that, a “wrap-up” or second partner review of audit docs, document monitoring.

Question 7

Peer review

Answer 7

One CPA firm reviews another CPA firm every 3 years in order to keep AICPA membership.

Question 8

Ethical requirements

Answer 8

To maintain public confidence in the profession.
At least annually independence written confirmation.
Independence threatened if bookkeeping , financial info system implemented, appraisal services, actuarial, internal audit.
Lead partner rotates every 5 years.
No contingent fee arrangements.