AUD 2.1 - Quality Control

Question 1

This consists of policies and procedures designed, implemented, and maintained to ensure that the firm complies with professional standards and appropriate legal and regulatory requirements and that any reports issued are appropriate:

Answer 1

Quality control system

Question 2

The six interrelated elements of quality control are:

Answer 2

Human Resources
Engagement/client acceptance and continuance
Leadership responsibilities
Performance of the engagement
Monitoring
Ethical requirements

Question 3

This element of the quality control system encompasses criteria or recruitment, hiring, assigning personnel to engagements, professional development, compensation, etc.

Answer 3

Human resources

Question 4

This element of the quality control system is established for deciding whether to accept or continue a client relationship and whether to perform a specific engagement.

Answer 4

Engagement/client acceptance and continuance

Question 5

This element of the quality control system emphasizes that leadership bears ultimate responsibility for the quality control system and should create a culture that emphasizes quality. “Tone at the top”.

Answer 5

Leadership

Question 6

This element of the quality control system has policies and procedures that help to achieve a consistently high level of performance; ensure the engagement is appropriately supervised and work is reviewed; maintain confidentiality, safer custody, integrity; and allow consultation with experts:

Answer 6

Performance

Question 7

This element of the quality control system is established to provide the firm with reasonable assurance that its system is relevant, adequate, operating effectively, and complied within practice. It involves ongoing consideration and evaluation of the design and effectiveness of the system:

Answer 7

Monitoring

Question 8

These types of procedures include the performance of engagement quality control reviews, post issuance reviews of documentation, and inspection (both internal & external) of a selection of completed engagements:

Answer 8

Monitoring procedures

Question 9

The AICPA requires this type of review to determine and report whether the CPA firm being reviewed has developed adequate policies and procedures for the elements of quality control and is following them.

Answer 9

Peer Review

Question 10

How often is a peer review required by the AICPA?

Answer 10

Every 3 years

Question 11

The Sarbanes Oxley Act requires this type of review of audit documentation by a partner not involved in the audit for public companies:

Answer 11

A “wrap up” or “second parter preissuance review”

Question 12

This element of the quality control system provides the firm with reasonable assurance that personnel maintain independence in all required circumstances, perform all professional responsibilities with integrity, and maintain objectivity in discharging professional responsibilities:

Answer 12

Ethical requirements

Question 13

How often are firm personnel subject to independence requirements required to confirm their independence in writing or electronic form?

Answer 13

Annually

Question 14

The nature an extent of a firms quality control policies and procedures depend on:

Answer 14

Firms size
Organizational structure
Nature and complexity of its practice
Cost benefit considerations

Question 15

What relates to the conduct of each individual audit engagements?
What relates to the conduct of all professional activities of the firm’s practice as a whole?

Answer 15

GAAS

Quality control standards

Question 16

Do deficiencies in or noncompliance with a firm’s quality control system indicate a lack of compliance with GAAS or that the quality control system is insufficient?

Answer 16

NO

Question 17

What areas should the engagement partner review?

Answer 17

Critical areas of judgement
Significant risk (always revenue recognition and mgmt. override)
Other areas deemed important

Question 18

Audit documentation should include:

Answer 18

Who performed the work and date the work was completed
Who reviewed the work and the date the review occured

Question 19

For a nonissuer audit, this is performed only when required by the firms policies and procedures and is completed before the engagement partner releases the audit report. It provides an objective evaluation of the significant judgements the engagement team made and the conclusions it reached in formulating the auditors report.

Answer 19

Engagement quality control review (EQCR)

Question 20

For an issuer audit, this is required and concurring approval of audit report issuance for all audits of issuers and for each engagement to review the interim financial statements of an issuer:

Answer 20

Engagement quality control review

Question 21

Under PCAOB, (public companies) the firm cannot given the client permission to use the engagement report until:

Answer 21

Th EQCR provides concurring approval of issuance