Chapter 2 LO8 Flashcards
Identify quality control standards and practices within the accounting profession
for members of a firm to be eligible for membership in the AICPA what do public accounting firms have to be enrolled in?
an AICPA approved practice monitoring (peer review) program
what does the element of quality control “ relevant ethical requirements” mean? (3)
independence, integrity, objectivity 1. all personal on engagements should maintain independence in mind and appearance 2. all should perform all professional responsibilites with integrity 3. all should maintain objectivitiy in performing their professional responsibilities
how often are peer reviews conducted
every 3 years
T/F quality control is closely relatated but distinct from auditing standards
T
T/F quality control procedure do not depend on different aspects about the firm like size, nubmber of offices, or nature of practice
F
what is the purpose of a peer review?
to determine and report whether the CPA firm being reviewed has developed adequate quality control policies and procedures and follows them in practice
Firms required to be registered with the PCAOB must be reviewed by whom? for what purpose?
the AICPA National Peer Review Committee to review the non-SEC portion of the firms practice that is not inspected by the PCAOB
what is practice monitoring (peer review)
the review by CPA’s of another CPA firms compliance with its quality control system
what does the element of quality control “monitoring “ mean
P& P should existi to ensure the other quality control elements are being effectively applied
what does a cpa firm do to ensure that the principles in auditing standards are followed on every audit?
they follow specific quality control procedures to meet those standards consistently on every engagement
they system of quality control should include policies and procedures that address what 6 elements?
- leadership responsibilities for quality within the firm (tone at the top) 2. relevant ethical requirements 3. acceptance and continuation of client relationships and specific engagements 4, human resources 5. engagement performance 6. monitoring
what does the element of quality control “acceptance and continuation of client relationships and specific engagements” mean? (3)
- policies and procedure should be established to decide whether to take or continue a client relationship or specific engagement 2. the P&P should minimize risk of associating with client whose management lacks integrity 3. firm should only undertake engagements that can be completed with professional competence
who is the AICPA peer review program administered by?
state CPA societies under the overall direction of the AICPA peer review board
what is the difference between quality controls and audit standards?
quality controls are established for the entire cpa firm whereas auding standards are applicable to individual engagements
each firm should ____ and _____ quality control policies and procedures
document establish
what does the element of quality control “engagement performance” mean ? (3)
P& P should exist to ensure that the work perfromed by people meets 1. applicable professional standards 2. legal and regularoy requirement 3. firms standards of quality
what requires firms to document quality control policies and procedures?
auditing standards
what are Audit Practice and Quality Centers?
organizations established by AICPA to help firms meet quality control standards and audit standards
what are 2 audit practice and quality centers and what do they do?
- The Center for Audit Quality (CAQ) is a public policy organization affiliated with the AICPA serving investors, public company auditors, and the capital markets 2. The Private Companies Practice Section (PCPS) provides practice management information to firms of all sizes
the methods for quality control include what 2 things?
- the organizational structure of the firms 2. the poicies and procedures the firm establishes
what is quality control?
methods used to ensure that the firm meets its professional responsibilities to clients and others
a quality control system provides reasonable assurance, not a guarantee , that what are followed?
auditing standards
what does the element of quality control “human resources” mean? (4)
should have P& P in place to provide firm with assurance that 1. all new personel is qualified to perform work competently 2. work is assigned to people who have adequate techinial training and proficiency 3. everyone should participate in CPE and prfessional development activiites that enable them to fulfill their assigned responsiblities 4. people selected for advancement have qualifications necessary for fulfillment of assigned responsibilities
what does the element of quality control “leadership responsibilities for quality within the firm (tone at the top” mean?
the firm should promote a culture that quality is essential in performing engagments and should establish plicies and procedures that support that culture
