Chapter 2 - The Public Accounting Profession and Audit Quality

Question 1

What is the Canada Public Accountability Board?

What is one of its core objectives?

Answer 1

An independent oversight body whose mandate is to promote high quality external audits of publicly listed company.

One of the core objectives is conducting regular inspections of participating audit firms.

Question 2

What percentage of the accounting industry is held by the Big Four? Who has the largest share?

Answer 2

47.3%, with Deloitte holding the largest amount of the share.

Question 3

What are the Big Four International Accounting Companies? What is the job of the big four firms?

Answer 3

Deloitte, PwC, EY, and KPMG. Audit nearly all of the worlds largest companies, and many smaller firms as well.

Question 4

What are the Big Four Domestic Accounting Companies (National network Firms)? What do they do?

Answer 4

MNP, BDO, Grant Thornton, and Ray Chabot, which are large but smaller than the Big 4. Perform the same work and compete for clients, and they are associated with other firms and thus have an international presence.

Question 5

What are regional and large local firms?

Answer 5

Firms with professional staff of more than 50 people that serve a specific geographic market.

Question 6

What are examples of Large Regional and Local Firms?

Answer 6

Davidson and Company
Manning Elliot
RSM Canada
Smyth
McGovern Hurley.

Question 7

What do these Large Regional and Local Firms do?

Answer 7

They compete for the clients of the Big International Four, some of these firms only have one office within commuting distance, whereas others have more. They may be associated with public accounting firms and thus share resources like technical information and continuing education.

Question 8

What are small local firms? What do they primarily provide?

Answer 8

These are public accounting firms that have fewer than 25 people in a single office. They primarily perform reviews and compilations along with tax services, not audits.

Question 9

When would a small local firm provide audit services? Can they have public companies as clients?

Answer 9

Small businesses, not for profit organizations, or municipalities. Yes they can, it is rare, but they can have 1 or 2.

Question 10

What is the organizational form used by many public accounting firms?

Answer 10

Sole proprietorship, or a partnership. However, many provinces permit special purpose liability partnerships or professional corporations.

Question 11

How do accounting firms typically come to be?

Answer 11

Several professionals come together to practice as partners, offering audit and other services. The partners will then typically hire professional staff to assist them in their work.

Question 12

What is the organizational hierarchy in a typical accounting firm?

Where do new hires start and how long do they have to be in each position before they move up?

Answer 12

1. Partner
2. Manager
3. Supervisor
4. Seniors
5. Assistants

New hires start at the bottom as an assistant, and they spend about 2 - 3 years in each classification before they hit partner status.

Question 13

How quick is the advancement in public accounting? What is the impact of technology on assistants jobs?

Answer 13

Fairly rapid, with evolving duties and responsibilities. Audit staff members usually gain diverse experience and knowledge from a wide range of clientele. The more basis tasks are offshored or done by computers, thus the assistants can do more complex tasks.

Question 14

What is the average years of experience and typical responsibility for a staff level accountant?

Answer 14

0-2 years experience. Performs most of the detailed audit work.

Question 15

What is the average years of experience and typical responsibility for a senior accountant?

Answer 15

2-5 years. Coordinates and is responsible for the audit field work, including supervising and reviewing staff work.

Question 16

What is the average years of experience and typical responsibility for a manager accountant?

Can they be responsible for more than one engagementt at a time?

Answer 16

5-7 years. Manage the audit, review the seniors work, and manage the relationships with the client. May be responsible for more than one engagement at a time.

Question 17

What is the average years of experience and typical responsibility for a senior manager accountant?

Answer 17

7-10 years. Lead the engagement and review the teams work. Works directly with the partner and assists in client relationships.

Question 18

What is the average experience and typical responsibility for a partner accountant? What is the ultimate job of ]the partner?

Answer 18

10+ years. Leads the engagement, reviews the overall audit work, and is involved in significant audit decisions. Ultimate responsibility for conducting the audit and maintaining client relationships.

Question 19

Why is there a hierarchical nature in public accounting?

What are other path options available?

Answer 19

It helps to promote competence. Each level checks and supervises, reviewing the work at the level below them in the organizational structure.

If an individual does not want to become a partner but does want an executive position, they can become a director.

Question 20

What are the requirements to become a public accountant?

Answer 20

1. Undergraduate degree
2. Chartered Professional Accountant (CPA) designation - Consisting of graduate level education, professional exams, and practical experience.
3. Public accountant license.

Question 21

What are three considerations when deciding whether to work for a small or large accounting firm?

Answer 21

1. Large firms hire in batches of 40 our more new accountants starting at the same time, there is pressure to compete and work overtime. However it does mean you can make peers quickly.
2. Large firms invest a lot of money in formal training and mentoring, whereas small firms cannot do that instead focus on learn as you go.
3. Large firms may provide the flexibility of going abroad and relocating.

Question 22

In terms of clients and services, what differentiates large accounting firms to small accounting firms?

Answer 22

Large accounting firms have a full range of assurance and non assurance, and wide variety of clients in size and industry. They also do many public company audits.

Vs

Small / medium accounting firms focus on small / medium sized clients but they can be specialized in an industry.

Question 23

What are the differences in work environment in large vs small accounting firms?

Answer 23

1. Smaller firms are a friendlier, relaxed environment.
2. Outgoing, competitive a bigger firm may be better.

Question 24

What is CPA Canada?

Answer 24

Represents the CPA profession domestically and internationally, it is an umbrella organization for the CPA designation and provincial accounting bodies.

Question 25

What does CPA Canada do in terms of the standards and the programs?

Answer 25

Develops a uniform standard of qualification for admission of provincial CPA’s and maintaining appropriate standards for professional conduct.

They develop the CPA Professional Education Program (PEP) and the CPA (CFE) Common Final Examination.

Question 26

Besides the creation of standards, being an international representative, and creating the CFE and PEP, what other three important things does the CPA do?

Answer 26

1. Member services and professional literature.
2. Undertakes research and develops guidance on current issues in accounting (such as governance)
3. Fosters relationships with key stakeholders nationally and internationally.

Question 27

T or F: Individual CPA’s are not members of CPA Canada, but rather members of their provincial CPA organization.

Answer 27

True

Question 28

What are the responsibilities of the provincial CPA body in regard the members of the CPA?

What are the responsibilities of the provincial CPA body in regard to protecting society?

Answer 28

Maintain the admissions, licenses, the mandatory continuing education requirements, and they discipline members, firms, and students .

Inspect public accounting firms, investigate complaints, conduct the practice inspections of the public accounting firms.

Question 29

Why is CPA Canada important in Audit Quality?

Answer 29

It sets the accounting, auditing, and assurance standards for businesses, not for profit organizations, and the government.

Question 30

What is the Audit Quality Blog.

Answer 30

It provides updates on audit quality and to engage various stakeholders in the discussion. Also has collaborative efforts with regulators, like the CPAB.

Question 31

Why are provincial practice inspections important?

Answer 31

1. Ensures that public accountants are adhering to professional standards set out by the CPA Handbook Assurance
2. Help public accountants improve their professional standards.

Question 32

What happens in practice inspections? How often is this completed, what situation would make it such that it has to be completed annually?

Answer 32

1. Review a firms system of quality control systems
2. Individual Audit
3. Review engagement files.

Typically completed every three years, it can be annual if the inspectors conclude that the practice unit does not adhere to the standards.

Question 33

T or F: Provincial practice inspection committees can impose sanctions? What are the four different types of sanctions?

Answer 33

True. They can:

1. Reinspect and refer to professional conduct committee of the province, like the member has to take a course.
2. Remove the units right to train students
3. Expel the member from the professional body
4. Withdraw the members right from using CPA

Question 34

What caused the emersion of Auditor Oversight Boards across the globe?

Answer 34

It was triggered by a crisis in the confidence of the audit profession in the USA, which created the Sarbanes Oxley Act of 2002, it established the Public Company Accountability Oversight Board (PCAOB used in America) , who oversees the audits of public companies, ending self regulation frameworks.

Question 35

What is the Canada Public Accountability Boards mission?

Answer 35

Contribute to the publics confidence in the integrity of financial reporting in reporting issuers in Canada by promoting effective regulation and high quality, independent auditing.

Question 36

What are reporting issuers?

Answer 36

Publicly held companies or mutual funds listed on a Canadian stock exchange that are required to file annual audited financial statements with their listing exchange.

Question 37

What are the four priorities of CPAB to ensure it achieves it mission?

Answer 37

1. Effective inspections.
2. Risk Management
3. Thought Leadership
4. Stakeholder Engagement

Question 38

Who oversees the practice inspection program? What do public accounting companies have to do?

Answer 38

The Canada Public Accountability Board. Public accounting firms are required to register with CPAB and are subject to quality control inspections if they audit reporting issuers.

Question 39

How many audit firms were registered under the CPAB. How many of these firms do not audit reporting issuers?

Answer 39

267 were registered, 92 do not audit reporting issuers.

Question 40

What power does the CPAB have with inspections and its impacts on society.

Answer 40

1. It can impose restrictions, like limiting the right to audit reporting issuers.
2. Report the deficiencies to the relevant provincial securities commission.
3. If the company does not fix the issues identified, they can release the report to the public.

Question 41

How does the CPAB enhance audit quality through thought leadership and stakeholder engagement activities?

Answer 41

Hosting several audit quality symposiums, where international regulators, CPA Canada, auditors, and various stakeholders share their views on ways to enhance audit.

Question 42

What is the key difference between the Canada Public Accountability Board and the Public Company Oversight Accountability Board?

Answer 42

While both of them oversee and promote good quality audits through inspections, the PCOAB establishes the quality control standards. the CPAB provide feedback, the Assurance and Auditing Standards Board make the standards.

Question 43

What is another key difference for audit standards of private firms?

Answer 43

In Canada, the Assurance and Audit Standards Board are responsible for both private and public firms.

vs

In the USA, the PCOAB is responsible for public firms, and the American Institute of Certified Professional Accountants (AICPA) is responsible for private firms.

Question 44

Who conducts the inspections of registered accounting firms in the USA? What happens in the USA if the PCOAB performs an inspection and they fail?

Answer 44

The Public Company Oversight Accountability Board (PCOAB). They could be reported to the Security Exchange Commission of America and they would take similar discplinary actions as the PCAB.

Question 45

How many Canadian audit firms are registered under the PCAOB and how is the inspection process done for Canadian audit firms under the PCAOB ?

Answer 45

There are 30 firms, and it is a joint process with the CPAB.

Question 46

What is the primary role of security regulators? What are the two relevant securities regulators in Canada?

Answer 46

Protect investors to foster fair, efficient, and competitive capital markets, and assist in public company audits. Provincial securities commission and SEC.

Question 47

In Canada, who is in charge of securities regulation? What is the provincial securities commissions?
What is the responsibility of the provincial jurisdictions with respect to securities regulations?

Answer 47

The provinces are in charge.

Provincial organization with quasi legal status that administers securities regulations within their jurisdictions. These are a provincial matter. They administer the purchase and sale of securities within their jurisdictions.

Administer the purchase and sale of securities within their jurisdiction.

Question 48

What is the Canadian Securities Administrators?

Answer 48

It is the national umbrella organization, which sets policies which the member commissions agree to adhere too.

Question 49

What has the Canadian Securities Administrators done in the past that are now imposed on us today?

Answer 49

1. The CSA were the ones who created the idea that all public accounting firms that audit a reporting issuer has to report with the CPAB.
2. The CSA attempted to pass a legislation that would require auditors to provide opinions on internal controls, the BC Securities Commissions stopped it as it was unnecessary costs for the reporting issuers.

Question 50

What do provincial securities have the ability to do against
public accountants and companies if they choose?

Answer 50

Prosecute public accountants and the companies they audit.

Question 51

Why is the securities exchange committee in the USA relevant to us in Canada?

Answer 51

Many of the Canadian companies are listed on the American stock exchanges, and therefore are bounded to the SEC.

Question 52

What is the Securities and Exchange Commission?

Answer 52

A US federal agency that oversees the orderly conduct of the securities market. The SEC assists in providing investors in public corporations with reliable information upon which investment decisions can be made.

Question 53

What has SEC stated about the creation of accounting principles and auditing standards in the USA?

Answer 53

The PCOAB should be responsible for accounting principles and auditing standards, the Securities Exchange Commissions still have a significant influence on the creation of generally accepted accounting principles and disclosure requirements.

Question 54

What makes the SEC similar to the provincial securities commissions and the Canada securities administrator?

Who is the SEC able to prosecute?

Answer 54

They have the ability to prosecute and to establish the rules for securities.

They typically prosecute American auditors, they can really prosecute anyone as long as they have a connection with an audit inn the US stock exchange.

Question 55

What are the two main auditing standards in Canada? Who sets these standards?

Answer 55

1. International Standards on Auditing
2. Canadian Auditing standards

International Standards on Auditing is set by the IAASB
The Canadian Auditing standards are set by the Canadian Auditing and Assurance Standards Board.

Question 56

What do auditing standards provide? What professional qualities are included?

Answer 56

Requirements, application, and other explanatory material to aid auditors in fulfilling their professional responsibilities. Includes considerations of professional qualities, such as independence, reporting requirements, and evidence.

Question 57

What is the international auditing and assurance standards board (IAASB)

Answer 57

Independent standard setting body that sets international standards for audit and assurance, and other related standards. It is responsible for the convergence of international and national audit and assurance standards.

Question 58

How many jurisdictions are using or in the process of using the International Standards on Auditing?

Answer 58

113

Question 59

Who consists on the International Audit and Assurance Standards Board? Who are they appointed by?

Answer 59

A full time chair and 17 volunteer members. They are appointed by the International Federation of Accountants (IFAC)

Question 60

What is a key part of the Audit and Assurance Standard Board in Canada to ensures that standards are of high quality?

Answer 60

Standard setting process ensures the standards are of high quality, but there is research and consultation with the stakeholders, not just the audit profession.

Question 61

What is the Audit and Assurance Standards Board (AASB) of Canada?

Answer 61

An independent board of CPA Canada that has the responsibility for issuing auditing and assurance standards for financial statement audits, and other types of assurance and related service arrangements. they set the Generally Accepted Auditing Standards (GAAS)

Question 62

What are assurance standards? What are three examples?

Answer 62

Standards for assurance engagements other than historical financial statements. Assurance standards are issued by the Auditing and Assurance Standards Board.

Review engagements, compilations, and agreed upon procedure engagements.

Question 63

What is the position of the AASB with the International Standards of Auditing? How does the Canadians Accounting and Assurance Standard Board represent us to the International Accounting and Assurance Standards Board?

Answer 63

They will take on the international standard as a Canadian standard if it is relevant and applicable to the Canadian context. Ensures that our point of view is represented.

Question 64

Who funds the AASB? How are the board members and the volunteers selected?

Answer 64

CPA Canada funds the AASB. They are selected by the auditing and assurance standards oversight board. (AASOB)

Question 65

What do the following sections in the CPA Handbook - Audit, represent for the Canada Audit Standards:
200-299
300-499
500-599
600-699
700-799
800-899

Answer 65

200-299: General Responsibilities and Principles
300-499: Risk Assessment and Response
500-599: Audit Evidence
600-699: Using the Work of Others
700-799: Audit conclusions and reporting
800-899: Specialized areas.

Question 66

What are the four principles underlying the financial statement audit?

Answer 66

1. Purpose of the Audit
2. Personal Responsibilities
3. Performance Responsibilities
4. Reporting Responsibilities

Question 67

What is the purpose of the four principles underlying the financial statement audit?

Answer 67

It does not provide meaningful guide to the practitioners, it does set a framework that defines the purpose of the financial statement audit as well as the auditors ethical and professional responsibilities.

Question 68

What are the 5 objectives of a financial statement audit?

Answer 68

1. To provide reasonable assurance that the financial statement are not materially misstated.
2. Consider both potential fraud and error.
3. Communicate whether the financial statements comply with an applicable framework using the expression of an opinion.
4. Report on the financial statements
5. Communicate the auditors findings in accordance with the Canada Audit Standards.

Question 69

In accordance with the principles underlying a financial audit, what is the purpose of an audit?

Answer 69

Provide an opinion on the financial statement.

Question 70

In accordance with the principles underlying a financial audit, what are the personal responsibilities?

Answer 70

1. Comply with ethical and independent requirements
2. Possess the appropriate capabilities and competence
3. Maintain professional skepticism and exercise professional judgement.

Question 71

In accordance with the principles underlying a financial audit, what are the performance responsibilities? What are the four steps to fulfilling the performance responsibilities?

Answer 71

Obtain reasonable assurance about whether financial statements are free off material misstatements

1. Plan the audit and supervise the engagement team.
2. Determine and apply materiality level or levels.
3. Identify and assess risks of material misstatement, based on understanding the entity and its environment, including the internal controls.
4. Obtain sufficient appropriate audit evidence.

Question 72

In accordance with the principles underlying a financial statement audit, what are the reporting responsibilities?

Answer 72

1. Express opinion in financial statement in a written report.
2. State whether financial statements were presented in accordance with financial reporting framework.

Question 73

What is the underlying assumption of an audit?

Answer 73

Essentially we provide management with the benefit of the doubt. Management is responsible for the preparation of the financial statement in accordance with the relevant standards, and that management has selected, designed, implemented, and maintained internal controls relevant to the preparation of the financial statements that are free of material error.

Question 74

What does an auditor assume management will provide when providing an audit? What standards is this in accordance with?

Answer 74

Management will provide the auditor with access to all information relevant to the preparation and presentation of financial statements, including unrestricted access to persons within the entity of whom the auditor may obtain audit evidence. The Canada Audit standards.

Question 75

Describe professional competence and due care

Answer 75

Requiring the auditor to have formal education in auditing and accounting, adequate practical experience for the work being performed, and continuing professional education. The auditor must be technically qualified and experienced in the industry in which their clients are engaged.

Question 76

In accordance with professional competence and due care, what would occur if an auditor is not familiar with an industry?

Answer 76

1. Gain the requisite knowledge required in the industry
2. Suggest someone who is more qualified to perform the audit.
3. Decline the engagement.

Question 77

What are the relevant independence and ethical requirements that auditors must abide by? (5 points)

Answer 77

1. Integrity
2. Due Care
3. Objectivity
4. Confidentiality
5. Professional Behaviour.

Question 78

What is professional skepticism?

Answer 78

An attitude that includes a questioning mind, being alert to conditions that might indicate misstatements due to fraud or error, and critically assessing audit evidence.

Question 79

What does performance responsibilities in an audit means?

Answer 79

Actions concerning the evidence accumulation and other activities during the actual conduct to the audit.

Question 80

What is professional judgement?

Answer 80

If the auditor is to make an assumption about a possible misstatement, they must apply relevant training, knowledge, and specific courses of action for that particular circumstance. They must be diligent and careful.

Question 81

What type of an approach should be used when conducting a financial statement audit?

Answer 81

Using a risk based approach. Since to express opinion, there must be reasonable assurance that the financial statement as a whole is free from material misstatement either due to fraud or error.

Question 82

What are the 5 parts to adequate planning?

What are 5 things that an auditor should plan for

Answer 82

1. Set out the engagement teams responsibilities
2. The nature of the entity’s business
3. Risk related issues
4. Problems that may arise
5. A detailed approach to perform the engagement

Question 83

What are two important items to be supervised in a financial statement audit?

What are two steps to take if there is an issue in these sections?

Why it it important?

Answer 83

1. The progress of the audit engagement
2. The competence and capabilities on the individual staff members (Time to carry out the task and if the understand it)
3. Address significant issues
4. Modifying the planned approach as necessary.

This is important as many of the people actually performing the audit are less experienced.

Question 84

Describe the determining materiality and applying?

Answer 84

Materiality defines that if the information is wrong it would have a significant impact on an investors decision to invest or not. The auditor must outline and create important details about what is classified as material and what is not.

Question 85

What knowledge must an auditor have to ensure that they can adequately assess the risks of material mistatements? Why is this important?

Answer 85

Have an understanding of the clients business and industry. For example to audit a bank, the auditor must understand the nature of the banks operations, relevant regulations, and risks like loan loss reserves.

Question 86

What is the most widely accepted concept in the theory of auditing to mitigate risk? Why is this important?

Answer 86

The importance of the clients system of internal control for mitigating client business risk, safeguarding assets and records, and generating reliable financial information. If the auditor is satisfied that there is significant safeguards they can reduce the amount of evidence that must be accumulated for audit evidence vs is the information was not so certain. If it is inadequate, they may not be able to perform an audit.

Question 87

Describe sufficient appropriate evidence. How do we determine what type of information is classified as sufficientt approrpriate evidence?

Answer 87

To make a claim as to whether the financial statement are free of material misstatements, there must be good responses to the assessed risks. To determine how much and what type of information is based on professional judgement.

Question 88

What happens if the auditor has no reservations on an audit report?

Answer 88

A clean unmodified audit opinion is issued.

Question 89

What happens if the auditor has reservations about the nature of the financial statement? What if they cannot modify it because they are unsure?

Answer 89

If they are unable to examine all necessary evidence or there is a departure in GAAP or the accounting standards (criteria), the opinion must be modified to explain the nature of the reservation. They must withdraw or resign from the engagement if they cannot with confidence fix the issue.

Question 90

What is the PCOAB’s definition of audit quality?

Answer 90

Meeting investors needs for reliable and independent audits, which emphasizes the auditors key role is to protect the public interest.

Question 91

What are the five parts of IAASB’s definition on high quality audits?

Answer 91

1. Shows appropriate ethics, values, and attitudes.
2. Sufficiently knowledgable, skilled, and experienced.
3. Apply a rigorous audit process and quality control procedure.
4. Interact with the relevant shareholders
5. Provide useful and timely reports

Question 92

What influences the ability to have the right engagement team?

Answer 92

The environment in which they operate influences the rightt engagement tteam. There are standards that help create good qualittty standards management to ensure this is attainable.

Question 93

What are the two quality management standards from the CPA Handbook?

Answer 93

Canadian Standard on Quality Management (CSQM) 1 - Quality Management for firms that perform audits or reviews of financial statements, or other assurance or related engagement services.

CSQM 2 - Engagement Quality Reviews

Canada Audit Standards 220 - Quality Management for an Audit of Financial Statements.

Question 94

What is the System of Quality Management (SOQM)?

Answer 94

Is a system designed, implemented, and operated by a firm to provide a firm with reasonable assurance that:

1. The firm and its personnel fulfill their responsibilities in accordance with professional standards and conduct engagements in accordance with the standards and requirements.
2. Appropriate engagement reports are issued.

It is a mechanism that creates an environment that enables and support engagement teams in performing quality engagements.

Question 95

What approach does CSQM 1 require audit firms to take to managing quality? How is qualitty management tailored?

Answer 95

A risk based pro-active approach to managing quality.Each firm tailors quality management to its own nature and circumstances.

Question 96

Is the SOQM static? How do we update it?

Answer 96

No it is not static, it is meant to be continually reviewed and enhanced. It is updated through the risk assessment process, which is tailored to a firms nature, circumstances, and the engagements it performs.

Question 97

What are the three parts to the risk assessment process?

Answer 97

1. Establish quality objectives.
2. Identify and assess risks to achieving the objectives.
3. Design and implement responses in the form of policies or procedures to address those risks.

Question 98

What are the six components of the system of quality control? What is their purpose?

Answer 98

1. Governance and Leadership - Establishes the environment in which the SOQM operates.
2. Relevant Ethical Requirements - Specific topic fundamental for engagement performance
3. Engagement Performance - Specific topic fundamental for engagement performance.
4. Acceptance and continuation of clients and engagement - Specific topic fundamental for engagement performance.
5. Resources - Enables the operations of the other components
6. Information and Communication - Enables the Operations of Other Components.

Question 99

What are required quality objectives for governance and leadership?

Answer 99

The firm demonstrates a commitment to quality through a culture that recognizes and reinforce the firms roles in serving the public interest, the importance of professional ethics, the responsibility of all for quality, and the importance of quality in all firm decisions.

Question 100

What is leadership responsible for?
What does leadership demonstrate?
What is the role of organizational structure in governance and leadership?
What is the role of resources in governance and leadership?

Answer 100

1. Leadership is responsible for quality
2. Leadership demonstrates a commitment to quality
3. Organizational structure and assignment of responsibilities and authority is appropriate.
4. Resources are planned and adequate.

Question 101

What are the required quality objectives of relevant ethical requirements?

Answer 101

1. All personnel understand ethical requirements for the firm and engagements, and fulfil their ethical responsibilities.
2. Others, understand ethical requirements from the firm and engagements and fulfill their ethical responsibilities.

Question 102

What are the required quality objectives of engagement performance?

1. Engagement team
2. Professional judgement and skepticism.
3. Difficult Matters
4. Opinions
5. Documentation

Answer 102

1. Engagement teams understand and fulfill their responsibilities in connection with engagements. The nature, timing, and extent of engagement teams and work is appropriate.

2.Engagement teams exercise professional judgement and skepticism.

3. Consultation on difficult matters are untaken and the conclusions agreed upon and implemented.
4. Differences of opinions are brought to the firms attention and resolved.
5. Engagement documentation is assembled on a timely basis and is appropriately maintained and retained.

Question 103

How do individuals determine whether an engagement should be continued or not? What information is not considered when determining this?

Answer 103

1. Information obtained about the nature of the engagement and client integrity.
2. The firms ability to perform the engagement.

Financial and operational priorities of the firm.

Question 104

What are Human Resources in the context of quality
of the SOQM?

Answer 104

1. Personnel are hired, developed and retained and have the competence and capability to consistently perform quality engagements.
2. Personnel demonstrate a commitment to quality through their actions, behaviours, and are held accountable through evaluation, compensation, promotion, and other incentives.

Question 105

What are technological resources in the context of quality objectives.

Answer 105

The firms uses and obtains appropriate technological resources for the SOQM engagements.

Question 106

What are intellectual resources in the context of quality objectives.

Answer 106

The firms obtains or develops appropriate intellectual resources for the operation of the SOQM and consistent performance of quality engagements.

Question 107

What are service resources in the context of quality objectives.

Answer 107

Human, tech, and intellectual resources from service providers are appropriate for the firms SOQM and in the performance of engagements.

Question 108

What are the quality objectives in the information and communication?

1. Capabilities of the information system?
2. Culture
3. Info Exchange?
4. External parties?

Answer 108

1. Identify, capture, process, and maintain relevant and reliable info.
2. The culture of the firm recognizes and reinforces the responsibility of personnel to exchange information with the firm and with one another.
3. Relevant and reliable info is exchanged through the firm and with engagement teams.
4. Relevant and reliable info is communicated to external parties.

Question 109

What are the two ways that a firm assesses risks?

Answer 109

1. Understanding the conditions, events, circumstances, actions, or inactions,
2. Thinking about how they may adversely affect the achievement of the quality objectives.

Question 110

What is a risk response?

Answer 110

Includes policies or procedures designed and implemented to address one or more quality risks.

Question 111

What are policies?

Answer 111

Statements of what should, or should not, be done to address a quality risk.

Question 112

What are procedures?

Answer 112

Actions to implement policies.

Question 113

What are the three steps to the monitoring and remediation process?

Answer 113

1. Perform monitoring activities.
2. Evaluate findings and identify deficiencies.
3. Design and implement responses.

Question 114

What are Audit Quality Indicators?

Answer 114

Measure the performance of an audit, and identify risks to audit quality, and take necessary steps to correct the issues identified.

Question 115

What does CSQM 1 require?

Answer 115

While it is not prescriptive, it does require the firms to conduct annual evaluations of their quality management system, and the inspections of engagements in which particular engagements and partners will be selected.

Question 116

What is an engagement quality review? Which CSQM does this apply to?

Who is it performed by and when does the assessment need to be completed?

What is this similar too?

Answer 116

An objective evaluation of the significant judgements made by the engagement team and the conclusion researched.

Performed by the EQ reviewer, and completed on or before the date of the engagement report.

It is similar to having a second set of eyes to evaluate the audit team, in addition to the random inspections.

It applies to the Canadian Standard of Quality Management (CSQM 2)

Question 117

Who is required to have Engagement inspections?
It is possible for there to be situations where no engagementts are necessary?

Answer 117

Required for all public companies, but for private high risk audits are also required, but there may be situations where no engagements are necessary.

Question 118

How do we enhance the objectivity of EQ reviewers?

Answer 118

The standard requires a cooling off period for at least two years, before an individual who was an engagement partner can become an engagement reviewer.

Question 119

What is the CAS 220 standard? What does CAS 220 describe?

Answer 119

It is known as the Canada Audit Standard. It is tthe quality management standard for audit of financial statements. It deals with engagement partner and engagement teams responsibilities for managing the quality of the audit of financial statements. It states that the engagement partner is responsible for taking responsibility of the overall engagement, while other tasks may be assigned to other members.

Question 120

What are the three key drivers in audit quality?

Answer 120

1. Audit team composition
2. EQ reviews
3. Firms system of quality

Question 121

What does the standard require the engagement partner to do by the end?

Answer 121

Requires the engagement partner to take a stand back review and assess whether they were sufficient and appropriate throughout the engagement.