Chapter 2 - The Public Accounting Profession and Audit Quality Flashcards
1
Q
What is the Canada Public Accountability Board?
What is one of its core objectives?
A
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.
2
Q
What percentage of the accounting industry is held by the Big Four? Who has the largest share?
A
47.3%, with Deloitte holding the largest amount of the share.
3
Q
What are the Big Four International Accounting Companies? What is the job of the big four firms?
A
Deloitte, PwC, EY, and KPMG. Audit nearly all of the worlds largest companies, and many smaller firms as well.
4
Q
What are the Big Four Domestic Accounting Companies (National network Firms)? What do they do?
A
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.
5
Q
What are regional and large local firms?
A
Firms with professional staff of more than 50 people that serve a specific geographic market.
6
Q
What are examples of Large Regional and Local Firms?
A
Davidson and Company
Manning Elliot
RSM Canada
Smyth
McGovern Hurley.
7
Q
What do these Large Regional and Local Firms do?
A
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.
8
Q
What are small local firms? What do they primarily provide?
A
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.
9
Q
When would a small local firm provide audit services? Can they have public companies as clients?
A
Small businesses, not for profit organizations, or municipalities. Yes they can, it is rare, but they can have 1 or 2.
10
Q
What is the organizational form used by many public accounting firms?
A
Sole proprietorship, or a partnership. However, many provinces permit special purpose liability partnerships or professional corporations.
11
Q
How do accounting firms typically come to be?
A
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.
12
Q
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?
A
- Partner
- Manager
- Supervisor
- Seniors
- 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.
13
Q
How quick is the advancement in public accounting? What is the impact of technology on assistants jobs?
A
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.
14
Q
What is the average years of experience and typical responsibility for a staff level accountant?
A
0-2 years experience. Performs most of the detailed audit work.
15
Q
What is the average years of experience and typical responsibility for a senior accountant?
A
2-5 years. Coordinates and is responsible for the audit field work, including supervising and reviewing staff work.
16
Q
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?
A
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.
17
Q
What is the average years of experience and typical responsibility for a senior manager accountant?
A
7-10 years. Lead the engagement and review the teams work. Works directly with the partner and assists in client relationships.
18
Q
What is the average experience and typical responsibility for a partner accountant? What is the ultimate job of ]the partner?
A
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.
19
Q
Why is there a hierarchical nature in public accounting?
What are other path options available?
A
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.
20
Q
What are the requirements to become a public accountant?
A
- Undergraduate degree
- Chartered Professional Accountant (CPA) designation - Consisting of graduate level education, professional exams, and practical experience.
- Public accountant license.
21
Q
What are three considerations when deciding whether to work for a small or large accounting firm?
A
- 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.
- 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.
- Large firms may provide the flexibility of going abroad and relocating.
22
Q
In terms of clients and services, what differentiates large accounting firms to small accounting firms?
A
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.
23
Q
What are the differences in work environment in large vs small accounting firms?
A
- Smaller firms are a friendlier, relaxed environment.
- Outgoing, competitive a bigger firm may be better.
24
Q
What is CPA Canada?
A
Represents the CPA profession domestically and internationally, it is an umbrella organization for the CPA designation and provincial accounting bodies.
25
What does CPA Canada do in terms of the standards and the programs?
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.
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?
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.
27
T or F: Individual CPA's are not members of CPA Canada, but rather members of their provincial CPA organization.
True
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?
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.
29
Why is CPA Canada important in Audit Quality?
It sets the accounting, auditing, and assurance standards for businesses, not for profit organizations, and the government.
30
What is the Audit Quality Blog.
It provides updates on audit quality and to engage various stakeholders in the discussion. Also has collaborative efforts with regulators, like the CPAB.
31
Why are provincial practice inspections important?
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.
32
What happens in practice inspections? How often is this completed, what situation would make it such that it has to be completed annually?
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.
33
T or F: Provincial practice inspection committees can impose sanctions? What are the four different types of sanctions?
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
34
What caused the emersion of Auditor Oversight Boards across the globe?
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.
35
What is the Canada Public Accountability Boards mission?
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.
36
What are reporting issuers?
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.
37
What are the four priorities of CPAB to ensure it achieves it mission?
1. Effective inspections.
2. Risk Management
3. Thought Leadership
4. Stakeholder Engagement
38
Who oversees the practice inspection program? What do public accounting companies have to do?
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.
39
How many audit firms were registered under the CPAB. How many of these firms do not audit reporting issuers?
267 were registered, 92 do not audit reporting issuers.
40
What power does the CPAB have with inspections and its impacts on society.
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.
41
How does the CPAB enhance audit quality through thought leadership and stakeholder engagement activities?
Hosting several audit quality symposiums, where international regulators, CPA Canada, auditors, and various stakeholders share their views on ways to enhance audit.
42
What is the key difference between the Canada Public Accountability Board and the Public Company Oversight Accountability Board?
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.
43
What is another key difference for audit standards of private firms?
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.
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?
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.
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 ?
There are 30 firms, and it is a joint process with the CPAB.
46
What is the primary role of security regulators? What are the two relevant securities regulators in Canada?
Protect investors to foster fair, efficient, and competitive capital markets, and assist in public company audits. Provincial securities commission and SEC.
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?
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.
48
What is the Canadian Securities Administrators?
It is the national umbrella organization, which sets policies which the member commissions agree to adhere too.
49
What has the Canadian Securities Administrators done in the past that are now imposed on us today?
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.
50
What do provincial securities have the ability to do against
public accountants and companies if they choose?
Prosecute public accountants and the companies they audit.
51
Why is the securities exchange committee in the USA relevant to us in Canada?
Many of the Canadian companies are listed on the American stock exchanges, and therefore are bounded to the SEC.
52
What is the Securities and Exchange Commission?
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.
53
What has SEC stated about the creation of accounting principles and auditing standards in the USA?
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.
54
What makes the SEC similar to the provincial securities commissions and the Canada securities administrator?
Who is the SEC able to prosecute?
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.
55
What are the two main auditing standards in Canada? Who sets these standards?
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.
56
What do auditing standards provide? What professional qualities are included?
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.
57
What is the international auditing and assurance standards board (IAASB)
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.
58
How many jurisdictions are using or in the process of using the International Standards on Auditing?
113
59
Who consists on the International Audit and Assurance Standards Board? Who are they appointed by?
A full time chair and 17 volunteer members. They are appointed by the International Federation of Accountants (IFAC)
60
What is a key part of the Audit and Assurance Standard Board in Canada to ensures that standards are of high quality?
Standard setting process ensures the standards are of high quality, but there is research and consultation with the stakeholders, not just the audit profession.
61
What is the Audit and Assurance Standards Board (AASB) of Canada?
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)
62
What are assurance standards? What are three examples?
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.
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?
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.
64
Who funds the AASB? How are the board members and the volunteers selected?
CPA Canada funds the AASB. They are selected by the auditing and assurance standards oversight board. (AASOB)
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
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.
66
What are the four principles underlying the financial statement audit?
1. Purpose of the Audit
2. Personal Responsibilities
3. Performance Responsibilities
4. Reporting Responsibilities
67
What is the purpose of the four principles underlying the financial statement audit?
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.
68
What are the 5 objectives of a financial statement audit?
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.
69
In accordance with the principles underlying a financial audit, what is the purpose of an audit?
Provide an opinion on the financial statement.
70
In accordance with the principles underlying a financial audit, what are the personal responsibilities?
1. Comply with ethical and independent requirements
2. Possess the appropriate capabilities and competence
3. Maintain professional skepticism and exercise professional judgement.
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?
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.
72
In accordance with the principles underlying a financial statement audit, what are the reporting responsibilities?
1. Express opinion in financial statement in a written report.
2. State whether financial statements were presented in accordance with financial reporting framework.
73
What is the underlying assumption of an audit?
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.
74
What does an auditor assume management will provide when providing an audit? What standards is this in accordance with?
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.
75
Describe professional competence and due care
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.
76
In accordance with professional competence and due care, what would occur if an auditor is not familiar with an industry?
1. Gain the requisite knowledge required in the industry
2. Suggest someone who is more qualified to perform the audit.
3. Decline the engagement.
77
What are the relevant independence and ethical requirements that auditors must abide by? (5 points)
1. Integrity
2. Due Care
3. Objectivity
4. Confidentiality
5. Professional Behaviour.
78
What is professional skepticism?
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.
79
What does performance responsibilities in an audit means?
Actions concerning the evidence accumulation and other activities during the actual conduct to the audit.
80
What is professional judgement?
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.
81
What type of an approach should be used when conducting a financial statement audit?
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.
82
What are the 5 parts to adequate planning?
| What are 5 things that an auditor should plan for
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
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?
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)
1. Address significant issues
2. Modifying the planned approach as necessary.
This is important as many of the people actually performing the audit are less experienced.
84
Describe the determining materiality and applying?
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.
85
What knowledge must an auditor have to ensure that they can adequately assess the risks of material mistatements? Why is this important?
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.
86
What is the most widely accepted concept in the theory of auditing to mitigate risk? Why is this important?
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.
87
Describe sufficient appropriate evidence. How do we determine what type of information is classified as sufficientt approrpriate evidence?
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.
88
What happens if the auditor has no reservations on an audit report?
A clean unmodified audit opinion is issued.
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?
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.
90
What is the PCOAB's definition of audit quality?
Meeting investors needs for reliable and independent audits, which emphasizes the auditors key role is to protect the public interest.
91
What are the five parts of IAASB's definition on high quality audits?
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
92
What influences the ability to have the right engagement team?
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.
93
What are the two quality management standards from the CPA Handbook?
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.
94
What is the System of Quality Management (SOQM)?
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.
95
What approach does CSQM 1 require audit firms to take to managing quality? How is qualitty management tailored?
A risk based pro-active approach to managing quality.Each firm tailors quality management to its own nature and circumstances.
96
Is the SOQM static? How do we update it?
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.
97
What are the three parts to the risk assessment process?
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.
98
What are the six components of the system of quality control? What is their purpose?
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.
99
What are required quality objectives for governance and leadership?
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.
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?
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.
101
What are the required quality objectives of relevant ethical requirements?
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.
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
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.
103
How do individuals determine whether an engagement should be continued or not? What information is not considered when determining this?
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.
104
What are Human Resources in the context of quality
of the SOQM?
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.
105
What are technological resources in the context of quality objectives.
The firms uses and obtains appropriate technological resources for the SOQM engagements.
106
What are intellectual resources in the context of quality objectives.
The firms obtains or develops appropriate intellectual resources for the operation of the SOQM and consistent performance of quality engagements.
107
What are service resources in the context of quality objectives.
Human, tech, and intellectual resources from service providers are appropriate for the firms SOQM and in the performance of engagements.
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?
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.
109
What are the two ways that a firm assesses risks?
1. Understanding the conditions, events, circumstances, actions, or inactions,
2. Thinking about how they may adversely affect the achievement of the quality objectives.
110
What is a risk response?
Includes policies or procedures designed and implemented to address one or more quality risks.
111
What are policies?
Statements of what should, or should not, be done to address a quality risk.
112
What are procedures?
Actions to implement policies.
113
What are the three steps to the monitoring and remediation process?
1. Perform monitoring activities.
2. Evaluate findings and identify deficiencies.
3. Design and implement responses.
114
What are Audit Quality Indicators?
Measure the performance of an audit, and identify risks to audit quality, and take necessary steps to correct the issues identified.
115
What does CSQM 1 require?
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.
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?
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)
117
Who is required to have Engagement inspections?
It is possible for there to be situations where no engagementts are necessary?
Required for all public companies, but for private high risk audits are also required, but there may be situations where no engagements are necessary.
118
How do we enhance the objectivity of EQ reviewers?
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.
119
What is the CAS 220 standard? What does CAS 220 describe?
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.
120
What are the three key drivers in audit quality?
1. Audit team composition
2. EQ reviews
3. Firms system of quality
121
What does the standard require the engagement partner to do by the end?
Requires the engagement partner to take a stand back review and assess whether they were sufficient and appropriate throughout the engagement.
