PCAOB on Engagement Quality Review Flashcards
To evaluate the significant judgments and conclusions of the engagement team under PCAOB auditing standards, the engagement quality reviewer should
Make inquiries of client personnel and perform analytical procedures.
Perform tests of details and analytical procedures to corroborate client account balances.
Make inquiries of client personnel and selected members of the engagement team.
Discuss matters with members of the engagement team, including the engagement partner, and review engagement documentation.
Discuss matters with members of the engagement team, including the engagement partner, and review engagement documentation.
The PCAOB (specifically, AS Section 1220) requires the engagement quality reviewer to evaluate the significant judgments and conclusions of the engagement team by (1) holding discussions with the engagement partner and other members of the engagement team and (2) reviewing the engagement’s audit documentation. The engagement quality reviewer is not expected to direct inquiries to client personnel or perform audit verification procedures to corroborate account balances, such as analytical procedures or tests of details. Hence, the last choice is the correct answer.
PCAOB standards applicable to an engagement quality review identify each of the following as examples of a “significant engagement deficiency,” except for when
The engagement team concluded that management’s accounting estimates were unreasonable.
The engagement team reached an inappropriate conclusion.
The firm is not independent of its client.
The engagement report is inappropriate.
The engagement team concluded that management’s accounting estimates were unreasonable.
The PCAOB (specifically, AS Section 1220) identifies the following as “significant engagement deficiencies”: when (1) the engagement team failed to obtain sufficient appropriate evidence; (2) the engagement team reached an inappropriate overall conclusion; (3) the engagement report is not appropriate; or (4) the firm is not independent of its client. Since B, C, and D[AU: avoid using letters for other answer choices here and below] are specifically identified as significant engagement deficiencies, A is the correct answer. If management’s accounting estimates are unreasonable, it constitutes a GAAP departure, not a deficiency in the performance of the audit engagement.
Which of the following is not a correct statement regarding differences between PCAOB auditing standards on engagement quality review and AICPA Statements on Quality Control Standards (SQCS)?
PCAOB auditing standards require a concurring approval of issuance before the engagement report is released, whereas the SQCS have no such requirement.
PCAOB auditing standards require a cooling-off period of at least two years before an engagement partner can serve as an engagement quality reviewer, whereas the SQCS have no such requirement.
PCAOB auditing standards require engagement quality review documentation to be retained separately from the related engagement documentation for 10 years, whereas SQCS only require that the engagement quality review documentation be retained for 5 years with the other related engagement documentation.
PCAOB auditing standards require an engagement quality review before an audit report is released, whereas SQCS do not require an engagement quality review.
PCAOB auditing standards require engagement quality review documentation to be retained separately from the related engagement documentation for 10 years, whereas SQCS only require that the engagement quality review documentation be retained for 5 years with the other related engagement documentation.
The PCAOB (specifically, AS Section 1220) identifies a number of differences relative to the AICPA’s quality control standards, including those stated in the first, second, and last choices. However, the PCAOB requires the engagement quality review documentation to be retained along with (not separately from!) the related engagement documentation; and PCAOB auditing standards require such audit documentation to be retained for 7 years, not 10. Moreover, the AICPA’s SQCS do not require that the engagement quality review documentation be retained along with the related audit documentation. Hence, C is correct.
Which of the following statements is correct regarding characteristics required of an engagement quality reviewer under PCAOB auditing standards?
Only a partner of the registered public accounting firm conducting the audit can serve as an engagement quality reviewer.
An individual outside of the registered public accounting firm becomes an “associated person” of the registered public accounting firm when receiving compensation from the firm for performing the engagement quality review.
There is no requirement that the engagement quality reviewer must be independent from the client involved, since the engagement quality reviewer cannot make engagement team decisions or otherwise assume any responsibilities of the engagement team.
The engagement quality reviewer is required to be a partner in a public accounting firm, regardless of whether the reviewer is from within the firm or outside the firm responsible for the audit engagement subject to the engagement quality review
An individual outside of the registered public accounting firm becomes an “associated person” of the registered public accounting firm when receiving compensation from the firm for performing the engagement quality review.
The PCAOB (specifically, AS Section 1220) states: “An outside reviewer who is not already associated with a registered public accounting firm would become associated with the firm issuing the report if he or she . . . (1) receives compensation from the firm issuing the report for performing the review or (2) performs the review as agent for the firm issuing the report.”
