Quality Control Standards (SQCS) Flashcards
What is the purpose of Quality Control for an Engagement Conducted in Accordance with [GAAS]?
Is to assist the auditor in implementing the firm’s quality control procedures specifically at the engagement level
What’s the auditor’s objective to implementing quality control procedures at the engagement level?
It’s to provide reasonable assurance that (a) the audit complies with professional standards and applicable legal and regulatory requirements and (b) the auditor issues an appropriate report
Why is a CPA firm required to have a “system of quality control” for its accounting and auditing services?
To provide reasonable assurance that engagements are performed in accordance with professional standards and applicable regulatory and legal requirements, and that the issuance of reports are appropriate in the circumstances
What is the Nature and Scope of an audit?
It’s that the policies and procedures will vary with the circumstances (e.g., firm size and number of offices, complexity of services offered, and the level of experience of the professional staff)
What is Inherent Limitations?
A “reasonable” (a high, but not absolute) assurance, reflecting implicit cost-benefit trade-offs
What are the 6 elements of Quality Control System?
1 Human Resources
2 Relevant Ethical Requirements
3 Engagement Performance
4 Acceptance and Continuance of Client-Relationships and Engagements
5 Leadership Responsibilities for Quality
6 Monitoring
What’s the element to Human Resources?
Policies and procedures should address important personnel issues (including initial hiring, assignments to engagements, professional development and continuing professional education, and promotion decisions)
What’s the element to Relevant Ethical Requirements?
Policies and procedures should address the independence of personnel as necessary (should obtain written confirmation of compliance with independence requirements from all appropriate personnel at least annually)
What’s the element to Engagement Performance?
Policies and procedures should focus on compliance with all applicable firm and professional standards and applicable regulatory requirements, and encourage personnel to consult as necessary with professional (or other) literature or other human resources within or outside of the firm for appropriate guidance
What’s the element of Acceptance and Continuance of Client-Relationships and Engagements?
Policies and procedures should carefully assess the risks associated with each engagement (including issues related to management integrity) and the firm should only undertake engagements that can be completed with professional competence
What’s the element of Leadership Responsibilities for Quality?
Policies and procedures should promote an internal culture that emphasizes a commitment to quality (sometimes called the “tone at the top”). The engagement partner should take responsibility for overall audit quality
What’s the element of Monitoring?
Policies and procedures should provide an ongoing assessment of the adequacy of the design and the operating effectiveness of the system of quality control.
Who is an Engagement Partner?
The person in the firm who is responsible for the audit engagement and its performance and for the auditor’s report
What is an Engagement Quality Control Review?
A process designed to provide an objective evaluation, before the report is released, of the significant judgments the engagement team made and the conclusions it reached in formulating the auditor’s report
Who is an Engagement Quality Control Reviewer?
This is the person in the firm, a suitably qualified external person, or a team made up of such individuals, none of whom is part of the engagement team, with sufficient and appropriate experience and authority to objectively evaluate the significant judgments that the engagement team made and the conclusions it reached in formulating the auditor’s report
