Simulation 1.1 Flashcards
An audit firm has a responsibility to adopt a system of quality control and establish policies and procedures to provide reasonable assurance that personnel comply with ______________.
GAAS
An audit firm has a responsibility to _______________ in accordance with the applicable legal and regulatory requirements.
Adopt a system of quality control and establish policies & procedures to provide reasonable assurance, implement quality control procedures that are applicable to the audit engagement, and remain alert for evidence of noncompliance with relevant ethical standards that may not be
Quality control for a CPA firm applies to all ____________ services.
review & compilation
The quality control policies and procedures applicable to a firm’s accounting and auditing practice encompass the following elements:
Independence, integrity, and objectivity Personnel management Acceptance and continuance of clients and engagements Engagement performance Monitoring
A CPA firm must appropriately document _______ to properly administer a quality control system.
policies & procedures, the size, structure, and nature of the firm, and complaints & allegations & the responses to them.
QC 10 states, “The form and content of documentation evidencing the operation of each of the elements of the system of quality control is a matter of judgment and depends on a number of factors, including the following:
The size of the firm and the number of offices
The nature and complexity of the firm’s practices and organization
QC 10 indicates that the firm should establish a monitoring process to provide reasonable assurance that policies relating to the system of quality control are relevant, adequate, and operating effectively. This process should include
an ongoing consideration and evaluation of the firm’s system of quality control, including inspection or a periodic review of engagement documentation, reports, and clients’ financial statements for a selection of completed engagements.
QC 10 indicates that the firm must establish and maintain a system of quality control, which should include policies and procedures addressing each of the following elements:
Leadership responsibilities for quality within the firm (the tone at the top)
Relevant ethical requirements
Acceptance and continuance of client relationships and specific engagements
Human resources
Engagement performance
Monitoring
QC 10 states, The AICPA Code of Professional Conduct establishes the fundamental principles of professional ethics, which include the following:
Responsibilities The public interest Integrity Objectivity and independence Due care Scope and nature of services.
The timing of periodic inspections to evaluate quality control over the audits of public companies by a CPA firm is dependent upon factors such as ___________________.
The size of the firm
The number and geographical location of offices
The results of previous monitoring procedures
The degree of authority of both personnel and office
The nature and complexity of the firm’s practice and organization
The risk associated with the firm’s clients and specific engagements
Typically involves only two parties.
Consulting services.
Results in a written conclusion about subject matter or a written assertion of another party.
Attestation services.
The CPA is independent and the level of assurance can be explicit or implicit.
Assurance and advisory services.
Obtained by the client for the purposes of making better decisions.
Assurance and advisory services.
The CPA makes recommendations based on management’s objectives.
Consulting services.
