[AUD] Quality Control

Apply to auditing and review practice of CPA firms ( not consulting / tax services)

manual(QC policies and procedures) >  written

deficiencies in QC do not necessarily indicate a lack of compliance with GAAS but require prompt correction.

Statement on Quality Control Standards (by AICPA)

 

1. Factors affecting the nature and extent of the QC

- size and structure(complexity)

- nature of its practice (audit vs review vs compilation)

- cost/benefit consideration

 

2. Elements

 1) Human Resources

  - Assignment personnel to engagement

  - professional development

  * Factors to consider when assigning personnel to an engagement

1) size and complexity 2) personnel availability 3) special expertise required 4) timing of the work to be performed 5) continuity and periodic rotation of personnel 6) opportunities for on-the-job training

 

 2) Relevant Ethical Requirement

  - Independence

  - Integrity

  - Objectivity

 

 3) Leadership responsibilities( tone at the top ) 

  - assume ultimate responsibility

  - policies

  - sufficient and appropriate resources should be devoted to the development, communication, and support of its QC procedures

 

 4) Engagement performance

  -  establish policies and procedures to provide reasonable assurance, and appropriate standards and that appropriate reports are issued

 

 5) Monitoring

    system of quality control is relevant, adequate, operating effectively

  - Second partner review: fair presentation of FS

  - Peer review: other CPAs or firm evaluate the quality of other firms' / CPA's accounting and audit work

 

   *engagement Quality reviewer: id the documentation reviewed(fraud)

    - ID reviewer & assisted reviewer

    - ID documents reviewed

    - Date concurring approval of issuance

 

 6) Acceptance and continuation of clients relationships and specific Engagements

   likelihood of associating with clients whose mgt lacks integrity is minimized

  - client integrity, competent