Quality Control, Engagement Acceptance, Planning, IC, M1

Question 1

What is Quality Control?

Answer 1

-AICPA requires firms conducting audits, attestation services, accounting and review services to adopt a system of QC standards.
-QC standards are policies and procedures designed, implemented, and maintained to ensure that the firm complies with professional standards and appropriate legal and regulatory requirements, and any reports issued are appropriate.
Elements of QC = “HELPME”
Human Resources
Engagement/client acceptance and continuance
Leadership responsibilities
Performance of the Engagement
Monitoring
Ethical requirements

Question 2

Elements of Quality Control (HELPME)

‘H’uman Resources

Answer 2

Toward that end, policies and procedures for human resources, including assigning personnel to engagements, should be established to provide reasonable assurance that the persons assigned will have the technical training and proficiency required to perform their work and progress within the firm.

Question 3

According to PCAOB, what should be included in an Engagement Quality Review?

Answer 3

1. Identify the documentation reviewed, not required to assess it.
2. The date issuance of the financials was approved.
3. Identification of the engagement quality reviewer and others who assisted them.

Question 4

What should be considered when implementing Quality Control in the Firm?

Answer 4

The AICPA’s Statements on Quality Control Standards assert that a system of quality control for a firm encompasses the firm’s organizational structure and the policies and procedures established by the firm in order to provide reasonable assurance of conforming to professional standards.

Question 5

What are examples of the five components of Internal Control?

“CRIME”

Answer 5

Control environment

• Participation of those charged with governance.
• Assignment of authority, responsibility, and accountability.
• Human resource policies and practices.

Risk assessments (identifies risk that needs to be identified and evaluated)

• Adoption of new accounting principles.
• The hiring of new personnel.
• Incorporation of new technology.
• Corporate restructuring.

Information and communication systems

• Used to present transactions and related disclosures properly.
• Used to measure and record transactions at their proper monetary values.
• Used to capture and record significant events.

Monitoring

• The internal audit function.

Existing control activities (PAIDTIPS)

• Pre-numbering of documents.
• Authorization of transactions.
• Independent checks to maintain asset accountability
• Documentation
• Timely and appropriate performance reviews
• Information processing general and application controls
• Physical controls for safeguarding assets
• Segregation of duties. (ARC) Authority, Record Keeping, and Custody separate.

Question 6

What does a CPA Firm’s nature and extent of a firm’s quality control procedures depend on?

Answer 6

Depends on:

• Size of the firm
• The operating autonomy allowed its personnel and officers
• The nature of its practice and organization
• Cost-benefit considerations

Question 7

What are the considerations for audit personnel staff?

Answer 7

The firm goal is to achieve a balance of engagement manpower requirements, personnel skills, and individual development and utilization.

Consider these factors:

1) engagement 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.