Chapter 2 LO8

Question 1

for members of a firm to be eligible for membership in the AICPA what do public accounting firms have to be enrolled in?

Answer 1

an AICPA approved practice monitoring (peer review) program

Question 2

what does the element of quality control “ relevant ethical requirements” mean? (3)

Answer 2

independence, integrity, objectivity 1. all personal on engagements should maintain independence in mind and appearance 2. all should perform all professional responsibilites with integrity 3. all should maintain objectivitiy in performing their professional responsibilities

Question 3

how often are peer reviews conducted

Answer 3

every 3 years

Question 4

T/F quality control is closely relatated but distinct from auditing standards

Answer 4

T

Question 5

T/F quality control procedure do not depend on different aspects about the firm like size, nubmber of offices, or nature of practice

Answer 5

F

Question 6

what is the purpose of a peer review?

Answer 6

to determine and report whether the CPA firm being reviewed has developed adequate quality control policies and procedures and follows them in practice

Question 7

Firms required to be registered with the PCAOB must be reviewed by whom? for what purpose?

Answer 7

the AICPA National Peer Review Committee to review the non-SEC portion of the firms practice that is not inspected by the PCAOB

Question 8

what is practice monitoring (peer review)

Answer 8

the review by CPA’s of another CPA firms compliance with its quality control system

Question 9

what does the element of quality control “monitoring “ mean

Answer 9

P& P should existi to ensure the other quality control elements are being effectively applied

Question 10

what does a cpa firm do to ensure that the principles in auditing standards are followed on every audit?

Answer 10

they follow specific quality control procedures to meet those standards consistently on every engagement

Question 11

they system of quality control should include policies and procedures that address what 6 elements?

Answer 11

1. leadership responsibilities for quality within the firm (tone at the top) 2. relevant ethical requirements 3. acceptance and continuation of client relationships and specific engagements 4, human resources 5. engagement performance 6. monitoring

Question 12

what does the element of quality control “acceptance and continuation of client relationships and specific engagements” mean? (3)

Answer 12

1. policies and procedure should be established to decide whether to take or continue a client relationship or specific engagement 2. the P&P should minimize risk of associating with client whose management lacks integrity 3. firm should only undertake engagements that can be completed with professional competence

Question 13

who is the AICPA peer review program administered by?

Answer 13

state CPA societies under the overall direction of the AICPA peer review board

Question 14

what is the difference between quality controls and audit standards?

Answer 14

quality controls are established for the entire cpa firm whereas auding standards are applicable to individual engagements

Question 15

each firm should ____ and _____ quality control policies and procedures

Answer 15

document establish

Question 16

what does the element of quality control “engagement performance” mean ? (3)

Answer 16

P& P should exist to ensure that the work perfromed by people meets 1. applicable professional standards 2. legal and regularoy requirement 3. firms standards of quality

Question 17

what requires firms to document quality control policies and procedures?

Answer 17

auditing standards

Question 18

what are Audit Practice and Quality Centers?

Answer 18

organizations established by AICPA to help firms meet quality control standards and audit standards

Question 19

what are 2 audit practice and quality centers and what do they do?

Answer 19

1. The Center for Audit Quality (CAQ) is a public policy organization affiliated with the AICPA serving investors, public company auditors, and the capital markets 2. The Private Companies Practice Section (PCPS) provides practice management information to firms of all sizes

Question 20

the methods for quality control include what 2 things?

Answer 20

1. the organizational structure of the firms 2. the poicies and procedures the firm establishes

Question 21

what is quality control?

Answer 21

methods used to ensure that the firm meets its professional responsibilities to clients and others

Question 22

a quality control system provides reasonable assurance, not a guarantee , that what are followed?

Answer 22

auditing standards

Question 23

what does the element of quality control “human resources” mean? (4)

Answer 23

should have P& P in place to provide firm with assurance that 1. all new personel is qualified to perform work competently 2. work is assigned to people who have adequate techinial training and proficiency 3. everyone should participate in CPE and prfessional development activiites that enable them to fulfill their assigned responsiblities 4. people selected for advancement have qualifications necessary for fulfillment of assigned responsibilities

Question 24

what does the element of quality control “leadership responsibilities for quality within the firm (tone at the top” mean?

Answer 24

the firm should promote a culture that quality is essential in performing engagments and should establish plicies and procedures that support that culture