AUD 02

AUD 02 - AUD - Notes Chapter 2 http:/

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AUD - Notes Chapter 2 Quality Control Standards The five interrelated elements of quality control are: A – Acceptance and continuance of client’s engagement I – Independence, integrity and objectivity C – Continuous monitoring P – Personnel management A – Assurance regarding engagement performance Acceptance and continuance of clients and engagements Considers the risk associated with clients (don’t accept a client whose mgmt lacks integrity) Undertakes only those engagements that the firm can reasonably expect to complete with professional care Independence, integrity and objectivity Policies and procedures which help maintain personnel independence in fact and appearance Lead partner and the reviewing partner must rotate off the audit every five years Routine tax return preparation, tax planning and employee personal tax services are allowed under Sarbanes-Oxley but must be approved by the audit committee in writing Continuous monitoring What the title implies Peer review - One CPA firm reviews another CPA firms quality control system, occurs every 3 years for a CPA firm that is a member of the AICPA. - Purpose is to determine and report whether CPA firm being reviewed has developed adequate policies and procedures for quality control and they are following them - Upon completion, a report is issued with conclusions and recommendations Personnel Management Criteria for hiring, assignment of the firms personnel to engagements, professional development and advancement Assurance regarding engagement performance Policies and procedures that assure that the engagement work meets professional standards, regulatory requirements, and the firms own standards of quality GAAS relate to the conduct of each individual engagement, whereas quality control relate to the conduct of all professional activities of the firms practice as a whole The quality control standards of a firm affect both the performance of each audit and the performance of the audit practice as a whole Deficiencies in a firm’s quality control do not necessarily mean/indicate a lack of GAAS compliance. Other Engagements, Reports and Accounting Services Auditing standards have restricted special reports to the following 5 areas 1. OCBOA – use of other comprehensive basis of accounting F/S (cash basis, price-level adjusted F/S) The use of non-GAAP requires the auditor to issue either a qualified or adverse opinion unless the non-GAAP method is an OCBOA (in which case an unqualified opinion is appropriate) 1
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AUD - Notes Chapter 2 2. Specific elements, accounts or items of a F/S – The auditor expresses an opinion on each of the specified elements, if the element is far-reaching or pervasive (NI, STK EQ, or any item based thereon) the auditor must audit the complete set of financial statements. A piecemeal opinion may be expressed if the items do not constitute a major portion of the F/S. A piecemeal
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AUD 02 - AUD - Notes Chapter 2 http:/

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