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Unformatted text preview: Becker Auditing 2008 Edition Chapter 2 1 Quality Control Standards I. Applicability: A. A CPA firm is required by the AICPA Code of Professional Conduct to adopt a system of quality control for its auditing, attestation, and accounting and review services. B. Statements on Quality Control Standards (SQCS) are issued by Auditing Standards Board and are applicable to both audit and non-audit engagements. II. Elements: The five interrelated elements of quality control are: A Acceptance and Continuance of Clients and Engagements I Independence, Integrity, and Objectivity C Continuous Monitoring P Personnel Management A Assurance Regarding Engagement Performance AICPA is all about quality control standards. A. Acceptance and Continuance of Clients and Engagements 1. Policies to decide to accept or continue client relationship and to perform a specific engagement 2. Policies for the likelihood of association with a client whose management lacks integrity is minimized and that the firm: a. Undertakes only those engagements that it can reasonably expect to complete with professional competence b. Appropriately considers the risks associated with providing professional services in the particular circumstances 3. Examples: a. Reviewing the FS and credit rating of the proposed client b. Inquiring of third parties as to the reputation of the proposed client c. Evaluating the firms ability to service the client properly d. Periodically re-evaluating clients for continuance B. Independence, Integrity, and Objectivity 1. Maintain public confidence in the profession 2. Policies that personnel maintain independence (in fact and appearance), perform all professional responsibilities with integrity, and maintain objectivity in discharging professional responsibilities 3. Qualities are defined and described as follows: a. Independence encompasses impartiality and freedom from any obligation to or interest in the client b. Integrity requires personnel to be honest and candid. Service and the public trust must not be subordinated to personal gain advantage c. Objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of interest 4. Examples include: a. Maintaining records showing which personnel were previously employed by clients or have relatives holding key positions with clients b. Notifying personnel as to the names of the audit clients publicly held c. Confirming with staff that prohibited relationships do not exist d. Emphasizing independence of mental attitude in training and supervision 5. The SOX of 2002 contains certain provisions that must be followed to maintain independence: a. Prohibits other services for audit clients (i.e. bookkeeping, financial information systems design/implementation, appraisals, actuarial services, internal audit outsourcing services, management/human resource functions, investment services, legal services) i. Other non-audit services may be performed if they are pre-approved by the audit...
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This note was uploaded on 05/11/2010 for the course CPA 2010 taught by Professor ?? during the Spring '10 term at Becker College.
- Spring '10